TMI Blog2022 (3) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... oshi For the Department : Shri Milind Chavan ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the Revenue against order of the Learned Commissioner of Income Tax (Appeals) 15, Mumbai [hereinafter in short Ld.CIT(A) ] dated 26.02.2020 for the 2012-13. 2. Revenue has raised following grounds in its appeal: - (i) On the facts and circumstances of the case and in law the Ld. CIT(A) erred in in directing the AO to re-compute the Capital Gain Tax on sale of flats at the rate applicable for long term capital gains i.e. 20% instead of 30% applicable to short term capital gains as the flats were held for more than 3 years without appreciating the fact that the income received or accruing as a result of transfer of assets being part of a block of assets shall be deemed to the capital gains arising from the transfer of short term capital assets as per sec.50C and hence taxable at the rate of 30% . (ii)` On the facts and circumstances of the case and in law the Ld. CIT(A) erred in holding that for tax rate purpose sec. 112 of the Act is applicable on capital gains arising from transfer of depreciable assets and deeming fiction of sec 50 will not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 48 or Section 49 of the Act as specifically stated therein and the said fiction created in sub-section (1) (2) of Section 50 has limited application only in the context of mode of computation of capital gains contained in Sections 48 and 49 and would have nothing to do with the exemption that is provided in a totally different provision i.e. Section 54E of the Act. Section 48 deals with the mode of computation and Section 49 relates to cost with reference to certain mode of acquisition. This aspect is analysed in the judgment of the Bombay High Court in the case of The Commissioner of Income-tax, Mumbai City-II, Mumbai vs. ACE Builders Pvt. Ltd. (2005) 3 Bom CR 598 in the following manner: In our opinion, 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 Sections 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-section (1) (2) of Section 50 is restricted only to the mode of computation of capital gains contained in Section 48 and 49. Secondly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nali Investment (ITA no. 1658 of 2012) in which Hon'ble Supreme Court has held as under :- 1. In this appeal by the Revenue for A.Y. 2005-06, following re-framed question of law has been proposed for our consideration. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the assessee is entitled to set ff under Section 74 in respect of capital gain arising on transfer of capital assets on which depreciation has been allowed in the first year itself and which is deemed as short term capital gain under Section 50 of the Income Tax Act relying upon the judgment of this Court in the case of CIT V/s. Ace Builders Limited even though the said decision was rendered in the context of eligibility of deduction under Section 54E ? 2 The respondent assessee had during the subject assessment year sold its meters and transformers on which it had claimed depreciation. On sale, the respondent assessee claimed long term capital gains and sought to set off the same against its carried forward long term capital loss in terms of Section 74 of the Income Tax Act, 1961. The assessing officer disallowed the claim and held that in v ..... 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