Case Law Details
Following the decision of ACE Builders (P) 28 ITR 2000(Bom) and Assam Petroleum Industries Pvt Ltd 262 ITR 58 (Gau). It was held that Section 54E does not make any distinction between the depreciable assets and non-depreciable assets, therefore, the investment u/s 54E is a permissible investment.
ITAT AHMEDABAD “D” BENCH
ITA No. 1944/Ahd/2010
A.Y. : -2007-2008
Income-tax Officer Vs. M/s Polestar Industries
C. No. 207/Ahd/2010
(Arising out of ITA No. 1944/Ahd/2010) A.Y.: -2007-08
M/s Polestar Industries Vs. ITO
Date of pronouncement : 31-01-2013
ORDER
PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:-
This is an appeal filed by the Revenue and C.O. by the assessee are arising from the order of CIT(A)-XVI, Ahmedabad dated 26-03-2010. Grounds raised are reproduced below:-
“(1) The Ld. CIT(A) erred in law and on facts in allowing claim of deduction U/s 54EC of the I. T. Act in respect of capital gains on transfer of depreciable assets.
(2) The Ld. CIT(A) erred in law and on facts while allowing assessee ’s claim as Section 50 is overriding provision and hence once Section 50 is applicable Section 54EC is not relevant, as otherwise once Section 50 becomes redundant.”
2. Facts in brief as emerged from the corresponding assessment order passed u/s 143(3) dated 24-12-2009 were that the assessee- firm is in the business of manufacturing of dies and chemicals however no commercial activity was carried out as the firm had sold its manufacturing unit. A property marked as plot No. 252 along with super structure, plant and machinery was sold by the assesses for a sale consideration of Rs. 24,99,000/-. The assessee has also sold an another property identified as plot of land bearing No. 254 along with assets such as building plant and machinery, laboratory equipments for a consideration of Rs. 4,93,104/-. It was also informed that the assessee had purchased REC bond for an amount of Rs. 41,70,000/- to claim exemption u/s 54EC of I.T. Act. At the assessment stage, the AO has computed the long term capital gain in respect of property No. 252 and computed long term capital gain after allowing the cost of inflation index at Rs. 23,5,266/-. Against this amount of long term capital gain the AO had allowed the exemption u/s 54EC upto that extent only. However, in respect of the other property bearing No. 254 the capital gain was computed at Rs. 41,53,722/- and no deduction u/s 54EC was allowed. This income was assessed as short term capital gain in the hands of the assessee.
5. In the result, the grounds of the Revenue is dismissed and C.O. dismissed being not pressed.
I think the ITAT has missed out an important aspect that sec 54EC is only against sale of Long Term Capital Gains whereas capital gains arising under section 50 is always short term. So how can exe,ption u/s 54EC be claimed for short term capital gains arising under sec 50