CIT Vs. ASSAM PETROLEUM INDUSTRIES P LTD

JUDGEMENT

(1.) THE appeal has been admitted on the following question of law :

(2.) TO answer the question, the brief facts necessary are--Assam Petroleum Industry is a company. The assessee derived income from house property as well as from his business dealing. The assessment year in question is 1991-92. During the previous year the assessee has received compensation from the Deputy Commissioner, Kamrup, for acquisition of its land and building. The assessee had invested the entire receipt of compensation by purchasing IDBI Bonds and claimed exemption of the capital gain under Section 54E of the Income-tax Act, 1961. The claim made by the assessee in regard to land was allowed by the Assessing Officer whereas the claim in regard to building the Assessing Officer was of the view that the depreciation of the said building having been claimed and allowed under the Income-tax Act, capital gain arising out of transfer of the said building is to be construed as short-term capital gain under Section 50 of the Act and not a long-term capital gain as claimed by the assessee and thus the assessee is not entitled to claim benefit under Section 54E of the Income-tax Act, 1961. It has come on record that the depreciation on the building has been allowed to the assessee in the year 1987-88 and thereafter no depreciation has been claimed by nor allowed to, the assessee. However, the unabsorbed depreciation was carried over from the preceding assessment years and was allowed set off against house property income in the assessment year 1989-90. The Assessing Officer, therefore, concluded that the assessee claimed the depreciation on the building and the Department allowed the same in the relevant year and therefore the building in question was a depreciated asset and thus capital gain arising out of transfer of the said property was short-term capital gains within the meaning of Section 50 of the Act. Consequently, the Assessing Officer rejected the claim of the assessee under Section 54E of the Act.

(3.) THE question falls for determination is whether the assessee who has claimed and allowed depreciation on capital assets is entitled for benefits under the provisions of Section 54E and claimed deduction while calculating his income or by virtue of Section 50 of the Income-tax Act. THE capital gains shall be considered to have arrived out of short-term capital asset and the assessee is not entitled to claim benefit.