2017 (8) TMI 179 - AT - Income Tax

Depreciation clubbing of the two block of assets - Computation of short term capital gains u/s 50(1) - A.O. calculated short term capital gain on sale of plant and machinery @ 60% and plant and machinery @ 15% - as per assessee rate of depreciation on plant and machinery and motor cars are same (i.e. 15%) thus clubbing of the two block of assets is correct - Held that - Be it stated that a block of assets includes assets of all units of the assessee having the same rate of depreciation and not assets of only one unit. Block 5 on Plant machinery Any plant or machinery (not covered by Block 6, 7, 8, 9, 10, 11 & 12) and motor cars (other than those used in a business of running them on hire) acquired or put to use on or after April 1, 1990 says rate @ 15% We find that the issue in the instant case is covered by the judgment by the Hon ble Delhi High Court in Ansal Properties and Infrastructure Ltd. (2012 (4) TMI 469 - DELHI HIGH COURT) and M/s Filmkarft Productions (I) Ltd. (2015 (7) TMI 1193 - ITAT MUMBAI). We follow the above decisions and allow the appeal filed by the assessee.

Summary

Issues:
1. Disallowance under section 14A read with rule 8D.
2. Computation of short term capital gains under section 50(1) of the Act.

Issue 1: Disallowance under section 14A read with rule 8D:
The appeal concerns the disallowance under section 14A of the Income Tax Act, 1961, related to tax-exempt income like dividends and interest on UTI tax-free bonds. The appellant argued that no direct expenses were incurred for such income. The CIT(A) disallowed an amount under section 14A read with Rule 8D. The appellant contested the disallowance, particularly regarding interest paid on cash credit. The Tribunal noted the appellant's decision not to press Ground No. 1 related to this issue.

Issue 2: Computation of short term capital gains under section 50(1) of the Act:
The dispute involves the computation of short term capital gains on the sale of depreciable assets under section 50(1) of the Act. The AO observed assets in the motor vehicles block at 15% depreciation rate, leading to a denial of short term capital loss claim. The AO differentiated between motor cars and plant and machinery blocks due to historical depreciation rate differences. The CIT(A) upheld the AO's decision. The appellant cited relevant case laws to support merging the blocks due to the same depreciation rate. The Tribunal examined precedents and ruled in favor of the appellant, aligning with the decisions in Ansal Properties and Infrastructure Ltd. and M/s Filmkraft Productions (I) Ltd. The Tribunal allowed the appeal, emphasizing that assets with the same depreciation rate constitute a block of assets, supporting the appellant's position.

This judgment addresses the issues of disallowance under section 14A and the computation of short term capital gains under section 50(1) of the Income Tax Act, 1961. The Tribunal ruled in favor of the appellant regarding the computation of short term capital gains, emphasizing the concept of a block of assets with the same depreciation rate.