Section 54F r.w.s 50 – Deeming fiction of section 50 cannot be extended to the deduction allowable u/s. 54F and therefore, assessee is entitled for deduction u/s. 54F on the capital gains arising on the sale of depreciable assets as these assets were held for a period of more than thirty-six months.

34.  [2019] 197 TTJ 583 (Mumbai – Trib.) DCIT vs.
Hrishikesh D. Pai ITA No.:
2766/Mum/2017 A.Y.:
2012-13 Dated: 26^th September, 2018

Section 54F r.w.s 50 – Deeming fiction of
section 50 cannot be extended to the deduction allowable u/s. 54F and
therefore, assessee is entitled for deduction u/s. 54F on the capital gains
arising on the sale of depreciable assets as these assets were held for a
period of more than thirty-six months.

FACTS

The assessee, a doctor by profession, had
sold a property, which was used by him for commercial purposes for his clinic and
on which depreciation was also claimed u/s. 32. The said property was held by
the assessee for a period of more than thirty six months before being sold.
Further, the assessee had purchased a new residential flat from the
consideration received from sale of the above property. The assessee claimed
deduction under section 54F on the capital gains arising from the sale of
aforesaid property.

The Assessing Officer treated the aforesaid
property as short-term capital assets within the deeming provision of section
50 and held that the assessee was not entitled for deduction u/s. 54F with
respect to short-term capital gains arising on sale of such short term capital
assets, as the deduction u/s. 54F was available only on the long-term capital
gains arising from transfer of long-term capital assets.

Aggrieved by the assessment order, the
assessee preferred an appeal to the CIT(A). The CIT(A) allowed the deduction
u/s. 54F to the assessee. Being aggrieved by the CIT(A) order, the Revenue
filed an appeal before the Tribunal.

HELD

The Tribunal
held that section 50 created a deeming fiction by modifying provisions of
sections 48 and 49 for the purposes of computation of capital gains chargeable
to tax u/s. 45 with
respect to the depreciable assets forming part of block of assets and there was
nothing in section 50 which could suggest that deeming fiction was to be
extended beyond what was stated in provisions of section 50 and it couldnot be
extended to deduction allowable to the assessee u/s. 54F which was an independent section operating in
altogether different field.

Thus, the assessee was entitled for
deduction u/s. 54F on the capital gains arising on the sale of depreciable
assets being commercial property.

In view of the aforesaid, the appeal filed
by the revenue deserved to be dismissed.