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2011 (2) TMI 1433 - AT - Income TaxComputation of Capital Gain - LTCG or STCG - addition u/s 50 - Cost Indexation Benefit - assessee had stopped claiming depreciation in the income tax return - Assessee treated a flat as fixed asset in balance sheet - claimed the benefit of cost indexation while computing the capital gains on sale of that flat - whether the character of the asset did change and the asset became a fixed asset or investment and ceased to be a business asset? - CIT(A) noted assessee erred in not considering income from flat as business income. The sale gave rise only to short term capital gains. As regards the cost indexation benefit, the benefit was available only where an asset held as investment is realized HELD THAT:- The order in SAKTHI METAL DEPOT VERSUS INCOME-TAX OFFICER. WARD-2 [2004 (11) TMI 507 - ITAT COCHIN] is applicable where in held that if no depreciation had been claimed or allowed in respect of the asset, even though for an earlier period depreciation was claimed and allowed, from the year in which the depreciation claimed was discontinued, the asset would cease to be a business or depreciable asset and if the asset had been acquired beyond the period of thirty six months from the date of sale, it would be a case of long term capital gains. In our humble understanding, the ratio of the order appears to be that the asset had ceased to be a business asset and had become an investment. The moment the assessee stopped claiming depreciation in respect of the flat and even let out the same for rent; it ceased to be a business asset. In the present case there is also no dispute that the flat under consideration was held for a period of more than thirty six months and therefore a long term capital asset. Accordingly the capital gains is directed to be assessed as long term capital gains after allowing the benefit of cost indexation as claimed by the assessee - Decision in favour of Assessee Applicability of Section 112 - In our view the capital gains are long term capital gains, the assessee’s contention regarding application of Section 112 is correct. However, since the entire capital gains will then be exempt under section 54EC. Computation of Minimum Alternative Tax u/s 115JB - CIT(A) confirmed the action of AO in not reducing the profit earned by the petitioner on sale of flat for the purposes of computing the book profits u/s 115JB - HELD THAT:- It is agreed by the parties that this ground is covered in favour of the department by the order of the Special Bench in the case of RAIN COMMODITIES LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), HYDERABAD [2010 (7) TMI 794 - ITAT HYDERABAD]. Accordingly the orders of the departmental authorities in respect of this ground are confirmed - Decision Against Assessee
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