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TMI Blog2025 (4) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant. On the facts and circumstances of the case and in law, long term capital gains computed on sale of Pragee Office ought to be accepted. 2. Without prejudice to ground no. 1 above, Ld. CIT(A) has erred in confirming action of the AO of computing notional depreciation while computing gain on sale of Pragee Office, without appreciating the fact that no such depreciation was claimed by the appellant in the return of income. On the facts and circumstances of the case and in law, no notional depreciation ought to be computed while computing the capital gains on sale of Pragee Office. 3. Without prejudice to the ground no.1 & 2 above, Ld. CIT(A) has erred in confirming the action of the AO for computing tax on gain on sale of Pragee office at 30%, without considering the fact that the asset is held for more than 36 months, therefore, tax has to be computed at 20% being long-term capital assets. On the facts and circumstances of the case and in law, tax rate of 20% ought to be applied while computing tax on gains on sale of Pragee Office. 4. Ld. CIT (A) has erred in confirming the action of the AO to disallow Rs. 2,79,818/- towards management fees paid to AIF. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firming the action of the AO of not allowing set off of brought forward long-term capital loss of Rs. 1,63,34,215/-against the short-term gain computed on depreciable assets under section 50 of the Income-tax Act, 1961. On the facts and circumstances of the case and in law, setoff of brought forward long- term capital loss ought to be allowed against the short-term capital gains computed on depreciable assets." 4. The Applicant most humbly submits that the Hon'ble Tribunal has power to admit the additional grounds in view of the full bench decision of the Bombay High Court in the case of Ahmedabad Electricity Co Ltd Vs. CIT [1993] 199 ITR 351 (Bombay). 5. The Applicant further humbly submits that admission and adjudication of the above additional ground of appeal is necessary in the interests of justice and for complete and proper disposal of the appeal filed by the Applicant." 3.1. From the above, sum and substance of the additional ground raised is that assessee claims set off of short-term capital gain computed u/s.50 against brought forward long-term capital loss. From the prayer made above, we note that all the facts and material relating to the aforesaid claim are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed part of gross block of assets used by the assessee in his business on which depreciation was claimed up to Assessment Year 2003-04. According to him, merely because business operations were not carried out, the capital asset would not cease to be a business asset. He thus, recomputed the capital gain by applying provisions of section 50 to arrive at a short-term capital gain of Rs. 1,36,60,649/-. While computing this short-term capital gain, he computed notional depreciation from Assessment Year 2004-05 to Assessment Year 2016- 17 and reduced the WDV on 31.03.2003 from Rs. 33,02,106/- to WDV as on 31.03.2016 for Rs. 8,39,351/-. 6. As noted, there is no dispute about the fact that impugned property was used by the assessee for the purpose of his proprietary business and depreciation was claimed thereon. Assessee contends that since he had discontinued the business, he stopped claiming depreciation and treated the said property as capital asset in his personal balance sheet. On this contention, we observe that ld. CIT(A) has analysed the copies of return of income, computation of income and profit and loss account and trading account from Assessment Year 2004-05 onwards till Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were set off against capital gain / income from other sources in certain years, even though depreciation on the impugned property was not claimed. He also noted from the profit and loss account that up to Assessment Year 2008-09, assessee carried on the business activities under the name and style of M/s. Mangal Textiles. Ld. CIT(A) by placing reliance on the decision of Hon'ble Supreme Court in the case of Sakthi Metal Depot [2011] 130 taxmann.com 238 (SC) concluded that sale of assets held once as business asset on which depreciation had been claimed or was allowable even if not claimed, then even after discontinuation of the business, gain on sale of said asset shall be taxable u/s.50 of the Act. On the claim of benefit of indexation, while computing capital gain by the assessee, ld. CIT(A) upheld the view of ld. Assessing Officer by not giving the benefit of lower rate of tax u/s.112, taking note of the position that capital assets were held by the assessee for more than three years. 7. In the present set of facts and taking note of the observations and findings of the authorities below, we note that section 50 provides for assessment of depreciable asset in respect of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as the assessee continued business, the building forming part of the block of assets will retain it's character as such, no matter one of two of the assets in one or two years not used for business purposes disentitles the assessee for depreciation for those years. In our view instead of selling the building, if the assessee started using the building after two years for business purposes the assessee can continue to claim depreciation based on the written down value available as on the date of ending of the previous year in which deprecation was allowed last." [emphasis supplied by us by underline] 7.2. Hon'ble Supreme Court did not find merit in the appeal filed by the assessee, i.e. Sakthi Metal Depot, since the reasoning given by the Hon'ble High Court commended to the Hon'ble Supreme Court. Thus, we hold that capital gain has to be computed u/s.50 of the Act. However, for the purpose of computing the capital gain, the written down value of the impugned property is to be taken as on 31.03.2003, i.e. Rs. 33,02,106/- which was arrived at in the Assessment Year 2003-04 when depreciation for the last time was claimed. Ld. Assessing Officer has computed the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settled position of law is that section 50 only substitutes computation provisions as per section 48 and 49. It has no relevance with respect to application of section 74, which deals with carry forward and set off of long term capital loss, as well as section 112 dealing with rate at which tax is to be levied on such capital gains. 8.1. For the first aspect in respect of section 74, we make a useful reference to the decision of Hon'ble Jurisdictional High Court of Bombay in the case of CIT vs. Manali Investments [2013] 39 taxmann.com 4 (Bom) whereby Hon'ble Court up held the claim of assessee to set off its long term capital loss in terms of section 74 against long term capital gain on sale of depreciable asset. It was held that short term capital gain computed on long term depreciable asset can be set off against long term capital loss. For this, Hon'ble Court followed its earlier decision in the case CIT Vs. Ace Builders [2006] 281 ITR 210 (Bom) wherein it was held that "by virtue of section 50 of the Act, only the capital gains is to be computed in terms thereof and be deemed to be short term capital gain. However, this deeming fiction is restricted only for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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