Case Law Details
Palco Tex Fab Limited Vs ACIT (ITAT Delhi)
ITAT Delhi held that there is no transfer of assets in case of the shifting of plant & machinery from fixed assets to current assets. Accordingly, there is no question of determination of capital gain.
Facts- During the course of scrutiny proceedings, AO noticed that the assessee in his books has shifted some plant & machinery from fixed assets to current assets and booked impairment loss in the books. This impairment loss was suo moto disallowed by the assessee in the return of income. AO observed that the assessee had not made any corresponding effect of shifting of plant & machinery from fixed assets to current assets in the block of assets.
Accordingly, AO issued a notice asking the assessee to show cause as to why the said transaction be not treated as transfer in terms of section 43(6) of the Act treating it as assets discarded and accordingly calculate depreciation u/s. 32 of the Act, business loss and short-term capital gain/short-term capital loss u/s. 50 of the Act.
AO concluded that the discarded price of plant & machinery which needed to be reduced from the block of assets of plant & machinery and the resultant gain or loss shall have to be determined in terms of section 50 of the Act as short term capital gain or short term capital loss. Accordingly, AO determined the short-term capital gain u/s. 50 of the Act and reduced the claim of depreciation u/s. 32 of the Act while completing the assessment.
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