Section 50 of the Income Tax Act
Income-tax Act, 2025: s.74
Section 50 of the Income-tax Act, 1961 corresponds to section 74 (Special provision for computation of capital gains in case of depreciable assets) of the Income-tax Act, 2025.
Read section 74 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 50 is CIT v. Ace Builders (P) Ltd. (281 ITR 210), cited in 88 of the 392 judgments on BharatTax that turn on this section.
Leading authorities on Section 50
The deeming fiction in Section 50, which treats capital gains from depreciable assets as short-term, applies only for the purpose of computing capital gains under that section. For other provisions, such as set-off of losses under Section 74 or deductions under Section 54E/54EC, the asset's original character (long-term or short-term) is to be considered.
The 20% tax rate under Section 112 applies to capital gains arising from the transfer of a depreciable asset, even if it is deemed a short-term capital gain under Section 50, provided the asset was held for more than 36 months. The fiction created by Section 50 for treating such gains as short-term does not alter the long-term nature of the asset for applying the tax rate under Section 112.
The conditions for claiming a bad debt deduction under Section 36(1)(vii) read with Section 36(2) are not fulfilled if the assessee fails to provide details of the parties associated with the debts or evidence that these amounts were offered to tax in earlier years. An alternate claim for loss under Section 28 is denied without evidence substantiating the loss in the relevant assessment year.
An assessee can claim an outstanding balance as a business loss under Section 28 if it arises from regular business transactions, even if conditions for bad debt deduction under Section 36(1)(vii) are not met, provided sufficient evidence is produced.
Section 54E deduction is allowable against capital gains assessable under section 50 on depreciable assets. For other provisions, the asset remains a long-term capital asset despite being treated as short-term for section 50.
Expenditure on scientific research for weighted deduction must satisfy the conditions in section 35(2AB) and also the provisions of section 35(3)(b) of the Income Tax Act.
Land classified as agricultural by the District Collector is considered agricultural land for tax purposes, regardless of the owner's intention to use it for industrial purposes or the absence of agricultural operations.
