INCOME TAX DECISIONS
Exemption u/s 54E is available on investment of gains on sale of depreciable assets also :
Hon'ble Guahawati High Court in the matter of CIT Vs. Assam Petroleum Industries Pvt. Ltd. held that Section 54E is an independent provision, which is not controlled by Section 50 when the building held for more than 56 months was sold though on which depreciation has been allowed and whole of the net consideration invested in the specified asset as per Section 54E, was entitled to exemption. [ 262 ITR 587 ]. A similar view was also taken by Hon'ble Bombay High Court while deciding the case of CIT Vs. ACE Builders Pvt. Ltd. wherein Hon'ble Court held that fiction created in sub-section
1 and 2 of section 50 is restricted only to the mode of computation of capital gain contained in Section 48 and 49 and does not apply to another provision and therefore, an assessee is entitled to exemption under Section 54E in respect of capital gains arising on the transfer of a long term capital asset on which depreciation has been allowed. [144 Taxman 855].
Income from property as business income:
Hon'ble Madhya Pradesh High Court in the matter of CIT Vs. Kohinoor Tobacco Products Pvt. Ltd. held that the property were temporarily let out to keep them in good condition so that they could be
used and exploited again for the purpose of assessee's business and that the assessee's intention was
to increase its business gradually and not to close down his business. Hence rental income was assessable as business income. [283 ITR 162 ].
Invalidity of notice u/s 148 :
Hon'ble Delhi High Court in the matter of Tech span India Pvt. Ltd. and Another Vs. Income Tax
Officer held that once deduction is allowed after scrutiny in the assessment order, change of opinion afterwards is not a valid reason for reassessment. Reason to believe that income is escaped assessment is not justified. [283 ITR 212]
Transfer of property in a family settlement is not transfer chargeable to capital gains tax
Hon'ble Madras High Court in the matter of CIT Vs. A.L. Ramanathan held that family arrangement
was a bonafide one in as much as it was made voluntarily to resolve the disputes among members of family and not induced by any fraud or collusion and it was arrived at in the presence of Panchayatdars, it did not amount to transfer and no chargeable capital gains arose from the transaction. [245 ITR 494].
Land is separate from the building for the purpose of calculating capital gains tax :
Hon'ble Bombay High Court in the matter of CIT Vs. Citibank N.A. interpreted Section 50 of the Income Tax Act more elaborately and treated land on which building is constructed which is
depreciable, as long term assets for the purpose of arriving capital gains. Hon'ble Court held that for the purpose of capital gains land and building are two separate and distinct assets and therefore
profits arising from sale of land was required to be considered as long term capital gain whereas profit arising from sale of building was required to be considered as short term capital gain. [261 ITR 570].
Hon'ble Guahawati High Court in the matter of CIT Vs. Assam Petroleum Industries Pvt. Ltd. held that Section 54E is an independent provision, which is not controlled by Section 50 when the building held for more than 56 months was sold though on which depreciation has been allowed and whole of the net consideration invested in the specified asset as per Section 54E, was entitled to exemption. [ 262 ITR 587 ]. A similar view was also taken by Hon'ble Bombay High Court while deciding the case of CIT Vs. ACE Builders Pvt. Ltd. wherein Hon'ble Court held that fiction created in sub-section
1 and 2 of section 50 is restricted only to the mode of computation of capital gain contained in Section 48 and 49 and does not apply to another provision and therefore, an assessee is entitled to exemption under Section 54E in respect of capital gains arising on the transfer of a long term capital asset on which depreciation has been allowed. [144 Taxman 855].
Income from property as business income:
Hon'ble Madhya Pradesh High Court in the matter of CIT Vs. Kohinoor Tobacco Products Pvt. Ltd. held that the property were temporarily let out to keep them in good condition so that they could be
used and exploited again for the purpose of assessee's business and that the assessee's intention was
to increase its business gradually and not to close down his business. Hence rental income was assessable as business income. [283 ITR 162 ].
Invalidity of notice u/s 148 :
Hon'ble Delhi High Court in the matter of Tech span India Pvt. Ltd. and Another Vs. Income Tax
Officer held that once deduction is allowed after scrutiny in the assessment order, change of opinion afterwards is not a valid reason for reassessment. Reason to believe that income is escaped assessment is not justified. [283 ITR 212]
Transfer of property in a family settlement is not transfer chargeable to capital gains tax
Hon'ble Madras High Court in the matter of CIT Vs. A.L. Ramanathan held that family arrangement
was a bonafide one in as much as it was made voluntarily to resolve the disputes among members of family and not induced by any fraud or collusion and it was arrived at in the presence of Panchayatdars, it did not amount to transfer and no chargeable capital gains arose from the transaction. [245 ITR 494].
Land is separate from the building for the purpose of calculating capital gains tax :
Hon'ble Bombay High Court in the matter of CIT Vs. Citibank N.A. interpreted Section 50 of the Income Tax Act more elaborately and treated land on which building is constructed which is
depreciable, as long term assets for the purpose of arriving capital gains. Hon'ble Court held that for the purpose of capital gains land and building are two separate and distinct assets and therefore
profits arising from sale of land was required to be considered as long term capital gain whereas profit arising from sale of building was required to be considered as short term capital gain. [261 ITR 570].
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