Which tax rate should be applied at capital gains on depreciable assets which are held for more than three years even when they have to be treated as STCG u/s 50?

Last updated: 04 July 2014

Court :
ITAT, Mumbai

Brief :
An assessee sold his depreciable business asset (a flat) for 35 Lakhs and computed capital gains u/s 50 at Rs. 12.52 Lakhs after deducting the WDV of the block of assets from the sale price received. However, as per the AO, the stamp duty value of the property was 59 lakhs. Therefore, he applied Section 50 C and computed capital gain accordingly as a short term capital gain. The assessee was of a view that Section 50C isn’t applicable for depreciable assets and also the asset was a long term asset hence the gains should be taxed at LTCG rates. It was held by the Tribunal that 50 C also applies to depreciable assets in view of United Marine Academy. Also, with respect to the tax rate, it was held that although for the purpose of computing the capital gain, the flat has to be treated as a STCG u/s 50, but for the purpose of the applicability of tax rate, it is to be considered as a LTCG if it is held more than 3 years.

Citation :
M/s Smita Conductors Ltd vs. The Deputy Commissioner of Income Tax, Mumbai