2003 (5) TMI 479 - AT - Income Tax

Summary

Issues Involved:
1. Whether a single asset can form a "block of assets" as per section 2(11) of the Income-tax Act, 1961.
2. Applicability of section 50 in respect of premises sold by the assessee when the business had ceased.

Summary:

Issue 1: Single Asset as a Block of Assets
The assessee trust ceased its business activities from the assessment year 1985-86 but retained possession of its assets, including a factory building acquired in 1978. The building was let out, and income was shown under "Income from other sources." Upon selling the premises, the income was declared as long-term capital gains. However, the Assessing Officer treated it as short-term capital gains u/s 50 due to prior depreciation claims. The Commissioner of Income-tax (Appeals) upheld this view.

The Tribunal examined whether a single asset could form a "block of assets" u/s 2(11). The term "block of assets" is defined as a group of assets with the same depreciation rate. The Tribunal concluded that even a single asset could form a block of assets, as excluding it would lead to absurd results, such as denying depreciation to an assessee owning a single asset used for business.

Issue 2: Applicability of Section 50
The assessee argued that the concept of a block of assets presupposes an ongoing business, and since the business had ceased, the asset should not form part of the block of assets. The Tribunal disagreed, stating that section 50 applies if depreciation has been allowed on the asset at any time under the Income-tax Act, 1961, or the Indian Income-tax Act, 1922. The Tribunal emphasized that the user of the asset during the year under consideration is not necessary for it to be part of the block of assets.

The Tribunal referred to previous decisions, including Artic v. Asstt. CIT and Oceanic Investment Ltd. v. Asstt. CIT, which supported the view that section 50 applies regardless of the asset's use in the year of sale. The Tribunal distinguished the case from Mrs. Rohita Subramaniam v. Deputy CIT, where the assessee never carried on the business.

Conclusion:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s order, confirming that the profit from the sale of the building should be assessed as short-term capital gains u/s 50. The assessee's appeal was dismissed.