Calcutta High Court
Britannia Industries Limited vs Principal Commissioner Of on 11 March, 2024
Author: Supratim Bhattacharya
Bench: T.S. Sivagnanam, Supratim Bhattacharya
1
OD- 34
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction [Income Tax]
ORIGINAL SIDE
ITAT/79/2024
IA NO: GA/1/2024
BRITANNIA INDUSTRIES LIMITED
VS
PRINCIPAL COMMISSIONER OF
INCOME TAX, KOLKATA - 1,
KOLKATA
BEFORE :
THE HON'BLE CHIEF JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE SUPRATIM BHATTACHARYA
Date : 11th March, 2024
Appearance :
Mr. Abhratosh Majumdar, Sr. Adv.
Mr. Sanjay Bhaumik, Adv.
Mr. A.K. Dey, Adv.
..for the appellant.
Mr. Om Narayan Rai, Adv.
Mr.Soumen Bhattacharjee, Adv.
..for the respondent.
The Court : We have heard Mr. Abhratosh Majumdar, learned senior advocate assisted by Mr. Sanjay Bhaumik, learned advocate for the appellant and Mr. Om Narayan Rai, learned senior standing counsel assisted by Mr.Soumen Bhattacharjee, learned standing counsel for the respondent.
The appellant assessee has raised the following substantial questions of law :
"(a) Whether, on a true and proper interpretation of the provisions of the Act and by virtue of the deeming provision of section 50 of the Act, a long term capital asset could be converted into a short 2 term capital asset and the tax should be calculated, on the gain realised from the transfer of such long term depreciable asset, at the normal rate of tax instead of concessional rate of tax as provided in section 112 of the Act?
(b) Whether, on a true and harmonious construction of the provisions of the Act, the tax liability of a domestic company, like the appellant, on the dividend distributed to its non-resident shareholders shall be at the rate as applicable in the respective DTAA as the same is more beneficial to the appellant comparing the rates prevailing under the provisions of section 115-O of the Act?"
So far as the substantial questions of law (a) is concerned, it is not in dispute that the same has been covered in favour of the assessee in the light of the decision of this Court in Principal Commissioner of Income Tax, Kolkata - 4 Vs. Eveready Industries India Limited in ITAT/233/2018 dated 30.11.2021. In the said appeal the substantial question of law
(b) is identical to that of substantial question of law (a) [supra]. In the said decision the question was answered in favour of the assessee on the following terms :
"With regard to substantial question no.(b) the Tribunal answered the said issue in favour of the respondent/assessee by following the decision of the Hon'ble High Court of Bombay in Commissioner of Income Tax versus ACE Builders (P) Ltd. reported in [2005] 44 Taxmann 855 (Bombay). The said decision was noted with approval by the Hon'ble Supreme Court 3 in the case of Commissioner of Income Tax, Panji versus V.S. Dempo Company Limited reported in [2016] 74 taxmann.com 15 [SC]. The operation portion of the judgment reads as follows :
"1. In the return filed by the respondent/assessee for the Assessment Year 1989-90 the assessee had disclosed that it had sold its loading platform M.V. Priyadarshni for a sum of Rs.1,37,25,000/- on which it had earned some capital gains. On the said capital gains the assessee had also claimed that it was entitled for exemption under Section 54E of the Income Tax Act. Admittedly, the asset was purchased in the year 1972 and sold sometime in the year 1989. Thus, the asset is almost 17 years old. Going by the definition of long term capital asset contained in Section 2(29B) of the Income Tax Act, 1995 (hereinafter referred to as 'the Act'), it was admittedly a long-term capital asset. Further the Assessing Officer rejected the claim for exemption under Section 54E of the Act on the ground that the assessee had claimed depreciation on this asset and, therefore, provisions of Section 50 were applicable. Though this was upheld by the Commissioner of Income Tax(Appeals), the Income Tax Appellate Tribunal allowed the appeal of the assessee herein holding that the assessee shall be entitled for exemption under Section 54E of the Act. The High Court has confirmed the view of the Commissioner of Income Tax (Appeals) and dismissed the appeal of the Revenue. While doing so the High Court has relied upon its own judgment in the case of CIT v. ACE Builders (P.) Ltd. [2006] 281 ITR 210/[2005] 144 Taxman 855 (Bom.). The High Court has observed that Section 50 4 of the Act which is a special provision for computing the capital gains in the case of depreciable assets is not only restricted for the purposes of Section 48 or Section 49 of the Act as specifically stated therein and the said fiction created in sub-section (1) & (2) of Section 50 has limited application only in the context of mode of computation of capital gains contained in Sections 48 and 49 and would have nothing to do with the exemption that is provided in a totally different provision i.e. Section 54E of the Act. Section 48 deals with the mode of computation and Section 49 relates to cost with reference to certain mode of acquisition. This aspect is analysed in the judgment of the Bombay High Court in the case of ACE Builders (P.) Ltd. (supra) in the following manner: "In our opinion, the assessee cannot be denied exemption under Section 54E, because, firstly, there is nothing in Section 50 to suggest that the fiction created in Section 50 is not only restricted to Sections 48 and 49 but also applies to other provisions. On the contrary, Section 50 makes it explicitly clear that the deemed fiction created in sub-section (1) & (2) of Section 50 is restricted only to the mode of computation of capital gains contained in Section 48 and 49. Secondly, it is well established in law that a fiction created by the legislature has to be confined to the purpose for which it is created. In this connection, we may refer to the decision of the Apex Court in the case of State Bank of India v. D.Hanumantha Rao 1998 (6) SCC 183. In that case, the Service Rules framed by the bank provided for granting extension of service 5 to those appointed prior to 19.07.1969. The respondent therein who had joined the bank on 1.7.1972 claimed extension of service because he was deemed to be appointed in the bank with effect from 26.10.1965 for the purpose of seniority, pay and pension on account of his past service in the army as Short Service Commissioned Officer. In that context, the Apex Court has held that the legal fiction created for the limited purpose of seniority, pay and pension cannot be extended for other purposes. Applying the ratio of the said judgment, we are of the opinion, that the fiction created under Section 50 is confined to the computation of capital gains only and cannot be extended beyond that. Thirdly, Section 54E does not make any distinction between depreciable asset and non-depreciable asset and, therefore, the exemption available to the depreciable asset under Section 54E cannot be denied by referring to the fiction created under Section 50. Section 54E specifically provides that where capital gain arising on transfer of a long term capital asset is invested or deposited (whole or any part of the net consideration) in the specified assets, the assessee shall not be charged to capital gains. Therefore, the exemption under Section 54E of the I.T. Act cannot be denied to the assessee on account of the fiction created in Section 50."
2. Following the above decision which squarely applies in the case in hand, substantial question no.(b) is also answered against the revenue." 6
Accordingly, the substantial question of law (a) is answered in favour of the appellant assessee. The appeal is admitted on the substantial question of law (b) referred to above.
Though the stay petition is formally disposed of, as it contains all the relevant papers and documents, the same be treated as an informal paper book in this appeal.
Since the respondent is represented by its learned advocate, service of notice of appeal is waived on them.
Settlement of index and all other formalities are dispensed with.
List the appeal after twelve weeks for hearing.
(T.S. SIVAGNANAM) CHIEF JUSTICE (SUPRATIM BHATTACHARYA, J.) S.Das/ 7