Section 50 computation fiction does not change asset character, preserving set-off of long-term capital losses.

Section 50 is a special computation provision for depreciable assets and creates a legal fiction only for computing capital gains under sections 48 and 49; it does not change the intrinsic character of a long-term capital asset into a short-term capital asset. For section 74, the character of the underlying asset remains relevant, so the deeming fiction cannot be extended to deny set-off of current year's and brought forward long-term capital losses. The stated jurisdictional precedent supports this limited operation of section 50. On that basis, the assessee is entitled to set off long-term capital losses against the gain from transfer of the depreciable asset.

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Issues: Whether gain computed under section 50 of the Income-tax Act, 1961 on transfer of a depreciable asset can be treated as short-term capital gain for all purposes so as to deny set-off of current year's and brought forward long-term capital losses under section 74.

Analysis: Section 50 is a special computation provision for depreciable assets and creates a legal fiction only for the mode of computing capital gains under sections 48 and 49. The fiction is confined to the computation of the gain and does not convert the underlying long-term capital asset into a short-term capital asset. Where the transferred asset is admittedly a long-term capital asset, the character of the asset remains relevant for section 74, and the deeming provision cannot be expanded beyond its intended purpose. The binding jurisdictional precedent holds that section 50 does not alter the intrinsic nature of the asset and cannot be used to deny statutory set-off otherwise available under the Act.

Conclusion: The assessee was entitled to set off current year's and brought forward long-term capital losses against the gain arising from transfer of the depreciable asset, and the Revenue's objection was rejected.

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