The Kolkata bench of ITAT recently announced that the depreciable assets which had been held for more than 36 months prior to its sale, does not lose its character of being a long term capital asset, even though it might get taxed as short term capital gain in terms of deeming fiction provided u/s 50 of the Act.
The bench comprising Aby. T. Varkey, JM & M.Balaganesh, AM said that the assessee is indeed entitled to set off the brought forward long term capital loss against the deemed short term capital gain.
During the course of proceedings, the assessee claimed set off of Long Term Capital Loss arising on sale of land, against the deemed short term capital gain arising out of sale of residential property.
The AO in the draft assessment order denied the set off of above matter computed u/s 50 of the Act and by applying the provisions of section 74 of the Act, which permitted set off of long term capital loss only with long term capital gains.
The same was upheld by the DRP and aggrieved assessee went for an appeal before the tribunal. While observing the records, the ITAT held that the depreciable assets which had been held for more than 36 months prior to its sale, does not lose its character of being a long term capital asset, even though it might get taxed as short term capital gain in terms of deeming fiction provided u/s 50 of the Act.
The tribunal bench relied on the decision of High Court in the case of CIT vs Manali Investment wherein held that short term capital gain computed u/s 50 of the Act on long term depreciable assets can be set off against long term capital loss u/s 74 of the Act.
Accordingly bench allowed the appeal of assessee and granted the permission of set off the brought forward long term capital loss against the deemed short term capital gain.
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