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Tax on sale of business car

Gopi Nath Mondal (Student CA Final ) (32 Points)

09 July 2015

A car (used for business purpose) was purchased on installment payment system 3 year ago costing Rs. 3200000 and now sold. WDV on the date of sale Rs.1817810. Total Rs. 265000 amount of finance yet to be paid to the bank and further these will be paid by purchaser... Selling amount Rs. 2000000/- including Rs. 265000/- And my question--- will I have to pay tax considering long term capital gain, if yes then how much.??

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9 Replies

Sandip Sadhukhan (Student) (40 Points)
Replied 10 July 2015

NO,

becouse, u/s-2(14)"capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include—

personal effect, that is to say, movable property (including wearing apparel and furniture) held for personal us by the assessee or any member of his family dependent on him, but excludes—

(a)jewellery;

(b) archaeological collections;

(d) paintings;

(e) sculptures; or

(f) any work of art.

badri (Bcom(Hons) Mcom CA final group 2) (119 Points)
Replied 10 July 2015

Why no sir, the exclusion part of definition clearly states "personal use" while in the present case assessee has used it for business purpose

1 Like

shalini (CA) (525 Points)
Replied 10 July 2015

It will be short term capital gain because according to section 50 if assessee has sold capital asset(building,machiner) on which depreciation has been allowed,income arising from such assets is treated as short term capital gain regardless of the period of holding.

STCG =2000000-1817810

somebody please confrm this

CA Chandra Prakash (9873059766 Increasing knowledge through sharing) (296 Points)
Replied 10 July 2015

There is STCG if block of assets of 15% ceases to exist, otherwise total consideration would be reduced from the said block of asset. CG amount would be as computed above.

VARUN RAJ SHUKLA (ACCOUNTANT) (22 Points)
Replied 10 July 2015

If sales consideration is greater than total cost the asset will be taxable as stcg

Zarra.Belal.Nomani (CS Final B.com CA Final.) (167 Points)
Replied 11 July 2015

What about outstanding installment amount ? Will it be deducted from sale consideration ?

(Guest)

In my view Rs 265000/- will not be deducted from Rs 2000000/- even if it is be paid by the purchaser directly to the finance company. The reason is that the loan amount is already included in the cost of the asset and it is not an expenditure incurred in relation to the transfer.

CIT v. Attili N. Rao — 252 ITR 880 (SC).

If the block ceases to exist after the sale Rs 2000000-1817810=182190 will be taxed as STCG.