25 July 2011
This relates to block of assets. Let us take one example that you have purchased one Car for Rs. 5,00,000/- after depreciating for 5 years the WDV is say Rs.2,00,000/- Now you have purchased another car for 8,00,000/- and sold the sod car for Rs. 1,50,000.
As per Section 50 the value of the car is to be taken at 8,50,000/- and the depreciation for the year is to be calculated on 8,50,000 and not 8 lacs.
How 8,50,000 has been arrived is old car WDV 200000 sold for 150000 loss 50,000 but the block has not been completely eroded therefore the loss is to be added to the new assets and so on.
In case the entire block has been sold for 300000 then WDV is to be reduced and 1 lac shall be the short term capital gain and taxable as business income.
Net if the car has been sold for 6 lacs then 1 lac shall be capital gain 3 lac shall be Short term Capital Gain
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