This view has been confirmed by the Supreme Court in CIT Vs. V. S. Dempo Company Ltd [ (2016) 387 ITR 354]. Wherein the Supreme Court has approved the judgement of the Bombay High Court in CIT Vs. ACE Builders Pvt. Ltd. [ (2006) 281 ITR 598]. In the aforesaid judgement the Bombay High Court has observed:

“ In our opinion, the assessee can not be denied exemption under section 54E, because, firstly, there is nothing in section 50 to suggest that the fiction created sub section 50 is not only restricted to sections 48 and 49 but also applied to other provisions” On the contrary sub section 50 makes it explicitly clear that the deemed fiction created in sub sections (1) and (2) of section 50 is restricted only to the mode of computing 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 Apex Court in the case of State Bank of India Vs. D. Hanumatha Rao (1998) 6 SCC 183. In that case, the service rule framed by the bank for providing for granting extension of service to those appointed prior to July 19,1969. The respondent who has jointed the bank in July 01,1972 claimed extension of service because he was deemed to be appointed in the bank with effect from October 26,1965. 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 purpose. Applying the ratio of this judgement, we are of the opinion, that the fiction created under section 50 is confined to the computation of capital gains only and can not 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 fiction created under section 50. Section 54E specifically provides that where capital gains 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 Income tax Act can not be denied to the assessee on account of fiction created in section 50”.

No software provides for such situation, however we can work out as under :

Now, for this purpose in the return of income under the column “Deprecation as per Income tax Act” WDV is to be shown as sale value. So short term capital gain would be Nil. Then under the column “Long Term Capital Gain” in other asset, full consideration is to shown and cost of asset is to be shown as WDV. So long term gain would be calculated.