TMI Blog2003 (6) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... question is answered in favour of the assessee and it is held that the assessee is entitled for exemption or deduction as provided under section 54E of the Income-tax Act on capital gains. - - - - - Dated:- 24-6-2003 - Judge(s) : P. P. NAOLEKAR., AMITAVA ROY. JUDGMENT The judgment of the court was delivered by P.P. NAOLEKAR C.J.-The appeal has been admitted on the following question of law: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in upholding the order of the Commissioner of Income-tax (Appeals) in allowing exemption under section 54E of the Income-tax Act, 1961, on gains arising out of transfer of depreciated assets, when unabsorbed depreciation of earlier years was claimed and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, therefore, concluded that the assessee claimed the depreciation on the building and the Department allowed the same in the relevant year and therefore the building in question was a depreciated asset and thus capital gain arising out of transfer of the said property was short-term capital gains within the meaning of section 50 of the Act. Consequently, the Assessing Officer rejected the claim of the assessee under section 54E of the Act. Aggrieved by the order of assessment the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Guwahati. The Appellate Commissioner has held that the capital gain claimed by the assessee on the transfer of its building was a long-term capital gain and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain and consequently from his income under that provision. Section 2(42A) defines "short-term capital asset" which means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer. Thus the assets, which have been already held for more than 36 months before it is transferred, would not be short-term capital assets. Section 2(29A) defines "long-term capital asset" means a capital asset, which is not short-term capital asset. Therefore, the asset, which has been held for more than 36 months before the transfer, would be long-term capital asset. Section 2(29B) provides for "long-term capital gain" which means capital gain arising from the transfer of a long-term capital asset. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (2) of section 48 wherein the assessee transferring long-term capital assets can claim further deduction as specified under sub-section (2). Section 50 of the Act, 1961, reads: "50. Special provision for computation of capital gains in case of depreciable assets. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications: (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd shall be substituted as mentioned in section 50. Section 50 only provides that if the depreciation has been allowed under the Act on the capital asset then the assessee's computation of capital gain would not be under sections 48 and 49 of the Income-tax Act and it would be with modification as provided under section 50. Section 54E is the section which has nothing to do with sections 48 and 49 or with section 50 of the Income-tax Act, 1961, wherein mode of computation of capital gain is provided. Section 54E is a provision whereby the assessee is entitled to claim exemption or deduction from his income if the condition laid down therein is fulfilled. The relevant provision of section 54E reads as under: "54E. Capital gain on transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of transfer. If these two conditions are satisfied by the assessee he shall be entitled for the benefit as provided under section 54E of the Act. Section 54E is an independent provision, which is not controlled by section 50 of the Act. Section 50 is a special provision where the mode of computation of capital gains is substituted if the assessee has claimed the depreciation on capital assets. Section 50 nowhere says that depreciated asset shall be treated as short-term asset, whereas section 54E has an application where long-term capital asset is transferred and the amount received is invested or deposited in the specified assets as required under section 54E. For application of section 54E the necessary pre-requisite condition an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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