head- capital gain

the reason is their value gets reduced over a period of time and you don't sell them at a higher price than the cost you bought....suppose you purchase a machinery worth 10000 and provide depreciation @ 10% on SLM basis. then @ the end of 9th year your wdv will be 1000 and you will only get a profit if u sell it at a price above 1000. whereas capital gain will come if only the machinery is sold at price exceeding 10000 being the actual cost of acquisition which is not possible in day to day times....therefore to forecast a true and fair view and also to remove the burden of capital gain tax on such items which would eventually be loss ....depreciable asset sales and any profit or loss arising in so cases to be considered as short term capital gain or loss

thanks

with pleasure

i have better reason

while we calculating depriciation we charge depriciation on block of assets and not on single assets individual basis as per sec 32 all assets in the block will count as the single assets so in block concept the assets lost it identity so it unable to understand as income tax point of view whether is short term or long term so for clearity it is count as short term

while computing Depreciation and WDV of Block of capital Asset as per Sec 32 read with sec 50,

There is an incidence of Short term capital loss in case:
Where block of asset does not exists, and has positive WDV.

There is an incidence of Short term capital gain in case:

1. block of asset exists and has negative WDV

2. block of asset does not exists and have negative WDV.

Ashwin gives the right logic and actually the department is concerned with huge collection of taxes if asset which is depreciable so value become so less and we realised it we dont get enough gain so the contention of department is charge short term capital gain tax as its rate is higher long term and 2nd reason is it does not get any indexation benefit and lawmaker wants to discourage people to earn short term gain