Capital Gain on Sale of Shop Premises

[Mihir Modak]

The shop premises were used as retail store for many years. The income tax return is filed under 44AD for all past years. Accordingly no depreciation was shown separately in returns. Now the shop is sold. whether it will be considered as depreciable asset for calculation of capital gains?

[Rajan Kumar and associates]

As per Sec. 44AD(3) of the Income Tax Act, 1961 - The WDV of any asset shall be deemed to have been calculated and actually allowed the deduction.  Hence the shop will be considered a depreciable asset for capital gains calculation, even though you did not show separate depreciation in your income tax returns filed under section 44AD.

AI Summary

Depreciable asset treatment affects capital gains calculation despite presumptive taxation and absence of separate depreciation. The shop premises must be treated as a depreciable asset for capital gains computation because, under the presumptive taxation framework, the written down value of assets is deemed to have been calculated and depreciation deemed allowed, even if separate depreciation was not shown in earlier returns.