TaxTMI 
TaxTMI 
2026 (1) TMI 1122
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....Rs. 58,04,850/-. The case was selected for scrutiny. The assessment was completed by the Assessing Officer vide order dated 28.12.2018 passed under section 143(3) of the Act. 3. During the relevant previous year, the assessee derived income from salary, income from house property and income from other sources. It was noted by the Assessing Officer that the assessee had transferred two residential house properties and earned long-term capital gains aggregating to Rs. 73,15,174/-. Against the said long-term capital gains, the assessee claimed set-off of the following losses: i. Long-term capital loss on sale of shop amounting to Rs. 15,52,968/- ii. Long-term capital loss on sale of motor car amounting to Rs. 29,16,609/- iii. Short-term capital loss on sale of motor car amounting to Rs. 50,93,993/- After such set-off, the assessee computed a net capital loss of Rs. 22,48,397/- and carried the same forward to the subsequent assessment year. 4. The Assessing Officer observed that the two motor cars sold during the year appeared to be personal effects and not capital assets. The assessee was therefore called upon to explain as to why the losses arising....
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....ain earlier years, and that re-computation of depreciation and WDV for concluded years was not permissible. It was also contended that short-term capital loss was legally allowable to be set off against long-term capital gains in accordance with the provisions of the Act. 6. The CIT(A), after considering the material on record, upheld the action of the Assessing Officer insofar as the rate of depreciation at 30 percent was concerned and also upheld the re-computation of depreciation and opening WDV by invoking the provisions of Explanation 6 to section 43(6) of the Act. However, the CIT(A) accepted the assessee's contention on the limited issue of set-off and held that short-term capital loss was allowable to be set off against long-term capital gains. The Assessing Officer was accordingly directed to allow such set-off. The appeal was thus partly allowed. 7. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in making an addition of Rs. 57,62,206/-, to the t....
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....ra, the learned Departmental Representative (DR) strongly relied upon the order of the learned CIT(A). The learned DR drew our attention to the findings recorded by the Assessing Officer and affirmed by the CIT(A) to contend that depreciation stood deemed to have been allowed in respect of the motor cars, once the assessee himself claimed that the vehicles were business assets given on hire. It was submitted that the Assessing Officer was justified in invoking the provisions of the Act to recompute depreciation and the opening written down value, and thereafter apply section 50 for determining the character of capital gains arising on transfer of the said assets. According to the learned DR, the CIT(A) has correctly held that depreciation is not optional in nature and that Explanation 6 to section 43(6) permits re-computation of WDV by allowing depreciation for earlier years, even if the assessee had not claimed the same. 10. The learned DR further submitted that the contention of the assessee that no depreciation was claimed in earlier years does not alter the legal position, since the depreciation stood deemed to have been allowed once the assets were treated as business asset....
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....ase. Explanation 6 to section 43(6) is a machinery provision intended to deal with computation of written down value where depreciation has been actually allowed or ought to have been allowed under the Act. It cannot be invoked to artificially rewrite the history of concluded assessments by forcing depreciation into years where neither claimed by the assessee nor allowed by the Assessing Officer, especially when no corresponding business income from the alleged use of the asset has been offered. Explanation 6 cannot be stretched to create a legal fiction so as to trigger section 50 in a case where the foundational condition for applicability of section 50 itself fails. The provision does not override section 50, nor does it dilute the explicit phraseology employed therein. 15. The learned AR has rightly placed reliance on the judgment of the Hon'ble Karnataka High Court in PCIT vs. M/s Swetha Realmart LLP (successor in interest of M/s Swetha Health Research Pvt. Ltd.), in ITA No. 186 of 2023.The Hon'ble High Court has categorically laid down the law after examining section 50 in depth. The relevant extract, which squarely applies to the facts before us, reads as under: ....