EDWISE INTERNATIONAL PROP EDWISE CONSUTLTANTS PRIVATE LIMITED,KALBADEVI, MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRLCE 4(1)(1),MUMBAI, AAYAKAR BHAVAN

ITA 4878/MUM/2025Status: DisposedITAT Mumbai22 September 2026AY 2013-1412 pages
AI SummaryAllowed

What were the facts?

The assessee, Edwise International Prop Edwise Consultants Private Limited, is appealing an order from the CIT(A), NFAC, Delhi, dated July 29, 2025. This order confirmed an addition of Rs. 72,55,534 made by the Assessment Unit during the assessment proceedings for Assessment Year 2013-14. The dispute concerns the tax treatment of a flat purchased in 2002 for Rs. 34,46,620 and sold in 2012 for Rs. 90,00,000. The assessee had claimed depreciation on this flat, initially at 5% and later at 10% when it was used commercially. The Revenue treated the gain on sale as short-term capital gain under Section 50 of the Income-tax Act, 1961, by creating a notional 5% block of assets.

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 72,45,296 (assessed as Rs. 72,55,534) made by the Assessing Officer and confirmed by the CIT(A) is deleted. The Tribunal reasoned that the Revenue had accepted the reclassification of the Santacruz flat as a commercial asset and allowed depreciation at 10% in Assessment Years 2006-07, 2007-08, and 2008-09. Once an asset becomes part of a block of assets carrying a 10% depreciation rate, its individual identity ceases for income-tax computation purposes under Section 2(11) read with Section 43(6). The Revenue cannot unilaterally extract a single asset from an existing running block to recreate an extinct 5% block in the year of sale. The Tribunal cited the principle that where an asset forms part of an ongoing block of assets eligible for depreciation at 10%, and the total sale proceeds are less than the opening WDV of the entire block, the consideration must be reduced from the block WDV. In this case, the opening WDV of the commercial block of assets was Rs. 3,84,39,183, which was significantly higher than the sale consideration of Rs. 90,00,000. Therefore, no short-term capital gain arose under Section 50. The appeal filed by the assessee is allowed.

What were the issues?

1. Whether the CIT(A) erred in confirming the addition of Rs. 72,55,534 on account of short-term capital gain on the sale of business capital assets, which the assessee claimed was part of a block of assets and the sale consideration was deducted from the Gross Block, contrary to the provisions of the Income-tax Act, 1961, and principles of natural justice? Assessee's Contention: The assessee argued that the property was part of a block of assets on which depreciation was claimed and allowed. The sale consideration should have been reduced from the block of assets, and since the block did not cease to exist and the sale consideration did not exceed the block's WDV, no short-term capital gain should arise. They relied on the fact that the Revenue had accepted the reclassification of the property as a commercial asset and allowed depreciation at 10% in earlier assessment years. Revenue's Contention: The Revenue, through the Assessing Officer and confirmed by the CIT(A), contended that the flat was initially a residential property eligible for depreciation at 5%. According to the AO, once an asset is placed in a 5% block, it cannot be shifted to a 10% block. As this was the sole property in the 5% block, its sale caused the block to cease to exist, making the gain taxable as short-term capital gain under Section 50.

Which sections of the Income-tax Act were involved?

Section 50,Section 2(11),Section 43(6),Section 143(3),Section 48,Section 49,Section 2(42A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Respondent: Smt. Sujatha Iyyanger, Sr DR
Pronounced: 22.09.2026

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by assessee is against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, Order No. ITBA/NFAC/S/250/2025-26/1079342812(1) dated 29.07.2025 passed against the assessment order by Assessment Unit, u/s. 143(3) of the Income-tax Act, 1961 (‘the Act’) dated 29.01.2016, for Assessment Year 2013-14. 2. Assessee has raised the following groun

The order continues below.

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