Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

7 year old depreciated asset of company sold 54ec allowed?

Valerian Dsouza (Manager Audit & Taxation) (413 Points)

02 February 2015

A Service provider Company is selling Office premises purchased 10 years ago, regularly claiming depreciation.

1. No LTCG since it is depreciated Asset, right?

2. Thought it is taxed as STCG, whether company can invest bonds and calim benefit u/s. 54EC?

3. How else Company can save capital gain tax?

Thank you for your kind advice.

Reply
Follow
Share

6 Replies

Raphael (Chartered Accountant) (214 Points)
Replied 02 February 2015

Dear Sir,

1. Yes the gain is STCG in nature.

2. 54EC can be applied only in case of LTCG

3. If the company is buying a new asset of the similar block, then STCG can be avoided by keeping the block of depriciable asset alive.

2 Like

GULRAJ AILANI (CA) (234 Points)
Replied 02 February 2015

Benefit under section 54 EC can be claimed , there is case law on this. I cant remind the name of case law right now. But the conclusion of case law is that

a) section 50 only says the Taxability of depricable Asset i.e whether it can be taxable as Long term capital gain or short term capital gain. section 50 only says about taxability of Depriciable Asset. Section 50 does not classify it as a Short Term Capital gain or Long term Capital gain. For classification of Asset as Short term or Long Term Creitieria for 36 months can be applied even in case of Depricable Asset. Hence benefit under section 54For 54EC can be claimed.

3 Like

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 03 February 2015

Totally agreed with Gulraj...the case law he is pointed out is-CTI vs Rajeev Shukla,Hon'ble Delhi HC

1 Like

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 03 February 2015

Totally agreed with Gulraj...the case law he haspointed out is-CTI vs Rajeev Shukla,Hon'ble Delhi HC.

1 Like

Arif Ali (Apt Co Advisory) (1230 Points)
Replied 03 February 2015

Originally posted by : Valerian Dsouza
	A Service provider Company is selling Office premises purchased 10 years ago, regularly claiming depreciation. 1. No LTCG since it is depreciated Asset, right? 2. Thought it is taxed as STCG, whether company can invest bonds and calim benefit u/s. 54EC? 3. How else Company can save capital gain tax? Thank you for your kind advice.