Supreme Court puts interim stay on Bombay High Court ruling regarding capital gain tax on depreciable assets

The Supreme Court stayed the Bombay High Court directive that had instructed the department to follow the Income Tax Appellate Tribunal (ITAT) special bench decision in the SKF matter concerning the capital gain tax rate on depreciable assets. The apex court will soon hear the case to deliver a final ruling on how these assets should be treated for tax purposes. Under Indian tax laws, gains arising from the transfer of depreciable assets are traditionally treated as short-term capital gains under specific statutory provisions, bypassing standard indexation benefits.

Taxpayers and the revenue department have frequently contested the applicable tax rates and computation methods for such assets, leading to conflicting tribunal and high court precedents like the SKF special bench ruling. Tax practitioners and chartered accountants should advise clients with pending litigation on depreciable assets to monitor the upcoming Supreme Court hearings closely. No immediate compliance filing changes are required until the apex court pronounces its final verdict, but maintaining comprehensive records of asset depreciation schedules remains essential.

Bottom line: stay alert to future apex court updates to safeguard client tax positions on asset sales.