Delhi H.C : section 54F exemption available on sale of depreciable asset which is long term

High Court Of Delhi

CIT Vs. Rajiv Shukla

Assessment Year : 2007-08

Section : 54F

A.K. Sikri And M.L. Mehta, JJ.

ITA No. 620 Of 2011

April  8, 2011


In the assessment year 2007-08, in the return filed by the assessee, herein, he had shown long-term capital gain on sale of property and also claimed the benefit of deduction under section 54F of the Income-tax Act, 1961 on the ground that he had purchased the said property in Mumbai from the said long-term capital gain. The details in this respect are as under :

The assessee had sold one flat at Defence Colony, New Delhi for a consideration of Rs. 1,04,00,000. The said flat was purchased on December 17, 1999 for Rs. 20 lakhs, stamp duty of Rs. 1,60,000 was paid on August 14, 2006, when the sale deed was executed and the said flat was used as an office on which, depreciation was claimed year to year. As on March 31, 2006, written down value was declared by the assessee at Rs. 10,62,882. The Assessing Officer further noticed that the assessee had declared the capital gain at Rs. 91,77,118 (Rs. 1,04,00,000 – Rs. 10,62,882 – Rs. 1,60,000) and had claimed deduction under section 54F treating the capital gain as long-term capital gain, stating that he had booked one flat with Chamber Constructions Pvt. Ltd., Mumbai for a sum of Rs. 2,71,55,555, possession of which was given on September 11, 2008. It was further stated that the assessee had paid a sum of Rs. 1 crore through cheque to M/s. Chamber Constructions (P) Ltd. The assessee also stated that the capital gain of Rs.91,77,118 was eligible for deduction under section 54F as the amount had been invested in the Capital Gains Deposit Account Scheme under section 54F.

2. However, the Assessing Officer rejected the claim of the assessee under section 54F on the ground that the assessee had not produced any evidence showing investment in the Capital Gains Deposit Account Scheme under section 54F and that the flat sold by him was a depreciable asset. As per the provisions of section 50, the capital gain arising from transfer of depreciable asset shall be deemed to be the capital gain arising from transfer of short-term capital asset and, therefore, deduction under section 54F was not available. Accordingly, the Assessing Officer made an addition of Rs. 91,77,118 under the head “Short-term capital gain”.

3. In appeal, the Commissioner of Income-tax (Appeals) deleted the addition and the order of the Commissioner of Income-tax (Appeals) is confirmed by the Income-tax Appellate Tribunal. On a perusal of the order of the Tribunal, we find that it has relied upon the judgment of the Bombay High Court in the case of CIT v. Ace Builders P. Ltd.[2006] 281 ITR 210 (Bom.). This decision of the Bombay High Court was followed by the same court in CIT v. Delite Tin Industries in I. T. A. 1118 of 2008 dated September 26, 2008. Against the order passed in Delite ( supra) proceedings, the Revenue had preferred a special leave petition which has also been dismissed by Supreme Court on August 21, 2009 [2010] 322 ITR (St.) 8 (SC).

4. We have gone through the judgment of the Bombay High Court in the aforesaid two cases. Learned counsel for the respondent has also submitted that even the Gauhati High Court has taken an identical view in CIT v. Assam Petroleum Industries P. Ltd.[2003] 262 ITR 587 (Gauhati).

5. We do not find any reason to take a different view. In these circumstances, we are of the opinion that no substantial question of law arises for consideration.

6. Accordingly, the present appeal is dismissed.

[Citation : 334 ITR 138]

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