Capital gain arising out of sale of commercial property

The following judgement of Tribunal can be helpful

Smt. Beena Kak vs Income Tax Officer on 5 December, 2000

ORDER S. R. Chauhan, J.M.

According to section 50 of Income tax act if an assessee has sold a capital asset forming part of block of assets (building, machinery etc) on which the depreciation has been allowed under Income Tax Act, the income arising from such capital asset is treated as short term capital gain.

Indexation benefit is not available for Short Term Capital Gain.

No depreciation was charged on land. can there be indexation of only land and consider that part as long term ?

Yes In such cases the capital gain on land and building should be calculated separately.

The profit on sale of land would be Long Term Capital Gain (LTCG) as the land is sold after a holding period of more than 36 months. 

The Supreme Court has held in (1967) 65ITR 377 that depreciation is available on the value of building and not on the value of plot. Considering the above decision of Supreme Court, the Rajasthan High court in (1993)201 ITR 442 has held that Plot and building are different assets. If the assessee has purchased plot more than 3 years back and constructed building on it less than 3 years back then the gain arising on sale of plot shall be long term capital gain and the benefit of indexation shall be given on it whereas the gain arising on sale of building shall be short term capital gain and will be added to the income of the assessee. Therefore both should be calculated separately.