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Tax Publishers Set off of Long term capital losses against short term capital gains from depreciable short term capital asset (residential flat) *Facts:* Assessee owned a residential flat as a depreciable asset. The flat was sold and the capital gain was offered as short term capital gain (being a depreciable asset) under section 50. The assessee also had brought forward long term capital losses which was claimed as set off against the short term capital gain which had risen from the depreciable capital asset (residential flat). Plea of the assessee was the deeming fiction of taxing a depreciable asset as short term was only a limited provision for taxing purposes and what is factually a long term immovable property such as a residential flat was factually a long term asset. Thus the offsetting of brought forward long term capital losses against the deemed short term capital gain was correct. This plea was acceptable to the AO and orders were passed. Subsequently the PCIT reopened the case questioning the same under section 263. On appeal by the assessee - Held in favour of the assessee that the order of the AO was correct and needs no intervention. The reopening was unwarranted *Applied:* Polestar Industries in [Tax Appeal No. 747 of 2013, dt. 7-10-2013] : 2014 TaxPub(DT) 1958 (Guj-HC) Aditya Medisales Ltd. in [Tax Appeal No. 730 of 2013, dt. 2-9-2013] : 2013 TaxPub(DT) 2746 (Guj-HC) Commissioner of Income Tax v. V.S. Dempo Company Ltd. (2016) 74 taxmann.com 15 (SC) : 2016 TaxPub(DT) 4318 (SC), "Section 50 creates a deeming fiction, treating depreciable assets as short term capital gains, and this deeming fiction is only for mode of computation of capital gain. That such depreciable assets, which otherwise qualify as long term assets cannot be denied other benefits due to long term capital assets. That accordingly the short term capital gain returned by the assessee, relating to depreciable assets was in the nature of long term capital gain and thus entitled to set off of brought forward long term capital losses against the same". *Ed. Note:* The principle in the decision of allowing set off of long term capital losses against short term capital gain needs to be noted. *Case:* National Dairy Development Board v. Pr. CIT 2023 TaxPub(DT) 4223 (Ahd-Trib)

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Set off of Long term capital losses against short term capital gains from depreciable short term capital asset (residential flat)

Facts:

Assessee owned a residential flat as a depreciable asset. The flat was sold and the capital gain was offered as short term capital gain (being a depreciable asset) under section 50. The assessee also had brought forward long term capital losses which was claimed as set off against the short term capital gain which had risen from the depreciable capital asset (residential flat). Plea of the assessee was the deeming fiction of taxing a depreciable asset as short term was only a limited provision for taxing purposes and what is factually a long term immovable property such as a residential flat was factually a long term asset. Thus the offsetting of brought forward long term capital losses against the deemed short term capital gain was correct. This plea was acceptable to the AO and orders were passed. Subsequently the PCIT reopened the case questioning the same under section 263. On appeal by the assessee -

Held in favour of the assessee that the order of the AO was correct and needs no intervention. The reopening was unwarranted

Applied:

Polestar Industries in [Tax Appeal No. 747 of 2013, dt. 7-10-2013] : 2014 TaxPub(DT) 1958 (Guj-HC)

Aditya Medisales Ltd. in [Tax Appeal No. 730 of 2013, dt. 2-9-2013] : 2013 TaxPub(DT) 2746 (Guj-HC)

Commissioner of Income Tax v. V.S. Dempo Company Ltd. (2016) 74 taxmann.com 15 (SC) : 2016 TaxPub(DT) 4318 (SC),

"Section 50 creates a deeming fiction, treating depreciable assets as short term capital gains, and this deeming fiction is only for mode of computation of capital gain. That such depreciable assets, which otherwise qualify as long term assets cannot be denied other benefits due to long term capital assets. That accordingly the short term capital gain returned by the assessee, relating to depreciable assets was in the nature of long term capital gain and thus entitled to set off of brought forward long term capital losses against the same".

Ed. Note: The principle in the decision of allowing set off of long term capital losses against short term capital gain needs to be noted.

Case: National Dairy Development Board v. Pr. CIT 2023 TaxPub(DT) 4223 (Ahd-Trib)