IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER &

SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 7219/Mum/2025 (Assessment Year: 2016-17)

(Assessment Year: 2016-17)

(Assessment Year: 2016-17)

(Assessment Year: 2016-17)

(Assessment Year: 2016-17)

(Assessment Year: 2016-17)

(Assessment Year: 2016-17)

Assessee by Shri Rakesh Joshi, Ld. AR Revenue by Shri Surendra Mohan, Ld. DR Date of Hearing 14.01.2026 Date of Pronouncement 19.01.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal is filed by the assessee against the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], dated 19.09.2025, passed under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”], for the assessment year 2016–17arising out of assessment framed by way of an order dated 28.12.2018 passed by the Assistant Commissioner of Income Tax, Circle 22(1), Mumbai [hereinafter referred to as “Assessing Officer”] under section 143(3) of the Act.

2. The brief facts of the case are that the assessee is an individual. He filed his return of income for the assessment year 2016–17 on 06.12.2016 declaring total income of Rs. 58,04,850/- . The case was selected for scrutiny. The assessment was completed by the Assessing Officer vide order dated 28.12.2018 passed under section 143(3) of the Act.

3. During the relevant previous year, the assessee derived income from salary, income from house property and income from other sources. It was noted by the Assessing Officer that the assessee had transferred two residential house properties and earned long-term capital gains aggregating to Rs. 73,15,174/-. Against the said long-term capital gains, the assessee claimed set-off of the following losses:

i.

Long-term capital loss on sale of shop amounting to Rs.

15,52,968/-

ii.

Long-term capital loss on sale of motor car amounting to Rs.

29,16,609/-

iii.

Short-term capital loss on sale of motor car amounting to Rs. 50,93,993/-

After such set-off, the assessee computed a net capital loss of Rs. 22,48,397/- and carried the same forward to the subsequent assessment year.

4. The Assessing Officer observed that the two motor cars sold during the year appeared to be personal effects and not capital assets. The assessee was therefore called upon to explain as to why the losses arising from sale of such motor cars should not be disallowed and not permitted to be set off against long-term capital gains under section 70 of the Act.In response, the assessee submitted that the motor cars, namely Audi and Mercedes Benz, were business assets which were hired out to M/s AB Infra Build Pvt. Ltd., of which the assessee was a director and owner. It was further submitted that the assessee had never claimed depreciation on the said vehicles and therefore the cost of acquisition should be taken at the original purchase price. The Assessing Officer did not accept the assessee’s contention. He held that depreciation is not optional and represents a permanent diminution in the value of an asset, irrespective of whether the assessee claims it or not. The Assessing Officer further held that if the assessee’s claim that the vehicles were business assets was accepted, then depreciation at the applicable rate was required to be allowed and the computation of gain or loss on transfer of such assets would fall under section 50 of the Act as short-term capital gain or loss. Accordingly, the Assessing Officer recomputed depreciation for the relevant earlier years, recalculated the written down value of the motor cars and determined a net short-term capital loss of Rs. 2,25,366/- from the sale of both vehicles. The said short-term capital loss was held to be adjustable only against the block of depreciable assets and not against long-term capital gains arising from sale of flats. Consequently, the Assessing Officer disallowed the set-off claimed by the assess