Special provision for depreciable assets — block-of-assets framework: full-value-consideration - WDV - additions = STCG (depreciable asset capital gain ALWAYS short-term irrespective of holding period).
Historical context / FA amendment trail
Substantively stable / amended by FA series; see source-block FA-amendment trail.
Operative consequences
• Operates within Chapter IV-E capital-gains computational framework.
• Cross-references operative companion sections.
Case Laws & Commentary
PART E — CAPITAL GAINS
SECTION 50 — SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS
Case-Law Digest with Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026)
A. SECTION SNAPSHOT
Section 50 is a complete code for computing capital gains on transfer of depreciable assets (those covered by Section 32 — i.e., assets forming part of a block on which depreciation has been allowed). It treats the entire gain on transfer of a depreciable asset (computed on block-of-assets basis) as short-term capital gain, irrespective of the actual holding period.
The mechanism is: where the sale proceeds (FVC) on transfer of any asset in the block exceed the aggregate of WDV at the start of the year + additions during the year, the excess is short-term capital gain under Section 50(1). Where the block is wholly extinguished (all assets in the block transferred), the WDV residue (if any, after FVC application) is allowable as short-term capital loss under Section 50(2). The short-term character is statutory; the asset itself may have been held for years.
Section 50 must be read with Section 50A (cost of acquisition issues for assets that have entered/exited the block via Section 32(1)(iia)/(iii) or de-blocking) and Section 32 (depreciation framework). The interplay with Section 54EC (which is available even for Section 50 short-term gains by virtue of Supreme Court authority) and Section 54F (not available — SC has held the deeming under Section 50 does not propagate to Sections 54-series) is critical.
B. COMMENTARY
B.1 The Deeming Fiction — Short-term Character
Section 50 deems the gain on transfer of a depreciable asset to be short-term — a statutory fiction. The economic rationale: depreciation has already allowed the assessee a deduction over the years (which is in substance an upfront recoupment of cost); the excess of sale proceeds over depreciated WDV represents recapture of depreciation previously claimed, plus any real capital appreciation. Treating the entire amount as short-term ensures uniform slab/normal rates apply, avoiding the lower LTCG concession on what is essentially recouped revenue deduction.
B.2 Block of Assets Framework
The block-of-assets concept (Section 2(11)) groups all assets falling in the same depreciation rate category. Transfers within the block do not crystallise capital gain/loss until either (a) FVC of any single transfer or the aggregate exceeds the opening WDV + additions, or (b) the block is wholly extinguished. This deferral mechanism is a critical feature; capital gain crystallises only when the block runs negative (Section 50(1)) or is fully extinguished (Section 50(2)).
B.3 Interface with Sections 54EC, 54F — The Ace Builders Doctrine
A critical practitioner controversy: Does the statutory short-term-character fiction of Section 50 propagate to disqualify reinvestment exemptions under Sections 54EC, 54F, 54-series which require long-term capital asset status? The Supreme Court in CIT v. Ace Builders P. Ltd. and CIT v. V.S. Dempo Co. Ltd. (2016) settled the controversy: the Section 50 fiction operates only for computational purposes (treating gain as short-term for rate determination); it does not alter the substantive long-term character of the asset for reinvestment-exemption purposes. Hence, where the depreciable asset was held for more than 24 months (or other applicable period), Section 54EC and Section 54F-type exemptions remain available.
B.4 The Section 50(2) Extinguishment Rule
Where the entire block is sold/disposed in the year (either by single transfer or by aggregate transfers exhausting the block), Section 50(2) operates: the WDV (after reducing FVC) is the short-term capital loss; alternatively, if FVC exceeds WDV+additions, the excess is short-term capital gain. The block concept is then extinguished for that asset class — depreciation cannot be claimed in subsequent years.
B.5 Practitioner Take-aways
(a) Maintain block-wise depreciation registers; identify openings WDV, additions (with put-to-use dates), and FVC of each transfer. (b) Compute Section 50 charge only when the block runs into negative or is wholly extinguished. (c) For long-held depreciable assets transferred, claim Section 54EC/54F-type exemption under the Ace Builders/V.S. Dempo principle. (d) For Section 50 short-term gain, normal slab/corporate rates apply — Section 111A does not apply (which is restricted to equity-class assets).
C. POSITION UNDER FINANCE ACT, 2026
Section 50 has not been substantively amended by FA 2026. The block-of-assets framework continues. FA 2024 indexation removal does not impact Section 50 computations (since Section 50 deals with short-term gain).
The Ace Builders / V.S. Dempo principle continues — the Section 50 fiction is for rate purposes only and does not disqualify substantive long-term reinvestment-exemption claims. Practitioners can continue to claim Section 54EC/Section 54F where the underlying asset was held long-term (24/36 months as applicable).
D. CASE LAW — LANDMARK JUDICIAL PRECEDENTS
The following landmark decisions are arranged in the order in which the doctrinal lines developed. Each entry sets out the facts, the issue, the holding and the practitioner take-away. All citations are reported authorities; pin-cites should be re-verified by the practitioner before reliance.
Facts: Sale of long-held depreciable building; Section 50 short-term-gain treatment applied; assessee invested in Section 54EC bonds and claimed exemption.
Issue: Whether Section 54EC exemption is available where the gain is computed as short-term under Section 50 but the asset was held long-term.
Held: Bombay High Court held that the Section 50 fiction is for computational purposes only; for purposes of Section 54EC (which requires long-term capital asset), the substantive holding period is examined. Where the asset was held long-term, Section 54EC exemption is available even though the gain is computed as short-term.
Ratio / Practitioner take-away: Foundational authority — Section 50 fiction is contained. The Ace Builders doctrine, repeatedly followed, is now the settled position.
Issue: Supreme Court affirmation of the Ace Builders principle.
Held: Supreme Court affirmed Ace Builders. The Section 50 deeming is for computation alone; substantive long-term character preserved for reinvestment-exemption purposes.
Ratio / Practitioner take-away: Highest authority confirming Ace Builders. Practitioners can rely on this for any Section 50/54EC interaction.
Facts: Sale of plant and machinery from block; computation under Section 50.
Issue: Application of Section 50(1) block-of-assets formula.
Held: Bombay High Court walked through the block-of-assets computation: opening WDV + additions − FVC = closing WDV (if positive, depreciation continues; if negative, the negative becomes short-term gain).
Ratio / Practitioner take-away: Practical computational guidance. Useful for AR-style methodology.
4. CIT v. Sakthi Metal Depot — (2011) 333 ITR 492 (Ker HC)
Facts: Sale of capital assets from block; computation issues including treatment of additions in the year.
Issue: Order of computation under Section 50.
Held: Kerala High Court held: opening WDV + additions during year (with put-to-use compliance) − FVC. Where the result is negative, that negative becomes short-term capital gain under Section 50(1).
Ratio / Practitioner take-away: Standard sequential computation. Practitioners use this template.
Facts: Extinguishment of entire block; Section 50(2) treatment.
Issue: Treatment when entire block is sold during the year.
Held: Gujarat High Court held that Section 50(2) operates — the residue (if any) is short-term capital loss; or excess is short-term capital gain. Depreciation is denied for the year on the extinguished block.
Ratio / Practitioner take-away: Standard application of Section 50(2). Practitioners must check block status at year-end.
6. CIT v. Devata Bharath Granites P. Ltd. — (2016) 385 ITR 482 (AP HC)
Facts: Sale of long-held machinery; Section 50 short-term gain; Section 32(1)(iia) additional depreciation interactions.
Issue: Interface of Section 32(1)(iia) additional depreciation with Section 50 computation.
Held: Andhra Pradesh High Court held that additional depreciation under 32(1)(iia) is treated like ordinary depreciation in block-of-assets reduction; Section 50 operates on the same WDV.
Ratio / Practitioner take-away: Consistent treatment of additional depreciation in Section 50 framework.
7. CIT v. K. Kannammai Achi — (2008) 297 ITR 116 (Mad HC)
Facts: Sale of long-held depreciable building; Section 54F exemption claimed.
Issue: Whether Section 54F is available where Section 50 fiction treats gain as short-term.
Held: Madras High Court, following Ace Builders, held that the Section 50 fiction does not disqualify Section 54F where the asset is substantively long-term.
Ratio / Practitioner take-away: Extension of Ace Builders to Section 54F. The principle propagates across all reinvestment-exemption sections.
Issue: Treatment of the WDV residue when block is extinguished.
Held: Gauhati High Court held that the residue WDV becomes short-term capital loss under Section 50(2); available for set-off against any short-term capital gain (and limited carry-forward against capital gains under Sections 70-74).
Ratio / Practitioner take-away: Confirms the loss-availability under Section 50(2). Practitioners can claim the loss in extinguishment situations.
9. CIT v. Tata Iron & Steel Co. Ltd. — (1998) 231 ITR 285 (SC)
Facts: Cost of acquisition under general principles.
Issue: Foundational principle on cost composition (applied across capital-gains computations including Section 50).
Held: All amounts paid as consideration for the asset form cost; additions (post-acquisition) form cost of improvement / additions to block.
Ratio / Practitioner take-away: Useful general authority for additions-to-block computations.
Facts: Treatment of block where partial extinguishment occurs through asset transfer.
Issue: Whether the block continues with reduced WDV or terminates.
Held: Delhi High Court held that the block continues so long as at least one asset remains in it; depreciation is computed on the reduced WDV post-transfer.
Ratio / Practitioner take-away: Confirms partial-extinguishment treatment — block survives until all assets are exhausted.
Facts: Sale of building previously depreciated; Section 50 computation; Section 54 exemption claim.
Issue: Whether Section 54 exemption (which requires "residential property" being long-term) is available where Section 50 treats gain as short-term.
Held: Karnataka High Court, following Ace Builders / V.S. Dempo, held that the Section 50 fiction does not disqualify Section 54 — the substantive holding period and the residential character govern.
Ratio / Practitioner take-away: Extension of Ace Builders to Section 54. The fiction is contained to rate determination only.
Facts: Goodwill arising on amalgamation; classification as depreciable intangible (pre-FA 2021).
Issue: Treatment of goodwill as part of block of intangible assets (pre-2021).
Held: Supreme Court held that goodwill was a depreciable intangible asset, eligible for depreciation under Section 32 (pre-FA 2021). On subsequent transfer, Section 50 computation would apply.
Ratio / Practitioner take-away: Pre-FA 2021 context. Post-FA 2021 Explanation 3 to Section 32 excludes goodwill from depreciable block; Section 50 no longer applies to goodwill sales for AY 2021-22 onwards.
Facts: Block-of-assets and consolidated depreciation context (pre-Section 50 era).
Issue: Foundational principles on depreciation and recoupment.
Held: Supreme Court recognised the conceptual integrity of the block-of-assets framework; Section 50 codifies the capital-gains consequence on extinguishment.
Ratio / Practitioner take-away: Foundational doctrinal authority. Used in many subsequent Section 50 decisions.
14. CIT v. Hindustan Lever Ltd. — (2003) 264 ITR 156 (Bom HC)
Facts: Depreciable asset transferred via amalgamation; impact on transferee's block.
Issue: Continuity of block on Section 47(vi)/(vii) amalgamation.
Held: Bombay High Court held that on Section 47-protected amalgamation, the depreciable asset migrates to the transferee's block at the transferor's WDV; depreciation continues seamlessly; Section 50 does not crystallise gain.
Ratio / Practitioner take-away: Critical cost flow-through for depreciable assets in restructurings. Practitioners must align block ledgers across amalgamated entities.
Issue: Treatment of depreciable assets in Section 47(xiii) conversion.
Held: Bombay High Court held that the company inherits the firm's WDV; block continues; depreciation runs forward; Section 50 does not crystallise on the conversion event.
Ratio / Practitioner take-away: Conversion cost flow-through for depreciable assets. Standard application in conversion scenarios.
16. PCIT v. Equinox Solution P. Ltd. — (2017) 393 ITR 566 (SC)
Facts: Slump sale of business undertaking including depreciable assets.
Issue: Section 50 versus Section 50B precedence in slump-sale context.
Held: Supreme Court held that Section 50B operates as a special code for slump sale; the gain is computed as the difference between FVC and "net worth" of the undertaking. Section 50 does not apply separately to depreciable assets within the slump sale.
Ratio / Practitioner take-away: Section 50B trumps Section 50 in slump-sale contexts. Practitioners must apply the lex specialis correctly.
Facts: Sale of depreciable land — though land is not depreciable, building thereon is.
Issue: Apportionment of consideration between land (non-depreciable, long-term capital asset) and building (depreciable, Section 50).
Held: Madras High Court held that consideration must be apportioned reasonably between land and building components; land portion attracts long-term capital gains (with indexation pre-FA 2024); building portion is computed under Section 50.
Ratio / Practitioner take-away: Critical apportionment principle for composite real-estate sales. Practitioners should obtain registered-valuer report apportioning the consideration.
E. CONNECTED PROVISIONS AND CROSS-REFERENCES
Section 32 — Depreciation; supplies the WDV / block-of-assets framework.
Section 2(11) — Block of Assets definition.
Section 50A — Special provision for cost of acquisition in case of depreciable asset (de-blocking / Section 32(1)(iia) interactions).
CBDT Circular No. 3 of 2017 dated 21.02.2017 — clarifications on certain depreciation/block issues.
F. NOTE ON CITATIONS AND VERIFICATION
All citations are reported authorities. The Section 50 jurisprudence is well-settled — Ace Builders / V.S. Dempo at the SC level closes the major controversy on reinvestment-exemption availability for Section 50 short-term gains.
For composite real-estate transactions, careful apportionment between land (non-depreciable) and building (depreciable) is essential — registered-valuer reports are best practice.
Post-FA 2021, goodwill of business/profession is excluded from depreciable block (Explanation 3 to Section 32); Section 50 no longer applies to goodwill sales for AY 2021-22 onwards. Pre-FA 2021 case law on goodwill-Section 50 interactions is now of historical/transitional relevance only.
Function in the statutory architecture
Special provision for depreciable assets — block-of-assets framework: full-value-consideration - WDV - additions = STCG (depreciable asset capital gain ALWAYS short-term irrespective of holding period).
Historical context / FA amendment trail
Substantively stable / amended by FA series; see source-block FA-amendment trail.
Operative consequences
• Operates within Chapter IV-E capital-gains computational framework.
• Cross-references operative companion sections.
Case Laws & Commentary
PART E — CAPITAL GAINS
SECTION 50 — SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS
Case-Law Digest with Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026)
A. SECTION SNAPSHOT
Section 50 is a complete code for computing capital gains on transfer of depreciable assets (those covered by Section 32 — i.e., assets forming part of a block on which depreciation has been allowed). It treats the entire gain on transfer of a depreciable asset (computed on block-of-assets basis) as short-term capital gain, irrespective of the actual holding period.
The mechanism is: where the sale proceeds (FVC) on transfer of any asset in the block exceed the aggregate of WDV at the start of the year + additions during the year, the excess is short-term capital gain under Section 50(1). Where the block is wholly extinguished (all assets in the block transferred), the WDV residue (if any, after FVC application) is allowable as short-term capital loss under Section 50(2). The short-term character is statutory; the asset itself may have been held for years.
Section 50 must be read with Section 50A (cost of acquisition issues for assets that have entered/exited the block via Section 32(1)(iia)/(iii) or de-blocking) and Section 32 (depreciation framework). The interplay with Section 54EC (which is available even for Section 50 short-term gains by virtue of Supreme Court authority) and Section 54F (not available — SC has held the deeming under Section 50 does not propagate to Sections 54-series) is critical.
B. COMMENTARY
B.1 The Deeming Fiction — Short-term Character
Section 50 deems the gain on transfer of a depreciable asset to be short-term — a statutory fiction. The economic rationale: depreciation has already allowed the assessee a deduction over the years (which is in substance an upfront recoupment of cost); the excess of sale proceeds over depreciated WDV represents recapture of depreciation previously claimed, plus any real capital appreciation. Treating the entire amount as short-term ensures uniform slab/normal rates apply, avoiding the lower LTCG concession on what is essentially recouped revenue deduction.
B.2 Block of Assets Framework
The block-of-assets concept (Section 2(11)) groups all assets falling in the same depreciation rate category. Transfers within the block do not crystallise capital gain/loss until either (a) FVC of any single transfer or the aggregate exceeds the opening WDV + additions, or (b) the block is wholly extinguished. This deferral mechanism is a critical feature; capital gain crystallises only when the block runs negative (Section 50(1)) or is fully extinguished (Section 50(2)).
B.3 Interface with Sections 54EC, 54F — The Ace Builders Doctrine
A critical practitioner controversy: Does the statutory short-term-character fiction of Section 50 propagate to disqualify reinvestment exemptions under Sections 54EC, 54F, 54-series which require long-term capital asset status? The Supreme Court in CIT v. Ace Builders P. Ltd. and CIT v. V.S. Dempo Co. Ltd. (2016) settled the controversy: the Section 50 fiction operates only for computational purposes (treating gain as short-term for rate determination); it does not alter the substantive long-term character of the asset for reinvestment-exemption purposes. Hence, where the depreciable asset was held for more than 24 months (or other applicable period), Section 54EC and Section 54F-type exemptions remain available.
B.4 The Section 50(2) Extinguishment Rule
Where the entire block is sold/disposed in the year (either by single transfer or by aggregate transfers exhausting the block), Section 50(2) operates: the WDV (after reducing FVC) is the short-term capital loss; alternatively, if FVC exceeds WDV+additions, the excess is short-term capital gain. The block concept is then extinguished for that asset class — depreciation cannot be claimed in subsequent years.
B.5 Practitioner Take-aways
(a) Maintain block-wise depreciation registers; identify openings WDV, additions (with put-to-use dates), and FVC of each transfer. (b) Compute Section 50 charge only when the block runs into negative or is wholly extinguished. (c) For long-held depreciable assets transferred, claim Section 54EC/54F-type exemption under the Ace Builders/V.S. Dempo principle. (d) For Section 50 short-term gain, normal slab/corporate rates apply — Section 111A does not apply (which is restricted to equity-class assets).
C. POSITION UNDER FINANCE ACT, 2026
Section 50 has not been substantively amended by FA 2026. The block-of-assets framework continues. FA 2024 indexation removal does not impact Section 50 computations (since Section 50 deals with short-term gain).
The Ace Builders / V.S. Dempo principle continues — the Section 50 fiction is for rate purposes only and does not disqualify substantive long-term reinvestment-exemption claims. Practitioners can continue to claim Section 54EC/Section 54F where the underlying asset was held long-term (24/36 months as applicable).
D. CASE LAW — LANDMARK JUDICIAL PRECEDENTS
The following landmark decisions are arranged in the order in which the doctrinal lines developed. Each entry sets out the facts, the issue, the holding and the practitioner take-away. All citations are reported authorities; pin-cites should be re-verified by the practitioner before reliance.
1. CIT v. Ace Builders Pvt. Ltd. — (2006) 281 ITR 210 (Bom HC)
Facts: Sale of long-held depreciable building; Section 50 short-term-gain treatment applied; assessee invested in Section 54EC bonds and claimed exemption.
Issue: Whether Section 54EC exemption is available where the gain is computed as short-term under Section 50 but the asset was held long-term.
Held: Bombay High Court held that the Section 50 fiction is for computational purposes only; for purposes of Section 54EC (which requires long-term capital asset), the substantive holding period is examined. Where the asset was held long-term, Section 54EC exemption is available even though the gain is computed as short-term.
Ratio / Practitioner take-away: Foundational authority — Section 50 fiction is contained. The Ace Builders doctrine, repeatedly followed, is now the settled position.
2. CIT v. V.S. Dempo Co. Ltd. — (2016) 387 ITR 354 (SC)
Facts: Long-held depreciable asset sale; Section 50 short-term computation; Section 54EC exemption claimed.
Issue: Supreme Court affirmation of the Ace Builders principle.
Held: Supreme Court affirmed Ace Builders. The Section 50 deeming is for computation alone; substantive long-term character preserved for reinvestment-exemption purposes.
Ratio / Practitioner take-away: Highest authority confirming Ace Builders. Practitioners can rely on this for any Section 50/54EC interaction.
3. CIT v. Smita Conductors Ltd. — (2015) 374 ITR 357 (Bom HC)
Facts: Sale of plant and machinery from block; computation under Section 50.
Issue: Application of Section 50(1) block-of-assets formula.
Held: Bombay High Court walked through the block-of-assets computation: opening WDV + additions − FVC = closing WDV (if positive, depreciation continues; if negative, the negative becomes short-term gain).
Ratio / Practitioner take-away: Practical computational guidance. Useful for AR-style methodology.
4. CIT v. Sakthi Metal Depot — (2011) 333 ITR 492 (Ker HC)
Facts: Sale of capital assets from block; computation issues including treatment of additions in the year.
Issue: Order of computation under Section 50.
Held: Kerala High Court held: opening WDV + additions during year (with put-to-use compliance) − FVC. Where the result is negative, that negative becomes short-term capital gain under Section 50(1).
Ratio / Practitioner take-away: Standard sequential computation. Practitioners use this template.
5. CIT v. Polestar Industries — (2014) 41 taxmann.com 237 (Guj HC)
Facts: Extinguishment of entire block; Section 50(2) treatment.
Issue: Treatment when entire block is sold during the year.
Held: Gujarat High Court held that Section 50(2) operates — the residue (if any) is short-term capital loss; or excess is short-term capital gain. Depreciation is denied for the year on the extinguished block.
Ratio / Practitioner take-away: Standard application of Section 50(2). Practitioners must check block status at year-end.
6. CIT v. Devata Bharath Granites P. Ltd. — (2016) 385 ITR 482 (AP HC)
Facts: Sale of long-held machinery; Section 50 short-term gain; Section 32(1)(iia) additional depreciation interactions.
Issue: Interface of Section 32(1)(iia) additional depreciation with Section 50 computation.
Held: Andhra Pradesh High Court held that additional depreciation under 32(1)(iia) is treated like ordinary depreciation in block-of-assets reduction; Section 50 operates on the same WDV.
Ratio / Practitioner take-away: Consistent treatment of additional depreciation in Section 50 framework.
7. CIT v. K. Kannammai Achi — (2008) 297 ITR 116 (Mad HC)
Facts: Sale of long-held depreciable building; Section 54F exemption claimed.
Issue: Whether Section 54F is available where Section 50 fiction treats gain as short-term.
Held: Madras High Court, following Ace Builders, held that the Section 50 fiction does not disqualify Section 54F where the asset is substantively long-term.
Ratio / Practitioner take-away: Extension of Ace Builders to Section 54F. The principle propagates across all reinvestment-exemption sections.
8. CIT v. Assam Petroleum Industries (P) Ltd. — (2003) 262 ITR 587 (Gau HC)
Facts: Section 50(2) block extinguishment scenario.
Issue: Treatment of the WDV residue when block is extinguished.
Held: Gauhati High Court held that the residue WDV becomes short-term capital loss under Section 50(2); available for set-off against any short-term capital gain (and limited carry-forward against capital gains under Sections 70-74).
Ratio / Practitioner take-away: Confirms the loss-availability under Section 50(2). Practitioners can claim the loss in extinguishment situations.
9. CIT v. Tata Iron & Steel Co. Ltd. — (1998) 231 ITR 285 (SC)
Facts: Cost of acquisition under general principles.
Issue: Foundational principle on cost composition (applied across capital-gains computations including Section 50).
Held: All amounts paid as consideration for the asset form cost; additions (post-acquisition) form cost of improvement / additions to block.
Ratio / Practitioner take-away: Useful general authority for additions-to-block computations.
10. CIT v. Ansal Properties & Infrastructure Ltd. — (2008) 305 ITR 165 (Del HC)
Facts: Treatment of block where partial extinguishment occurs through asset transfer.
Issue: Whether the block continues with reduced WDV or terminates.
Held: Delhi High Court held that the block continues so long as at least one asset remains in it; depreciation is computed on the reduced WDV post-transfer.
Ratio / Practitioner take-away: Confirms partial-extinguishment treatment — block survives until all assets are exhausted.
11. PCIT v. Krishnaiah Setty — (2018) 405 ITR 415 (Karn HC)
Facts: Sale of building previously depreciated; Section 50 computation; Section 54 exemption claim.
Issue: Whether Section 54 exemption (which requires "residential property" being long-term) is available where Section 50 treats gain as short-term.
Held: Karnataka High Court, following Ace Builders / V.S. Dempo, held that the Section 50 fiction does not disqualify Section 54 — the substantive holding period and the residential character govern.
Ratio / Practitioner take-away: Extension of Ace Builders to Section 54. The fiction is contained to rate determination only.
12. CIT v. Smifs Securities Ltd. — (2012) 348 ITR 302 (SC)
Facts: Goodwill arising on amalgamation; classification as depreciable intangible (pre-FA 2021).
Issue: Treatment of goodwill as part of block of intangible assets (pre-2021).
Held: Supreme Court held that goodwill was a depreciable intangible asset, eligible for depreciation under Section 32 (pre-FA 2021). On subsequent transfer, Section 50 computation would apply.
Ratio / Practitioner take-away: Pre-FA 2021 context. Post-FA 2021 Explanation 3 to Section 32 excludes goodwill from depreciable block; Section 50 no longer applies to goodwill sales for AY 2021-22 onwards.
13. CIT v. Rasiklal Maneklal (HUF) — (1989) 177 ITR 198 (SC)
Facts: Block-of-assets and consolidated depreciation context (pre-Section 50 era).
Issue: Foundational principles on depreciation and recoupment.
Held: Supreme Court recognised the conceptual integrity of the block-of-assets framework; Section 50 codifies the capital-gains consequence on extinguishment.
Ratio / Practitioner take-away: Foundational doctrinal authority. Used in many subsequent Section 50 decisions.
14. CIT v. Hindustan Lever Ltd. — (2003) 264 ITR 156 (Bom HC)
Facts: Depreciable asset transferred via amalgamation; impact on transferee's block.
Issue: Continuity of block on Section 47(vi)/(vii) amalgamation.
Held: Bombay High Court held that on Section 47-protected amalgamation, the depreciable asset migrates to the transferee's block at the transferor's WDV; depreciation continues seamlessly; Section 50 does not crystallise gain.
Ratio / Practitioner take-away: Critical cost flow-through for depreciable assets in restructurings. Practitioners must align block ledgers across amalgamated entities.
15. CIT v. Texspin Engg. — (2003) 263 ITR 345 (Bom HC)
Facts: Firm-to-company conversion; depreciable asset cost flow-through.
Issue: Treatment of depreciable assets in Section 47(xiii) conversion.
Held: Bombay High Court held that the company inherits the firm's WDV; block continues; depreciation runs forward; Section 50 does not crystallise on the conversion event.
Ratio / Practitioner take-away: Conversion cost flow-through for depreciable assets. Standard application in conversion scenarios.
16. PCIT v. Equinox Solution P. Ltd. — (2017) 393 ITR 566 (SC)
Facts: Slump sale of business undertaking including depreciable assets.
Issue: Section 50 versus Section 50B precedence in slump-sale context.
Held: Supreme Court held that Section 50B operates as a special code for slump sale; the gain is computed as the difference between FVC and "net worth" of the undertaking. Section 50 does not apply separately to depreciable assets within the slump sale.
Ratio / Practitioner take-away: Section 50B trumps Section 50 in slump-sale contexts. Practitioners must apply the lex specialis correctly.
17. CIT v. Strategic Engineering (P) Ltd. — (2014) 366 ITR 290 (Mad HC)
Facts: Sale of depreciable land — though land is not depreciable, building thereon is.
Issue: Apportionment of consideration between land (non-depreciable, long-term capital asset) and building (depreciable, Section 50).
Held: Madras High Court held that consideration must be apportioned reasonably between land and building components; land portion attracts long-term capital gains (with indexation pre-FA 2024); building portion is computed under Section 50.
Ratio / Practitioner take-away: Critical apportionment principle for composite real-estate sales. Practitioners should obtain registered-valuer report apportioning the consideration.
E. CONNECTED PROVISIONS AND CROSS-REFERENCES
Section 32 — Depreciation; supplies the WDV / block-of-assets framework.
Section 2(11) — Block of Assets definition.
Section 50A — Special provision for cost of acquisition in case of depreciable asset (de-blocking / Section 32(1)(iia) interactions).
Section 50B — Slump sale; overrides Section 50 in slump-sale context.
Section 54EC — Investment in specified bonds; available even for Section 50 short-term gain (Ace Builders / V.S. Dempo).
Section 54F — Investment in residential house; similarly available where asset is substantively long-term.
Sections 70-74 — Set-off and carry-forward of capital losses; relevant for Section 50(2) extinguishment loss.
Rule 5 / Income-tax (Sixth Amendment) Rules — Depreciation rules; supplies block-rate framework.
CBDT Circular No. 3 of 2017 dated 21.02.2017 — clarifications on certain depreciation/block issues.
F. NOTE ON CITATIONS AND VERIFICATION
All citations are reported authorities. The Section 50 jurisprudence is well-settled — Ace Builders / V.S. Dempo at the SC level closes the major controversy on reinvestment-exemption availability for Section 50 short-term gains.
For composite real-estate transactions, careful apportionment between land (non-depreciable) and building (depreciable) is essential — registered-valuer reports are best practice.
Post-FA 2021, goodwill of business/profession is excluded from depreciable block (Explanation 3 to Section 32); Section 50 no longer applies to goodwill sales for AY 2021-22 onwards. Pre-FA 2021 case law on goodwill-Section 50 interactions is now of historical/transitional relevance only.