Depreciation allowed on glow sign boards and oxygen cylinders, sale proceeds not taxable under Section 50

The Gujarat HC ruled in favor of the assessee regarding depreciation claims on glow sign boards and oxygen gas cylinders. The AO had rejected depreciation claims, arguing transactions on the last day of accounting year don't constitute business and glow sign boards are advertising material, not plant. The ITAT held sale proceeds of depreciated assets should be taxed as short term capital gains under Section 50. However, the HC disagreed, following Nectar Beverages SC precedent, and held that assets purchased before certain dates don't form part of block assets, making sale proceeds not taxable as balancing charge under Section 50. The appeals were disposed of favoring the assessee.

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Issues:
1. Interpretation of tax law regarding the taxation of sale proceeds of assets claimed for deduction under Section 32(1)(ii) of the Income Tax Act.
2. Determination of whether sale proceeds of assets, on which 100% depreciation was claimed and allowed, should be taxed as short-term capital gain under Section 50 of the Act.

Analysis:
1. The case involved two Tax Appeals arising from a common order passed by the Income Tax Appellate Tribunal regarding the Assessment Year 1993-94. The main question of law was whether the sale proceeds of assets, on which deduction under Section 32(1)(ii) of the Act was claimed and allowed, should be taxed as short-term capital gain under Section 50 of the Act.
2. The appellant- assessee claimed depreciation on Oxygen Gas Cylinders and Glow Sign Boards purchased for leasing to earn rental income, treated each unit as an item of plant, and claimed 100% depreciation under Section 32(1)(ii) of the Act.
3. The Assessing Officer rejected the depreciation claim, stating that the transaction on the last day of the accounting year cannot constitute business and Glow Sign Boards were not basic apparatus fulfilling the definition of plant.
4. The CIT(A) allowed the depreciation claim, stating that the transaction was within the law, and the appellant was entitled to the deduction of the whole cost of Glow Sign Boards under Section 32(1)(ii) of the Act.
5. The Tribunal upheld the CIT(A)'s decision, treating each Glow Sign Board as a plant. Another issue was the taxability of the sale proceeds of Gas Cylinders as short-term capital gain, which was confirmed by the CIT(A) and upheld by the Tribunal based on the decision of the Bombay High Court and fair concession by the assessee.
6. The appellant appealed to the High Court, arguing that the decision of the Bombay High Court had been reversed by the Supreme Court, stating that assets purchased before March 31, 1995, and claimed for 100% depreciation could not be taxed under Section 50 of the Act.
7. The High Court noted the Supreme Court's decision, which held that assets purchased before March 31, 1995, and depreciated at 100% did not form part of the block of assets and were not taxable as short-term capital gains under Section 50.
8. Consequently, the High Court allowed both Tax Appeals, holding that the sale proceeds of assets claimed for deduction under Section 32(1)(ii) were not required to be taxed as short-term capital gain under Section 50 of the Act, contrary to the Tribunal's decision.

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