India: Long-term capital gains rate applicable to gains from depreciable assets held for more than 36 months
A special bench of the Income Tax Appellate Tribunal decision.
A special bench of the Income Tax Appellate Tribunal held (by a 2:1 majority) that the long-term capital gains tax rate applied to gains from depreciable assets held for more than 36 months.
Background
The Income-tax Act, 1961 (the Act) follows a “block of assets” concept for tax depreciation purposes and generally deems gains arising from such depreciable assets to be short-term capital gains (irrespective of the holding period of the assets) for purposes of computing the amount of gain on a transfer of such assets.
The courts have issued conflicting decisions regarding whether other provisions applicable to long-term capital assets (i.e., deductions, loss set-off, and tax rate) can nonetheless be applied to gains from the transfer of depreciable assets that are held for more than 36 months.
Read an October 2024 report prepared by the KPMG member firm in India