Short Term/Long Term Capital Gain

[SITARAM AGRAWAL]

1. Pvt Ltd.Co. Closed business in the A.Y. 11-12.  No Business Transaction.

2. Co. Not dissolved.

3. Claimed depreciation up to 31-03-2010- Long Term Asset.

4. Depreciation Not claimed in the year -31-03-2011

5. Sales Long Term Asset in A.Y. 2012-13

6. Whether Taxable u/s.112 of Income Tax Act, 1961

Pl. Guide.

Thanks,

AGRAWAL SITARAM C.

[JOHN SHANNEL]

Dear Agrawal,

If depreciation is claimed for an asset then it is taxable as Short term Capital gain. But the Short Term Capital Gain can be adjusted against Long term Capital gain as per judgement given by tribunal in Manali Investment.

Please refer section 50, 50A, 50B.

Regards

John Shannel

[malhar shenoy]

Depreciable Assets of a company / Business if sold are deemed  as Capital Gain arising from Short term capital gain.

It will be Subject to section 50 , if they have remained in Block of assets for A.Y 2011-12.this will make no difference even if  no depreciation is claimed for year ended 31/03/2011, since it is depreciable asset in the Block.

It will be taxed to Normal tax provision & not u/s 112 even though it is long term capital assets .

Based on court judgement one can avail section 54 EC.

 

 

AI Summary

Depreciable asset sale treated as short-term capital gain and taxed under normal capital gains provisions, not long-term. Sale of a depreciable business asset that remained in the block of assets is treated as a short-term capital gain governed by depreciation recapture and block-of-assets rules, irrespective of whether depreciation was claimed in the immediately preceding year; such short-term capital gain treatment is subject to set-off against long-term capital gains and to applicable capital gains reinvestment reliefs where statutory conditions are met.