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2017 (10) TMI 596 - HC - Income TaxSTCG - sale of depreciable assets - Applicability of provisions of section 50 on asset sold as ceased to be used for the purpose of the business - whether asset cannot move out of the ‘Block of Assets’? - Whether, the Tribunal was right in law in holding that an asset cannot move out of the ‘Block of Assets’, if depreciation was allowed to the asset some time in the past, even though depreciation was claimed for many years thereafter ? - Held that:- The assets being gala nos.210 and 211 were purchased as industrial galas together. The assessee claimed depreciation on the galas together and written down value was also shown together. Though depreciation has been allowed in the past on gala no.210 and plant and machinery in gala no.210 was shifted to gala no.211 and no depreciation was claimed thereon subsequently, nonetheless, the depreciation on block of assets stipulated in Section 2(11) is applicable. Both the galas are of the same nature. They form one class of assets. Once the depreciation has been granted on gala no.210 and even if business operations were not carried out therefrom, merely at the convenience of the assessee, it does not cease to be a business asset. The understanding of this provision and the concept, to our mind, conforms with the consistent view taken by the Tribunal earlier, and which has been upheld by this Court. We do not see how the provisions can be construed otherwise. To our mind, the Kerala High Court in case of Commissioner of Income Tax Vs. Sakthi Metal Depot (2010 (1) TMI 659 - Kerala High Court ), with respect, has rightly understood this concept and in the backdrop of the facts which are more or less identical. Section 50 has to be understood with reference to the general scheme of assessment on sale of capital assets. The Kerala High Court referred to the fact that the assets covered by Section 50 are depreciable assets forming part of block of assets, as defined in Section 2(11) of the I.T.Act. The components of Section 50 have also been, with respect, rightly understood in that decision. The Kerala High Court on reading of these provisions took the view that once the building was acquired by the assessee and in respect of which depreciation was allowed to it as a business asset, no matter the nonuser disentitles the assessee for depreciation for two years prior to the date of sale, still, this asset does not cease to be a part of block of assets. The character of such asset is not lost, according to Kerala High Court. In our view, therefore, the questions proposed by the assessee and forwarded for our opinion, have to be answered in favour of the revenue and against the assessee. Tribunal was right in law in holding that even in a case where there is evidence to prove that an industrial gala which was once used for business is not used for business for many years, the gain on sale thereof will attract the provisions of section 50 and will consequently be short term capital gain
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