Dep is it manadory

If the firm is in loss, than depriciation will be carried forward for the upcoming years.

But there is no such option in tax that depreciation for AY 2013-14 can be claimed in AY 2014-15 when it is not carried forward.

LTCG will be computed on basis of sale consideration & indexed value of L&B and any additions there on. So claiming depreciation or not will not impact the LTCG part.

Your Queries are: 1.Audited pf has purchased the property of L&B in Aug2012. He wants to do not claim  & provide depreciation  for FY 2012-2013 in the books of accounts  & planning to claim from F.Y. 2013-2014. Is this valid or justify? Can he do? Why?

2. he plan to sell it after 5  years.while cal LTCG,HOW dep poni is considered if he does not provide dep in the f.y.2012-13 & provided dep after wards? how to see this issue from the point of taxation ? is it viable?

Reply: 1. The Explanation-5 to S 32(1) of the Income Tax Act provides:

Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;

Therefore, whether or not depreciation is claimed in the Assessment Year 2013-14, the AO will grant depreciation on it, or will be deemed to have been allowed on it.

2. The relevant provisions are contained in S 50 of the Income Tax Act 1961, which provides as under: 

[Special provision for computation of capital gains in case of depreciable assets.

50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :—

 (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :—

  (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers;

 (ii) the written down value of the block of assets at the beginning of the previous year; and

(iii) the actual cost of any asset falling within the block of assets acquired during the previous year,

such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets;

 (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.

In other words, capital gains arise only if it was the only item in the depreiation Block, and with its sale the Block itself ceases to exist. OR the sale price exceeds the Written Down Value (WDV) of the whole Block.

Please see S. 50A of the Income Tax Act 1961.