Depreciable asset capital gains are taxed under the applicable regime, and the higher rate was held unsustainable.

Section 50 applies to depreciable assets, but the rate of tax on the resulting short-term capital gain was held not to be exigible at the higher rate adopted by the Assessing Officer. The asset had been held beyond the prescribed period, and the applicable capital gains regime, as supported by settled Supreme Court authority, governed the taxation of the gain. The higher rate was therefore unsustainable, and the issue was decided in favour of the assessee.

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Issues: Whether the assessee was liable to tax short-term capital gains arising from transfer of a depreciable asset under section 50 of the Income-tax Act, 1961 at 30% instead of 20%.

Analysis: The asset had been held for more than the prescribed period and the controversy was whether the deeming provision governing depreciable assets justified taxation at the higher rate applied by the Assessing Officer. The rate issue was held to be covered by the settled legal position approved by the Supreme Court, which recognised that the gain in such circumstances is to be assessed in accordance with the applicable capital gains regime and not at the higher rate applied below.

Conclusion: The issue was decided in favour of the assessee and the higher tax rate was not sustainable.

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