TMI Blog2017 (8) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... of asset that too with Zero depreciation rate should not change nature of the asset. Ultimately the facts remain that no benefit of Depreciation is claimed and the asset is held for more than 3 years then the same should be treated as Long term capital and the gain on sale of such asset should be treated as Long term capital gains. The intention of Section 50 of the Act is clear to tax the business asset for which benefit has been claimed by way of depreciation. Accordingly, allow the claim of the assessee. - ITA No.759/Mum/2017 - - - Dated:- 23-8-2017 - SRI MAHAVIR SINGH, JM For The Assessee : None For The Revenue : Shri T.A. Khan, DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the order of CIT(A)-40, Mumbai, in appeal No. CIT(A)-40/IT-731/2014-15 dated 30-05-2016. The Assessment was framed by ITO Ward-29(1)(5) Mumbai for the A.Y. 2009-10 vide order dated 03-02-2015 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter the Act ). 2. At the outset, it is noticed that this appeal is time barred by 89 days and assessee has filed affidavit along with application for condonation of delay s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm Capital Gain and making addition 12,47,074/- to the total income. 5. The facts relating to this issue are that the assessee sold shop at Mulund for a total consideration of ₹ 25 lakhs. The assessee declared long term capital gain as the property was purchased on 02-06-2003 at a total cost of ₹ 12,28,670/-. The assessee computed the long term capital gain and declared in the return of income. According to AO, this shop is forming part of block of assets and accordingly, he invoked the provisions of section 50 of the Act by treating the asset as deemed depreciable asset under section 32 of the Act and computed the capital gains under the head of short term at ₹ 12,71,330/- Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO vide Para 6.2 of his appellate order as under: - 6.2 I have considered the reasoning of the Ld. AO in the assessment order and the submission of the appellant. As per explanation 5 inserted to section 32 with effect from AY 2002-03 depreciation shall be allowed whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income. Since the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee from the very beginning kept in the i.e. schedule of fixed assets, as per schedule to the balance sheet as on 31-03-2009 and this shop remain at the same value as was purchased from the very beginning and even now, the declared value was at ₹ 12,28,670/-. Now I have to examine whether this gain is long term or short term? I find that as per Section 2 of the Act various terms used in the Act, Section 2(14) of the Act defines capital asset' and section 2(29A) of the Act defines long term capital asset and section 2(29B) of the Act defines long term capital gain' Similarly section 2(42A) of the Act defines short term capital asset' and section 2(42) of the Act defines 'short term capital gain'. As per S.2(42A) of Act states, unless the context otherwise requires, the term 'short-term capital asset means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer. The AO was of the view that it is a business asset and forming pan of block of assets, sale consideration of asset (shop) cannot be treated as long term capital gains arising out of sale of long term capital asset and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held that once Tribunal had recorded a finding of fact that plant and machinery, which is covered by section 50 of the Act, would be a depreciable asset and not one on which no depreciation was ever claimed, then such assets, which were not depreciable, could riot ever be assessed under section 50 of the Act. Since assessee held assets as defined under section 2(28A) of the Act and capital gain arising on transfer is required to be assessed as long term capital gain. 7. Similarly, jurisdictional High Court in the case of CIT vs. Ace Builders Pvt. Ltd. [2006] 281 ITR 210 (Bombay), it is held that section 54E of the Act grants exemption from payment of capital gains tax, where the whole or pan of the net consideration received from the transfer of a long term capital asset is invested or deposited in a specified asset within a period of six months after the date of such transfer. It is true that section 50 of the Act is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions In other words, where the long term capital asset has availed d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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