Question And Answer
Subject: Long term capital gain or short term capital gain.
Querist: Kulkarni P.S
Answered by:
Tags: , ,
Date: June 7, 2022
Query asked by Kulkarni P.S

Assessee is private limited Co. Assessee is having building as fixed asset and assessee Co is regularly claiming depreciation as per companies Act. However since the year of purchase of building in the FY 2014_15 assessee has not claimed depreciation on building as per sec. 32 of the Income Tax Act. In the financial year 2018-19 assessee Co sold the building and offer profit on same after considering index cost as LTCG, on the ground that since no depreciation has been claimed as per provisions of Income Tax Act.  AO as well as CIT has not appreciated the submission and therefore confirmed addition by rejecting claim of the assessee on the ground that once assessee has claimed depreciation on the asset even as per companies Act, the profit on sale will be STCG.

Whether action of AO and CIT A is correct?

Is there any decision which supports assessee’s stand?

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: Section 50 specifically refers that where the capital asset is an asset forming part of block of assets in respect of which the depreciation has been allowed . On the facts the depreciation is not allowed as per the Income -tax Act , hence the claim of the assessee is justified . In Divine Construction Company v. ACIT(2012) 49 SOT 6 (URO)(Mum.)(Trib.) the Tribunal held that on sale of office premises which was included in block of assets no depreciation was claimed hence assessable as long term capital gains. Also refer , Divine Construction Co. v. ACIT (2011) 138 TTJ 72 / 53 DTR 461 (Mum.)(Trib.)

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