- (1.) THE Court: The appeal has been taken up for hearing ex -parte. No one appeared on behalf of the assessee in spite of service. Affidavit -of -Service filed be kept on record.
(2.) THE appeal is directed against a judgment and order dated 21st May, 2013 by which the learned Tribunal allowed the appeal preferred by the assessee. Aggrieved by the judgment and order of the Tribunal, the Revenue has come up in appeal. The facts and circumstances of the case, briefly stated, are as follows: The assessee was a partner of the firm carrying on business under the name and style of M/s. D.K. Roy & Brothers. He took over the business of the partnership together with assets and liabilities with effect from 1st April, 2001. He sold the assets during the financial year 2005 -06 which is the relevant previous year. He claimed the benefit of capital gains under section 54EC of the Income Tax Act (hereinafter referred to as 'the Act'). The learned Tribunal by the impugned judgment has allowed the aforesaid claim. The contention of the Revenue was that the benefit under section 54EC of the Act could not be claimed by the assessee because (a) the asset was not a long term capital asset and (b) it was a depreciable asset. Therefore, it was a short term capital asset to which the provisions of section 54EC of the Act did not apply. The learned Tribunal allowed the claim of the assessee on the basis of the following reasons: We have heard the rival contentions and carefully perused the material available on record. On a careful consideration of the facts and circumstances of the case we are inclined to agree with the provisions that the computation of capital gains as Long term capital gain cannot be denied to the assessee in so far as it was nobodys case to foresee what was to be gained after the business assets have been used claiming deprecation alone makes the sale of assets which gain on the sale thereafter has to be as capital gains. Once the capital gains have been computed the consideration for their investment is to be in accordance with the provision of the Income Tax Act cannot be disregarded in so far as the provisions do not disallow claiming of deduction U/s. 54EC of the Act whether has to be first termed as long term capital assets and then the re -computation whether could be as short term capital gain for taxation purpose. We are inclined to consider the submission of the ld. counsel for the assessee placing reliance on the decision of the Hon'ble Gujarat High Court in the case of DCIT vs. Himalaya Machinery (P) Ltd. which copy has been placed on record wherein the applicability of the provision of section 54EC read with sections 50 and 48 of the I.T. Act was held in favour of the assessee in so far as it was undisputed the transfer was of long term capital assets, the exemption U/s. 54EC is available and the assets on which depreciation is allowed have been owned and used by the assessee for claiming depreciation therefore holding them as for short term capital gain would be done as provided U/s. 50 of the Act by applying the provisions of section 48 and 49 and would not disentitle the same from availability of the said examination. For this proposition the Hon'ble High Court relied on CBDT Circular No. 469 dated 23rd September, 1986 and was also considered by the ITAT Mumbai Bench in ITA No. 2296/Mumbai/2011 in the case of M/s. Jai Hind Rubber Products Pvt. Ltd. Vs ACIT when this legal fiction was addressed by following the decision of the Hon'ble Gujarat High Court (supra).. Concluding we are of the considered view that the claim of deduction U/s. 54EC of the Act was therefore rightly claimed by the assessee on the basis of the facts and figures brought on record by the AO which it was entitled to not because it was being claimed as form short terms assets. The order of the ld. CIT(A) is set aside and the AO is directed to accept the claim as returned by the assessee on this issue.
(3.) MR . Bag, appointed a Amicus Curie by us, submitted that the tax effect in this case is Rs. 9,78,878/ - which is below Rs. 10 lakhs. He drew our attention to Instruction No. 3/2011 dated 9th February, 2011 issued by the CBDT under section 268A(1) of the Income Tax Act. He contended that the Revenue is not entitled to challenge the order of the learned Tribunal. He drew our attention to a Division Bench judgment of this Court in CIT, Central -II, Kolkata Vs. Ceramic Decorators (P) Ltd. in ITAT No. 83 of 2011, wherein the Division Bench dismissed the appeal for the following reasons: At the very outset, Mr. Nizamuddin, learned Advocate appearing for the appellant, points out that the tax effect of the present appeal is less than Rs. 10 lakh and this case does not come within the exception as pointed out in CBDT Instruction No. 3/11 dated 9th February, 2011. In view of the aforesaid fact, we find that this appeal has been filed by violating the instruction issued by the CBDT, which was binding upon the appellant in view of the provisions contained in Section 268A of the Income Tax Act, 1968. We, thus, dismiss this appeal on that ground alone.;