Once property let out it loses its character as a business asset

Nutech Engineering Technologies Ltd. Vs DCIT (ITAT Mumbai)

We noted that the assessee has claimed depreciation on the property sold as Lunkard Sky Max of 17 units in AYs 2010-11 and 2011-12. But from AY 2012-13 i.e. Financial Year 2011-12 out of 17 units 7 units were given on rent and accordingly rental income was shown as income from house property and no depreciation was claimed on this property. As argued by the learned Counsel for the assessee that once the property let out it loses its character as a business asset and no depreciation was allowable on it. This fact has not been denied by the Revenue.

Once, this is a fact that the moment assessee stopped claiming depreciation in respect of property and let out the same for rent, it ceases to be a business asset and thus, the profit or gain arising out of sale of property is to be considered as long term capital gain after Indexation.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-17, Mumbai, [in short CIT(A)], in ITA No. CIT(A)-17/IT-196/10878/16-17 dated 14.03.2018. The assessment was framed by the Asst. Commissioner of Income Tax, Circle 10(3)91) Mumbai (in short ACIT/ITO/ AO) for the A.Y. 2014-15 vide order dated 19.12.2016 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

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