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?

AI Summary

Shop premises treated as capital assets; depreciation applies but section 44AD taxpayers who didn't claim cannot retroactively claim A shop premises used in business is a capital asset; normally depreciation is available under income-tax provisions for tangible fixed assets, and any depreciation actually claimed adjusts tax consequences on sale. Where the taxpayer reported income under the presumptive scheme (section 44AD) and did not and could not claim depreciation, depreciation cannot be retroactively treated as claimed for prior years; capital gains will generally be computed by reference to the actual cost of acquisition (with indexation if applicable) and sale consideration. If the asset formed part of a depreciable block and depreciation was previously claimed, special recapture and block-adjustment rules apply, so seek specific tax advice.