| Question And Answer | |
|---|---|
| Subject: | Section 50C applicablity |
| Category: | Income-Tax |
| Querist: | Hinal Shah |
| Answered by: | Dr .K. Shivaram Senior Advocate |
| Tags: | 50C, Capital Gains, sale of depreciable assets |
| Date: | March 4, 2022 |
Sir, we had a property used as business asset, we have claimed depreciation on the assest for 8years, after which the business was not carried out and hence Depreciation was not claimed for about 9years. Now if we sell the Property, would that be considered as Short Term Capital Gain or Long Term Capital Gain? Would the sale of assest attract 50C or we can claim it as long term Capital Gain. Please suggest.
In Chhabria Trust v. ACIT ( 2003 ) 87 ITD 181 (SB)( Mum)(Trib) held that Assessee-trust, having ceased to carry on its business from assessment year 1985-8 Sold its factory premises and declared income as long-term gains . Assessing Officer brought it to tax as short-term capital gains on ground that assessee having availed depreciation on said asset in earlier years, transaction was hit by section 50 . special bench upheld the order of the Assessing Officer . The Special bench held in section 2(11), there is neither any explicit nor implied condition that asset should be used for purpose of business during year under consideration . As per section 50 also, it is not necessary that depreciation is allowed for year under consideration and if depreciation is allowed in any of years either under 1961 Act or under 1922 Act, section 50 would be applicable .
In ITO v. United Marine Academy ( 2011) 130 ITD 113/ 138 TTJ 129 (SB)(Mum)(Trib)) The question before the Hon’ble Special Bench was:
“On a proper interpretation of sections 48, 50 and 50C of the Income-tax Act, 1961, was the Assessing Officer right in law in applying section 50C to capital assets covered by section 50 (depreciable assets) and in computing the capital gains on the sale of depreciable assets by adopting the Stamp Duty valuation?” Held yes .
The Assessee would be entitled to exemption u/s section 54E /54EC of the Act though the income was computed u/s 50 of the Act . . Refer , CIT v. ACE Builders (2006) 281 ITR 210 ( Bom) (HC)
In Smita Conductors Ltd v. Dy.CIT ( 2015)) 152 ITD 417 ( Mum)( Trib)
held that the prescriptions of section 50 are to be extended only to stage of computation of capital gain and, capital gain resulting from transfer of depreciable asset which was held for more than three years would retain character of long-term capital gain for purposes of all other provisions of Act . The rate of tax will be as applicable to long term capital gains .
The assessee can compute the capital gains as per the ratio laid down by the case laws referred above . The assessee can consult his /their tax consultant who can compute the capital gains properly.