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2022 (3) TMI 1508 - AT - Income TaxShort Term Capital Gains u/s. 50 - assessee submitted before the AO that the sold property was part of block of assets as defined u/s 2(11) of the Act and that the assessee was claiming depreciation on the said building until the previous financial year - CIT(A) upheld the decision of the AO stating that the asset sold is no longer part of the block of assets, as no depreciation was claimed on the asset and hence the gain arising out of the sale of asset has to be treated as short term capital gains - HELD THAT:- From the definition it is clear that all the assets falling under the same class and for which the same rate of depreciation is prescribed, constitute one block of asset. In assessee’s case, the let out building against which no depreciation is claimed i.e. the building with NIL depreciation is grouped under the block. The income from letting out of these buildings is already assessed as income from house property against which statutory deduction u/s 24 is already allowed. Hence in our considered view buildings that are let out cannot be part of the block of assets as defined u/s.2(11) of the Act. The asset other than the asset sold in the block is the ‘Factory Building’. The rate of depreciation for factory building is same as that of the other building used for the purpose of the business and the factory building belongs to the same class of asset. Therefore it is correct to group the factory building as forming part of the block of assets along with other building used for the purpose of business. In the fixed asset schedule submitted, we notice that that the value of the factory building and that the value of the block is not exhausted after reducing the sale value of the building Dalamal Towers. The contention of the AO and CIT(A) that there is no depreciation asset appearing in the block is not correct basis the fact that the factory building belonging to the same block is a depreciable assets in the block. The fact that no depreciation is claimed during the year under consideration for the assets in the block viz., Dalamal Towers & Factory Building, does not remove the assets from the block. An asset gets removed from the block when the asset was sold or discarded or demolished or destroyed during the relevant previous year as provided in sections 43(6)(c)(i)(b) and 32(1)(iii) of the Act. The value of the block of asset under the class of assets ‘Building’ is more than the sale value of building Dalamal Towers, we hold that the assessee is right in reducing the sale value of the building from the value of the block of assets u/s.32 of the Act and that no short term capital gain arises on sale u/s.50 of the Act. Hence we allow the appeal in favour of the assessee.
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