PCIT Vs Swetha Realmart LLP (Karnataka High Court)
Mere nature as depreciable asset insufficient without actual Depreciation claim to apply sec 50- Karnataka High Court
In this case, the dispute revolved around whether Sec 50 , which governs taxation on capital gains from the sale of depreciable assets, should be applied in the assessee’s case.
BACKGROUND:
Assessee sold a property comprising land & a constructed shed/building. Dept argued that since the property included a depreciable asset (the building), any profit from the sale should be treated as short-term capital gain u/s 50, regardless of whether depreciation was actually claimed.
AO & CIT(A) had accepted this view & computed a short-term capital gain.
On appeal Tribunal[ ITA No.: 2435/Bang/2019 dt 09-12-2021] noted that the asset was brought in as initial capital by partner to the Partnership firm. On subsequent conversion of the firm to Pvt. Ltd. company, the alleged land was shown as fixed asset in the Balance Sheet. Further the impugned asset has been nomenclatured as vacant land in the Balance Sheet. There is nothing on record to establish that the sheds standing on the impugned asset formed part of block of assets on which depreciation was claimed. Tribunal noted that though the shed on the land was depreciable asset, the financial statements for year under consideration & preceding assessment year suggests that no depreciation was claimed by assessee. Tribunal ruled in favour of the assessee, holding that Sec 50 is not applicable, & the gain is Long Term Capital Gain, not Short Term, placing reliance on the following decisions :
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