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Tax Publishers Disposal of only asset in the block of asset and reconstruction of a new asset - Completion in subsequent year - Whether depreciation allowable - reinvestment under section 54 benefit whether permitted *Facts:* Assessee had a depreciable asset i.e. a hospital building on which capital gains had risen and new additions of new construction had commenced detailing as under - in Lakhs Sale price of old depreciable hospital building - Rs. 35.51 WDV of the above building - Rs. 2.42 Deemed Short term capital gains under section 50(1) - Rs. 33.09 lakhs New capital asset hospital cum residential building construction started - Rs. 78.39 Depreciation was claimed on Rs. 45.30 as the remaining block value (78.39 - 33.09) AO disallowed the depreciation citing that section 50(2) will need to apply as the only asset in the block was sold and the new construction was completed only in the financial year 2016 so the addition of asset cannot be allowed for now. On the alternative assessee claimed reinvestment benefit under section 54/54F citing that the new asset got invested in the said appeal year and the deeming provision of section 50 is only for the limited purpose of computing capital gains while the hospital building factually was a long term capital asset thus eligible for reinvestment benefit. On appeal by the assessee - Held in favour by remanding the case to verify and allow deductions of section 54/54F but on merits no depreciation will be allowable in the block during the assessment year in appeal. *Ed. Note:* The claim of section 54/54F if taken then only the balance investment of the hospital will be taken into block of asset concept, there cannot be a double deduction otherwise. *Case:* Nawab Pashasaheb Jamadar v. ITO 2023 TaxPub(DT) 6827 (Pun-Trib)

Tax Publishers

Disposal of only asset in the block of asset and reconstruction of a new asset - Completion in subsequent year - Whether depreciation allowable - reinvestment under section 54 benefit whether permitted

Facts:

Assessee had a depreciable asset i.e. a hospital building on which capital gains had risen and new additions of new construction had commenced detailing as under -

in Lakhs

Sale price of old depreciable hospital building - Rs. 35.51

WDV of the above building - Rs. 2.42

Deemed Short term capital gains under section 50(1) - Rs. 33.09 lakhs

New capital asset hospital cum residential building construction started - Rs. 78.39

Depreciation was claimed on Rs. 45.30 as the remaining block value (78.39 - 33.09)

AO disallowed the depreciation citing that section 50(2) will need to apply as the only asset in the block was sold and the new construction was completed only in the financial year 2016 so the addition of asset cannot be allowed for now.

On the alternative assessee claimed reinvestment benefit under section 54/54F citing that the new asset got invested in the said appeal year and the deeming provision of section 50 is only for the limited purpose of computing capital gains while the hospital building factually was a long term capital asset thus eligible for reinvestment benefit.

On appeal by the assessee -

Held in favour by remanding the case to verify and allow deductions of section 54/54F but on merits no depreciation will be allowable in the block during the assessment year in appeal.

Ed. Note: The claim of section 54/54F if taken then only the balance investment of the hospital will be taken into block of asset concept, there cannot be a double deduction otherwise.

Case: Nawab Pashasaheb Jamadar v. ITO 2023 TaxPub(DT) 6827 (Pun-Trib)