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2012 (12) TMI 607 - HC - Income TaxExemption u/s 54EC - Capital gain on depreciable assets being short term capital gain - held that:- the assessee cannot be denied exemption under section 54E, because, firstly, there is nothing in Section 50 to suggest that the fiction created in Section 50 is not only restricted to Section 48 and 49 but also applies to other provisions. On the contrary, Section 50 makes it explicitly clear that the deemed fiction created in sub-sections (1) and (2) of Section 50 is restricted only to the mode of computation of capital gains contained in section 48 and 49. Secondly, it is well established in law that a fiction created by the Legislature has to be confined to the purpose for which it is created. It is true that Section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions. In the other words, where the long term capital assets has availed of depreciation, then the capital gain has to be competed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gains has arisen out of a short-term capital asset but if such capital gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45 of the Income-tax Act. To put it simply the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. - Decided in favor of assessee.
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