Law:

Section:

Section 54E, read with section 50, of the Income-tax Act, 1961 - Capital gains - Not to be charged in certain cases - Assessment year 1991-92 - Whether section 50 nowhere says that depreciable asset shall be treated as short-term capital asset and section 54E has an application where long-term capital asset is transferred - Held, yes - Whether capital gain may have been received by assessee on depreciable asset, and if conditions necessary under section 54E are complied with by assessee, he will be entitled to benefit under section 54E - Held, yes FACTS The assessee, deriving its income from house property as well as from its business dealing, had received compensation for acquisition of its land and building. The entire receipt of compensation was invested in purchase of IDBI Bonds and exemption of the capital gain was claimed under section 54E. The Assessing Officer allowed the claim regarding land but rejected the claim for building holding that the building was a depreciable asset and, thus, capital gain arising out of transfer of the said property was short-term capital gains within the meaning of section 50 and not a long-term capital gain as claimed by the assessee. On assessee's appeal, the Commissioner (Appeals) held that the capital gain on transfer of building was a long-term capital gain and, thus, allowed the benefits of section 54E to the assessee. The Tribunal dismissed the revenue's appeal and upheld the findings of the Commissioner (Appeals). On appeal : HELD Sections 48 and 49 provide for the principles on which the capital gains shall be computed and the benefit which can be given for transfer of a long-term capital asset while calculating the capital gain by virtue of section 48(2) whereunder the assessee transferring long-term capital assets can claim further deduction as specified under sub-section (2). [Para 9] By virtue of section 50, notwithstanding anything contained in clause (42A) of section 2, wherein the short-term capital asset has been defined, if the depreciation is allowed, the procedure for computing the capital gain as provided under sections 48 and 49 would be modified and shall be substituted as mentioned in section 50.…

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