Primary condition for applicability of section 50 of Act is that asset tran

 

IT : Primary condition for applicability of section 50 of Act is that asset transferred should be a depreciable asset on which depreciation was actually allowed under Act; this section is applicable only in respect of sale of a capital assets forming part of a block of asset in respect of which depreciation has been allowed

• As no rate of depreciation has ever been prescribed for land, it is not part of 'block of assets' as defined in section 2(11)

• As land in question was held from April, 2001 to August, 2005 for a period of more than 36 months (and as deeming provisions of section 50 are not applicable to transfer of land), surplus of sale price over indexed cost of acquisition was rightly shown as long term capital gains by assessee and exemption under section 54EC available since assessee had invested in REC Bonds

Related case law:

• Legal fiction created by statute under section 50 is only to deal capital gain as short term capital gain and not to deem asset as short term capital asset; therefore, it cannot be said that section 50 converts long term capital asset into a short term capital asset-Dy .CIT v. Bharat Enterprises [2011] 14 taxmann.com 110 (Mum. - Trib.)

[2012] 20 taxmann.com 197 (Delhi)
HIGH COURT OF DELHI

Commissioner of Income-tax-IV

v.

I.K. International (P.) Ltd.