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Part of machinery sold in block of asset

Fenil Gupta (Student) (55 Points)

17 September 2014

In X Pvt Ltd

There were 10 machines in a block of which 4 machines were sold and other 6 machines were purchased, which generated me a profit of 385000 (as per LIFO method).

so here i have a doubt that will this 385000 profit be recognized in Profit & Loss A/c i.e as per Companies act?

will there any treatment in Income tax?

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3 Replies

Dixit (CA Final) (2405 Points)
Replied 17 September 2014

LIFO method is not approved in any act.

sumit jain (.) (844 Points)
Replied 18 September 2014

Profit needs to be calculated by speciic identification.

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Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 18 September 2014

Originally posted by : sumit jain
	Profit needs to be calculated by speciic identification.

And after providing depreciation till the date of sale...

Treatment for Tax purpose:

The Gain/loss recorded in books of accounts will be added/deducted bnack and the Sale consideration will be deducted from Block value to arrive at WDV as on 31.03.2014.....so only WDV will get reduced by Sale consideration unless the Sale consideration exceeds (Opening WDV +Additions) in that case the excess will be taxed as STCG u/s 50 of I.T Act,1961.