Depreciable asset gains may remain long-term for rate purposes while computation follows written down value under section 50.

Section 50 applies a limited deeming fiction for depreciable assets and governs computation by reference to the written down value, but it does not change the asset's long-term character for rate purposes where the holding period is satisfied. On that basis, the gain on sale of the depreciable asset was treated as long-term capital gain, while the computation remained tied to the written down value rather than the original purchase cost. The claim for cost of improvement was rejected for want of documentary evidence, and prior depreciation barred revival of the original cost for indexation.

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Issues: Whether, on sale of a depreciable asset forming part of a block of assets, the gain was to be taxed as short-term capital gain or long-term capital gain, and whether the cost of acquisition/indexation had to be worked out on the basis of the original purchase cost or the written down value.

Analysis: Section 50 creates a limited deeming fiction for computing capital gains in the case of depreciable assets. That fiction does not alter the inherent character of the asset for all purposes of the Act. Where the asset had been held for the requisite period, the gain could be treated as long-term capital gain for rate purposes under section 112, while the computation under section 50 was to proceed on the basis of the written down value. In the absence of any documentary evidence for cost of improvement, that claim was rightly rejected. The assessee, having already claimed depreciation in earlier years, could not revive the original cost for indexation purposes.

Conclusion: The written down value was correctly adopted for computation, the gain was rightly assessed as long-term capital gain, and no interference was called for.

Ratio Decidendi: In the case of depreciable assets, section 50 governs computation through a limited deeming fiction, but it does not destroy the long-term character of the asset for rate purposes where the period of holding is satisfied; the written down value remains the proper base for computation.

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