Case Law Details
Short term capital gains on transfer of depreciable assets held for more than 36 months u/s. 50(2) of the Act can be set-off against brought forward loss from other long term capital assets
Recently, the Mumbai bench of Income-tax Appellate Tribunal (the Tribunal) in the case of Manali Investments Vs. ACIT (ITA No. 6646/Mum/2008 A.Y.2005- 06)) held that the short term capital gains arising from the transfer of depreciable assets held for more than 36 months under Section 50(2) of the Income-tax Act, 1961 (the Act) can be set-off against the brought forward long term capital losses under Section 74 of the Act. Further, Section 50 of the Act is a deeming provision and the same has to be restricted only to the computation of capital gain of depreciable assets. Once the computation part is over, the operation of Section 50 of the Act comes to an end and the capital gains so determined shall be dealt with as per the other provisions of the Act.
Facts of the Case
• The taxpayer was engaged in the business of investment and finance. The tax department contended that since taxpayer claimed full depreciation on the assets sold, their transfer would attract the provision of section 50 of the Act and as a result the gain would be deemed to be short term capital gain.
• During the year under consideration, the taxpayer sold depreciable capital assets which were held for more than three years for a total consideration of INR 14.599 million. The capital gain on the same was shown as long term capital gain, which was set off against the brought forward loss from long term capital assets under section 74 of the Act.
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