Amit Bholanath Mishra Vs ACIT (ITAT Mumbai)
Section 50 Not Invocable Without Depreciation: ITAT Mumbai Deletes ₹57.62 Lakh Addition on Sale of Cars
The Mumbai ITAT (A-Bench) allowed the assessee’s appeal for AY 2016-17, holding that Section 50 cannot be applied in the absence of any depreciation actually allowed on the assets. The assessee had sold two motor cars and claimed set-off of capital losses against long-term capital gains from sale of flats. The AO recomputed depreciation for earlier years, invoked Explanation 6 to Section 43(6), treated the cars as depreciable business assets, and denied the set-off by applying Section 50.
The Tribunal found that no depreciation had ever been claimed or allowed in prior years and no hire/lease income from the cars was offered, undermining the premise that the cars formed part of a depreciable block. It held that Explanation 6 to Section 43(6) cannot be used to retrospectively force depreciation into concluded years merely to trigger Section 50. Relying on the Karnataka High Court in PCIT v. Swetha Realmart LLP, the ITAT ruled that Section 50 operates only where depreciation has been actually allowed. Consequently, the ₹57.62 lakh addition was deleted and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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