Applicability of STCG or LTCG ?

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This query is : Resolved

Pranaav P (Querist)

11 January 2008 Dear Sir,
I have a query regarding applicability of deemed STCG on depreciable assets.
FACTS of the case:
X Pvt Ltd have a factory building constructed in February 1990 for Rs.10 lacs on a leasehold land (rights for 99 years). The building was used for production purposes upto September 2000. Hence till A.Y.2001-02, we were allowed depreciation under I.T.Act. The closing WDV on March 2001 was Rs.6 lacs.
From 2001 the building was let out for rent and income was considered under head House Property.
In June 2007, the building was sold for Rs.30 lacs.
QUERY : Whether we can claim LTCG with indexation from 1990 on WDV, claiming the asset to be no more depreciable and as a capital asset; and also claiming that the source of income generated from the asset has changed ?
If not what should be the taxability of the case ?

Thanking you for your reply.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

15 January 2008 You have to first clarify whether the WDV of block of fixed assets in the category of buildings (it is possible that the company may have a number of buildings) is a positive figure or negative figure, after crediting it with sale proceeds.

Pranaav P

Pranaav P (Querist)

16 January 2008 It is the only building in the block and also from 2001-02 the depreciation was disallowed. Can we claim that the building is no more a depreciable asset, as it has started generating income from different SOURCE of income (Rental - House Property)?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

29 February 2008 If from 2001, the asset has been considered under House property, then LTCG can be claimed.

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