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2013 (12) TMI 527 - AT - Income TaxSet off of capital loss from assets on which depreciation was claimed Long term capital loss against long term capital gain Held that - Following CIT Vs ACE Builders 2005 (3) TMI 36 - BOMBAY High Court - the deeming fiction under section 50 is restricted to section 50 only and the said fiction is restricted only to the mode of computation of capital gains contained in Sections 48 and 49 Following Komac Investments & Finance Pvt. Ltd Vs ITO 2011 (4) TMI 705 - ITAT MUMBAI - Although the gain is short term capital gain due to the fiction created by provisions of S. 50(2) the asset remains as long term capital asset - The brought forward long term capital loss can be set off against the capital gain on account of transfer of the depreciable asset which has been held by the assessee for more than 36 months thereby making the asset a long term capital asset Decided against Revenue.
Issues:
1. Allowance of set off of brought forward Long Term Capital loss against Long Term capital gain from the sale of depreciable asset. 2. Interpretation of provisions of Sec. 50 of the Income Tax Act. 3. Application of judicial decisions in similar cases to determine the outcome. Analysis: Issue 1: Allowance of set off of brought forward Long Term Capital loss against Long Term capital gain from the sale of depreciable asset. The Revenue appealed against the order of the Ld. CIT(A) directing the Assessing Officer to allow set off of brought forward Long Term Capital loss against Long Term capital gain arising from the sale of a depreciable asset. The Revenue contended that since depreciation had been claimed on the asset sold, the provisions of Sec. 50 should apply. The Assessing Officer disallowed the set off of brought forward long term capital loss against short term capital gains, leading to the appeal. Issue 2: Interpretation of provisions of Sec. 50 of the Income Tax Act. The Assessing Officer observed short term capital gains on the sale of mutual funds and deemed capital gains from the sale of depreciable assets. The dispute arose regarding the set off of brought forward long term capital losses against these gains. The Ld. CIT(A) referred to the decision of the Hon'ble Bombay High Court in CIT Vs ACE Builders (P) Ltd 281 ITR 210 to support the allowance of the set off, emphasizing that the deeming fiction under section 50 is restricted to the mode of computation of capital gains under Sections 48 and 49. Issue 3: Application of judicial decisions in similar cases to determine the outcome. The Ld. CIT(A) allowed the appeal of the assessee based on the decision in the case of CIT Vs ACE Builders (P) Ltd and other Tribunal decisions favoring the assessee. The Tribunal concurred with this view, citing the restriction of the deeming fiction under section 50 to the computation of capital gains. The Tribunal upheld the allowance of set off of long term capital loss against the income arising from the sale of depreciable assets, dismissing the Revenue's appeal. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the allowance of set off of brought forward Long Term Capital loss against Long Term capital gain from the sale of a depreciable asset based on the interpretation of Sec. 50 and relevant judicial decisions.
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