TMI Blog1990 (1) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. In order to claim exemption under section 54E, the assessee invested the sum of Rs. 5,99,900 in the specified asset as mentioned in the aforesaid section. There is no dispute to the computation of such deduction except for minor adjustment. The deduction under section 48(2) was computed by the assessee at Rs. 5,79,000 with reference to the amount of capital gain of Rs. 11,48,000 which was arrived at after excluding the cost of the land and the cost of transfer. The net capital gain chargeable to tax was computed at Rs. 99,868. The Assessing Officer accepted the computation so made by the assessee. However, the Commissioner of Income-tax invoked the provisions of section 263 inasmuch as the order of the Assessing Officer was erroneous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------- --------------------- 3. Both the parties have been heard. The learned counsel for the assessee Mr. Inamdar has fairly admitted that only decision available on this issue is of the Kerala High Court in the case of CIT v. V.V. George [1997] 227 ITR 893 /93 Taxman 257, which is against the assessee. However, according to him, the conclusion arrived at by the Hon'ble Kerala High Court is incorrect. It was contended by him that section 48(2) clearly provides for deduction with reference to the capital gain arrived at after making the deduction under clause (a) of sub-section (1). It nowhere provides that the capital gain arrived at in section 48(1)(a) has further to be adjusted by the amount of exemption computed in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Capital gains" shall be computed, --- (a) by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :--- (i) expenditure incurred wholly and exclusively in connection with such transfer, (ii) the cost of acquisition of the asset, and the cost of any improvement thereto; (b) Where the capital gain arises from the transfer of a long-term capital asset (hereafter in this section referred to, respectively, as long-term capital gain and long-term capital asset) by making the further deductions specified in sub-section (2). (2) The deductions referred to clause (b) of sub-section (1) are the following, namely :--- (a) where the amount of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the new asset bears to the net consideration shall not be charged under section 45. 5. The scheme of the Act is like this--- Section 45 is the charging section but is subject to the provisions of various other sections enumerated therein including section 54E. The words "save as otherwise provided in the sections.... 54E...." are significant. Section 54E provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction as recognised by the Apex Court in various judgments compel us to take such a view. If so construed, the income of capital gain referred to under section 48(1)(a) would be that amount which is arrived at after excluding the amount not chargeable to tax under various sections including section 54E enumerated in section 45. The amount so arrived at, in our opinion, then has to be considered for the purpose of deduction under section 48(2). The pretation which we have made will achieve the object of the object of the Act. The object of the act is to augment the savings by way of investment in various securities, fixed deposit in Banks, etc. Full exemption has been granted if the entire net consideration is invested and proportionate d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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