2017 (8) TMI 1060 - AT - Income Tax

Sale of capital asset shop - LTCG V/S STCG - section 50C applicability - deemed depreciable asset - Held that - The benefit of section 54E of the Act will be available to the assessee irrespective of the fact that the computation of capital gains is done either under sections 48 & 49 or under section 50 of the Act. The contention of the revenue that by amendment to section 50 of the Act the long term capital asset has been converted into to short term capital asset is also without any merit. Therefore, it cannot be said that section 50 of the Act converts long term capital asset into a short term capital asset. In the present case of the Assessee has not charged depreciation on the asset (shop) and the asset is held for more than 36 months, this asset to be considered as long term capital asset. Further even though the asset is shown under the block of asset in the Balance sheet it is not a business asset and the depreciation rate is shown as 0% which implies that no depreciation has been charged on the asset. Just by mentioning in block of asset that too with Zero depreciation rate should not change nature of the asset. Ultimately the facts remain that no benefit of Depreciation is claimed and the asset is held for more than 3 years then the same should be treated as Long term capital and the gain on sale of such asset should be treated as Long term capital gains. The intention of Section 50 of the Act is clear to tax the business asset for which benefit has been claimed by way of depreciation. Accordingly, allow the claim of the assessee.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Treatment of sales of shop as short term capital gain.

Condonation of Delay:
The appellant filed an appeal 89 days late, citing inadvertence and work pressure on their Chartered Accountant. The Tribunal, considering the reasons and the concession by the Senior DR, condoned the delay and admitted the appeal.

Treatment of Sales as Short Term Capital Gain:
The appellant sold a shop and declared long term capital gain, but the AO treated it as short term capital gain under section 50 of the Income Tax Act. The CIT(A) upheld this decision, stating that the shop was a depreciable asset forming part of a block of assets. However, the Tribunal analyzed the facts and relevant legal provisions. It found that the appellant did not claim depreciation on the shop, and the asset was held for over 36 months. Referring to precedents, the Tribunal concluded that the shop should be considered a long term capital asset. Even though the shop was part of the block of assets, the absence of depreciation claims indicated its long term nature. The Tribunal emphasized that the intention of section 50 was to tax business assets with claimed depreciation benefits. Therefore, the Tribunal allowed the appeal, considering the shop as a long term capital asset, and ruled in favor of the assessee.

The judgment was delivered by Sri Mahavir Singh, JM, on August 23, 2017, in the case before the Appellate Tribunal ITAT Mumbai.