Hi,
In case of Depreciable Assets, There will be no Indexation or The Capital Gains will always be Short-term Capital Gain.
There is exception where on the Depreciable assets there may be Long term capital gain...
Suppouse u have purchase a assets and kept for exceeding 36 months and without using(Put to use) u sold it ,,,in such a case there will be LTCG even if the same is the depreciable Assets.
As per ur query ..there alwasy be short term capital gain bcs whenever it comes in Block of assets it mean it has been put to use.
https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=1397
And if u are VG Sir student or otherwise u can see at page no- 26 (VG Sir PGBP Module) Example 1 (Example in respects of section 50) ....There is no direct case is given in the books but it may be the situation...
Yes in case of Depreciable assets there always be short term capital gain
Yes in case of Depreciable assets there always be short term capital gain no long term capital gain
According to a recent judgment in the case of M/s Manali Investments
FACTS OF THE CASE
The assessee was in the business of investment and finance. The tax department contended that since the assessee has claimed depreciation on the asset sold , their transfer would attract the provision of section 50 of the Act and as result the gain would be deemed to be short term capital gain.
The assessee during the year sold depreciable assets held more than 36months and showed it as Long Term Capital Gain and adjusted the same with brought forward Long term Capital Loss.
The assessing officer did not agree and treated the same as Short term capital Gain and did not allow the set off of Short Term Capital Gain with Long term Capital Losses.
The taxpayer relied on Bombay High Court decision in case of ACE builders (P) Ltd and appealed against the order of the Assessing Officer.
THE RULING BY THE TRIBUNAL
The Tribunal observed that section 50 was a deeming fiction and it is because of this if a Long Term Depreciable Capital asset is transferred then Short Term Capital Gains arises.
But as per the rulings by Supreme Court deeming fiction provision are to restricted to that particular computation and not more than that.
So after the computation under section 50 the function of the provision of the said section comes to an end and the capital gain so determined shall be dealt with as per the other provisions of the Act.
The Tribunal relied on the case of Ace Builders and held that such Short Term Capital Gain can be set off with brought forward Long Term Capital Losses.
CONCLUSION
It is a very welcome decision by the Mumbai Tribunal where the Tribunal has held that the brought forward long term capital losses can be set off against the gains arising from sale of depreciable assets held for more than 36 months even if such gains were deemed as short term capital gain under section 50.
According to this case it is crystal clear that if the assessee will not claim depreciation then on transfer of Depreciable assets LTCG may be arised.
LTCG does not depend upon whether it is depreciable or not, its depend upon Holding period of Assets.
Another view may be taken that depreciation cannot be claimed unlees the assets is put to used(As given in Income Tax) hence if an assets in not put to used more than 36 months and then the same is sold then LTCG will arise.
So i think we dont restirct ourself upto the provision of section 50, we are going to be a market maker and professinalist so we have to taken all the considerable effort to understand the law and their impact.
Thank U all.
Hope that u guys think beyound.
CAclubindia
