TMI Blog2022 (9) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... puted under section 50 of the Act, tax rate applicable will be the rate in respect of the long term capital gain in respect of property held for more than three years. Section 50 of the Act, which is a special provision for computing the capital gains in the case of depreciable assets, is not only restricted for the purposes of 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 Section 48 and 49. See V.S. DEMPO COMPANY LTD. [ 2016 (10) TMI 62 - SUPREME COURT] In the present case, it is not the plea of the Revenue that the property from which the capital gains arose was held by the assessee for less than three years. The Assessing Officer only by application of provisions of section 50 of the Act treated the gains as arisen from transfer of short term capital asset and hence applied the rate of tax @ 30% as applicable in case of short term capital gain. Therefore, respectfully following the aforesaid judicial precedents, we find no infirmity in the impugned order passed by the learned CIT(A). As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicability of section 50 in a case where exemption had been claimed u/s 54E, and as such, the said judgment was not relevant to the present case? 4. The only grievance of the Revenue, in the present appeal, is against taxing the capital gains arising on transfer of capital asset, which is a depreciable asset, at the rate of 20% instead of 30%. 5. The brief facts of the case pertaining to the issue, as emanating from the record, are: For the year under consideration, the assessee filed its return of income on 31/03/2015, declaring total income of Rs.3,05,60,320. The assessee has declared capital gain of Rs.3,09,74,862, on sale of premises being Flat no.143 A, Twin Tower, Building A, Off Veer Savarkar Marg, Prabhadevi, Mumbai 400 025. As per the Profit Loss Account submitted by the assessee, the capital gain on sale of premises was Rs.5,48,34,449. Accordingly, during the course of assessment proceedings, the assessee was asked to file the working of the capital gains along with the relevant documents. In reply, the assessee filed sale and purchase deed for the property sold and also filed working for capital gains. It was further observed that the said property was pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be entitled for exemption under Section 54E of the Act The High Court has confirmed the view of the Commissioner of Income Tax (Appeals) and dismissed the appeal of the Revenue. While doing so the High Court has relied upon its own judgment in the case of CIT v. ACE Builders (P.) Ltd. [2006] 281 ITR 210/[2005] 144 Taxman 855 (Bom.). The High Court has observed that Section 50 of the Act which is a special provision for computing the capital gains in the case of depreciable assets is not only restricted for the purposes of 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 ACE Builders (P) Ltd. (supra) in the following manner: In our opinion, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Polestar Industries [2014] 41 taxmann.com 237/221 Taxman 423 (Guj.) CIT v. Assam Petroleum Industries (P.) Ltd. [2003] 262 ITR 587/131 Taxman 699 (Gau.). 4. We are also informed that against the aforesaid judgments no appeal has been filed. 5. In view of the foregoing, we do not find any merit in the instant appeal which is, accordingly, dismissed. Respectfully following the decision of Hon'ble Apex Court which has clearly held. such capital gain as LTCG, the AO is directed to tax the said gain of the sale of property being shown as a depreciable asset @20% instead of 30%. This ground of appeal is allowed. Being aggrieved, the Revenue is in appeal before us. 7. During the course of hearing, the learned Departmental Representative ( learned D.R. ) submitted that the property in respect of which the assessee has earned capital gain formed part of the block of assets on which deprecation was claimed and allowed to the assessee. The learned D.R., by referring to the provisions of section 50 of the Act submitted that the capital gains arising on transfer of capital asset which forms part of block of assets in respect of which depreciation has been claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets: 44 [Provided that in a case where goodwill of a business or profession forms part of a block of asset for the assessment year beginning on the 1st day of April, 2020 and depreciation thereon has been obtained by the assessee under the Act, the written down value of that block of asset and short-term capital gain, if any, shall be determined in such manner as may be prescribed 45 .] 46 [Explanation.-For the purposes of this section, reduction of the amount of goodwill of a business or profession, from the block of asset in accordance with sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43 shall be deemed to be transfer.] 11. Thus, the provisions of section 50 of the Act provides for procedure for computation of capital gains in case of transfer of capital asset which forms part of block of assets and in respect of which depreciation has been allowed under the Act. The said in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset which was held for more than three years would retain the character of long term capital gain for the purpose of all other provisions of the Act. In this case the Ld. AR for the assessee submitted that flat had been held for 15 to 20 years which is supported by the fact that cost of the flat as shown in the balance sheet was only Rs. 1,30,000/ Therefore, if the flat is held for more than three years the tax rate has to be applied as provided in section 112 of the IT Act applicable in respect of capital gain arising from transfer of long term capital asset. 2.6 We, therefore, held that, for the purpose of computation of capital gain, the flat has to be treated as short term capital gain u/s 50 of the IT Act, but for the purpose of applicability of tax rate it has to be treated as long term capital gain if held for more than three years. We accordingly direct the AO to compute the capital gain from the sale of flat and apply the appropriate tax rate after necessary verification in the light of observations made in this order. 10. We further find that the Hon'ble Supreme Court in CIT v/s V.S. Dempo Company Ltd. (supra) affirmed the conclusion reached by the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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