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February 2010

Section 50 r.w.s. 32 and 50C 1961: Depreciation u/s. 32 can be claimed on WDV only if on the last day of the year: (1) there is at least one asset in the block, and (2) there is some value of the block.

By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Chartered Accountants
Reading Time 2 mins
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51 (2009) 34 SOT 64 (Mum.)

Asst.CIT vs Roger Pereira
Communications (P.) Ltd.

ITA No.2099 (Mum.) of 2008.

A.Y.2004-05. Dated August 2009.

Section 50 r.w.s. 32 and 50C
1961: Depreciation u/s. 32 can be claimed on WDV only if on the last day of the
year: (1) there is at least one asset in the block, and (2) there is some value
of the block.

Facts:

During the relevant assessment year, the assessee sold one of
its four office premises. The Assessing Officer revoked Section 50C and taxed
the difference between the agreement value and the value adopted by the stamp
duty authorities as short-term capital gains u/s. 50. The CIT (A) deleted the
addition observing that Section 50 does not have any mention of stamp duty
valuation as is mentioned in Section 50C.

Held:

The Tribunal upheld the CIT (A)’s order. The Tribunal noted
as under:

a. Section 50 is a special provision which provides for
bringing to tax by way of short-term capital gains depreciable assets which
are transferred during the previous year. This section creates a deeming
faction and it cannot be extended beyond the purpose for which it has been
enacted.

b. Further, since the block of assets continued to exist
even after the sale of the first office premises and the block had not become
negative, no capital gain arose.


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