Sale of Assets of Partnership firm

• Any gain or loss arising from the sale of depreciable assets (assets on which depreciation has been claimed) is always treated as short-term capital gain (STCG) or short-term capital loss, regardless of the period of holding.

• STCG = Sale consideration - WDV of block.

• This rule applies even if the asset was held for more than 24 or 36 months.

• Indexation is not available for depreciable assets under Section 50, even if they are held long-term.

✅ 1. Is it STCG or LTCG?

Applicable Section: Section 50 of the Income Tax Act.

• The factory gala is a depreciable asset, part of a block of assets.

• As per Section 50, even though the asset is held for more than 36 months, the gain will be treated as Short-Term Capital Gain.

📌 Therefore, this is STCG even though the asset was held for more than 30 years.

✅ 2. What will be the Cost of Acquisition?

• Since this is a depreciable asset, we use the WDV method, not indexation.

• The entire block may be considered to be extinguished if this was the only asset in the block.

If:

• Block ceases to exist (i.e., no asset left in the block after sale),

• Then per Section 50, STCG = Sale consideration - WDV of block.

So, Cost of Acquisition = WDV = ₹8,590

✅ 3. Is Indexation allowed?

❌ No. Indexation is NOT allowed on depreciable assets, even if held for long term.

This is because Section 50 overrides normal LTCG rules. It deems such gains always as STCG for depreciable assets.