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TMI Blog2012 (4) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of Section 50 - in the absence of any depreciation being allowed to the assessee in any of the previous years on the said plant and machinery (not in use),the gain arising on the transfer of the said asset is to be treated as long term capital gain – directed in adopting the indexed cost of acquisition in determining the income from long term capital gain on sale of plant and machinery (not in use) – against revenue. - IT Appeal No. 408 of 2011 (O&M) - - - Dated:- 26-3-2012 - M.M. KUMAR AND ALOK SINGH, JJ. JUDGMENT M.M. Kumar, J. The short issue raised in the present appeal preferred by the Revenue under Section 260-A of the Income Tax Act, 1961 (For brevity 'the Act') is whether the plant and machinery (not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case, the Hon'ble ITAT was right in law in observing that the plant and machinery not put to uses constituted individual and separate 'block of assets' within the meaning of section 2(11) of the Income Tax Act, 1961 ignoring the provisions of Section 32(1)(ii) of the Income Tax Act 1961 whereby depreciation is allowed only on a 'block of assets' for all similar assets with same prescribed percentages. 4. Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in not appreciating that the said new plant and machinery did not constitute a 'Depreciable Asset' within the meaning of Section 50 of the Income Tax Act, 1961 read with Explanation 5 to Section 32(1) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been claimed by the assessee-respondent. It is only on the sale of such assets, the gain arising on the said sale of assets minus the WDV of the asset is considered as short term capital gain in the hands of the assessee-respondent as per provisions of Section 50 of the Act. The assessee-respondent claimed that since no depreciation at any stage was claimed, Section 50 of the Act would not apply and the assets (not in use) acquired by the assessee-respondent would be assessable as long term capital gain according to the definition given in Section 2(29-B) of the Act. However, the Assessing Officer dismissed the rectification application vide order dated 21.06.2009 (A-2). 3. The assessee-respondent challenged the order passed by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed under the provisions of Sections 48 and 49 of the Act have been subjected to modification. In other words, where the full value of the consideration received or accruing as a result of transfer of the asset together with the full value of consideration received or accruing on account of transfer of other capital asset falling within the block of asset during the previous year, exceeds the aggregate of the following amount i.e. the expenditure incurred in connection with such transfer plus the written down value of the block of assets at the beginning of the previous and actual of any cost of any asset acquired during the year falling within the block of years and excess is deemed to be capital gain arising from transfer of short te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was claimed. However, no depreciation was claimed on the plant and machinery capitalized under the head 'plant and machinery (not in use)'. Even for the assessment year 2005-06, the value of the said plant and machinery (not in use) is reflected at Rs. 1.23 Crores. Only in the financial year 2005-06, the said plant and machinery has been reflected to have been sold for 2.23 Crores, resulting in profit of Rs. 1.10 Crores. It is, thus, clear that the assessee-respondent for all the earlier years, had reflected in its list of fixed assets plant and machinery under two separate heads, namely, plant and machinery on which depreciation has been claimed in the year prior to the financial year 1996-97; another asset was created capitalized as plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the previous years, the two assets are different from each other and plant and machinery acquired in succeeding years do not merge with the earlier block of assets of plant and machinery. The assessee having not claimed any depreciation on the same cannot be burdened with the provisions of Section 50 of the Income-tax Act as the basic requirement for the applicability of section 50 of the Act is the assets forming part of block of assets in respect of depreciation had been allowed under the Act. In the absence of any depreciation being allowed to the assessee in any of the previous years on the said plant and machinery (not in use), the gain arising on the transfer of the said asset being a long term capital asset in turn is long term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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