TMI Blog2018 (10) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain account scheme within the time specified under section 139(1) of the Act. See ASHOK KAPASIAWALA VERSUS THE ITO WARD-7 (1) , SURAT [2015 (10) TMI 2045 - ITAT AHMEDABAD] - decided in favour of assessee - I.T.A. No.695/Ahd/2016 - - - Dated:- 3-10-2018 - Shri Waseem Ahmed, Accountant Member And Smt Madhumita Roy, Judicial Member For the Appellant : Shri Manish Shah, A.R. For the Respondent : Shri Mudit Nagpal, Sr. D.R. ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals) 5, Vadodara [CIT(A) in short] vide appeal no.CAB/5-162/2014-15 dated 01.12.2015 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961(here-in-after referred to as the Act ) dated 28.02.2014 relevant to Assessment Year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as under:- 1. The ld.CIT(A) erred in confirming the addition of short term capital gain of ₹ 50.69 lacs on account of income on sale of factory shed. 2. The CIT(A) has erred in confirming the addition of business income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 54F of the Act. The AO also observed the object for enacting the provision of Section 50 of the Act was to avoid the multiple benefits claimed by the assessee. Therefore, the assessee was not eligible for exemption u/s 54F of the Act. 5.4 Besides above, the AO without prejudice to the facts mentioned above also observed that the assessee has violated the provision of section 54F(4) of the Act as he failed to deposit the amount of net sale consideration in the capital gain account scheme. Therefore, the assessee cannot be allowed exemption u/s 54F of the Act. Accordingly, the AO disallowed the exemption claimed by the assessee for ₹ 50,69,260/- and added to the total income of the assessee. 6. Aggrieved, assessee preferred an appeal to ld CIT(A). The assessee before us ld CIT(A) submitted that the provision of Section 50 of the Act provides the manner of calculating the capital gain in respect of depreciable assets. The provision of Section 50 of the Act does not deny the benefit as provided u/s 54F of the Act. Both the Sections i.e. 54F and 50 of the Act are independent to each other and therefore no reference can be made to any of the section while applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 (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 of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block of assets acquired during the previous year, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (factory shed) formed part of a block of assets in respect of which depreciation was regularly allowed as per the provisions of the Act and by virtue of section 50 of the Act, the same was to be treated as Short Term Capital Asset, even though the same was held for more than thirty six months. Since the transferred asset was Short Term Capital Asset, the benefits of section 54F, which are available only to LTCG arising from the transfer of a Long Term Capital Asset, are not available to the assessee. The facts of the cases cited by the assessee in this regard are different from the case at hand, therefore, the same are not applicable to the present case. In view of this, his claim of exemption of ₹ 49,21,367/- u/s 54F of the Act is not sustainable in law. Consequently, the order of the Assessing Officer denying assessee's claim of exemption of ₹ 49,21,367/- u/s 54F to the assessee on transfer of the factory shed, is upheld. The assessee fails on this ground of appeal. 6.4 Being aggrieved by the order of ld CIT(A) assessee is in second appeal before us. 7. The ld AR before us submitted that the conditions specified u/s 54 of the Act for claiming the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit u/s 54F of the Act in respect of depreciable assets. The AO has made the disallowance on account of two reasons as discussed below: i. Exemption is in Section 54F of the Act is available only on sale of long term capital assets. Whereas, in the instant case, the assessee has sold depreciable assets which is treated as short term capital gain by virtue of the provision of Section 50 of the Ac. ii. Without prejudice to the above, the assessee is also not eligible for exemption under section 54F of the Act as he failed to deposit the net consideration received by him in the capital gain account scheme as mandated u/s 54F of the Act. 9.1 The view taken by the AO was subsequently confirmed by the ld CIT(A). 9.2 It is undisputed fact that the period of holding of factory shed was exceeding more than 36 months and on the same assets the depreciation was claimed by the assessee. Thus, the gain arose on sale of such depreciable assets was held as short term by virtue of the provision of Section 50 of the Act. At this juncture, we find a relevant to reproduce the Section 2(42A) of the Act, which is reads as under: (42A) [ short-term capital asset means a capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset. 9.4 Similarly, we also find to reproduce the provision of Section 50 of the Act, which is reads as under: 50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets24 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 of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :- (i) expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Section 54EC pertains to Capital gain not to be charged on investment in certain bonds, relevant portion of which are as under:- 54EC. (1) Whether the capital gain arises from the transfer of a long-term capital asset (the capital asset to transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this Section, that is to say - (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under Section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, though much of a capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long term specified asset bears to the whole of the capital gain, shall not be charged under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reading of section 54F(1) and 54F(4) of the Act, it is evident that the assessee would be entitled for exemption/deduction u/s.54F of the Act in the event he purchases new asset within one year from the date of transfer of original asset or the amount is utilized before the date of furnishing the return u/s.139 of the Act. In a case it is not utilized for the purpose of aforesaid and the period aforementioned section 54F(4) mandates the assessee to deposit such amount before due date of filing of return u/s.139(1) of the Act. Therefore, there is no ambiguity in the provision so far deposit of the unutilized amount is concerned, it has to be deposited in a specified capital gain account before the due date of filing of return u/d.193(1) of the Act. The question which is required to be examined whether the assessee has utilized the amount before the time limit prescribed for such purpose or if not whether the amount was deposited in the manner prescribed u/s.54F(4). In the present case, the undisputed facts are that the original asset was transferred on and the new asset was purchased on 05/10/2009. The assessee had not filed income-tax return u/s.139(1) so that matter u/s.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in construction of a residential house within the three years from the date of transfer. Could he be denied exemption under section 54 F on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s.139(1) of the Act. The Hon'ble High Court of Karnataka High Court held as under:- As it clear from Sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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