Income tax on slae of machinery

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shamkant (Querist)
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27 February 2012 A Company sold his machinery from block of machinery & block exist after selling this machinery & profit arise. is income tax charged on this profit if the block is exist& also if block not exist under what captail gain or other pls explain in both cases i.r if the block exist or not exists.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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27 February 2012 Let us discuss this query with the help of an example.

There are 4 assets in a block, A, B, C & D. The WDV of the block is Rs. 50 lakhs.

Case 1: Asset A sold for Rs. 10 lakhs.
In this case, the block still exists, physically (B,C & D) as well as in value terms. The sale price shall be reduced from the WDV and depreciation shall be allowed on the balance WDV of Rs. 40 lakhs.

Case 2: Asset A sold for Rs. 70 lakhs.

In this case, although the block exists physically, the sale price exceeds the WDV. Accordingly, the WDV shall become NIL and STCG of Rs. 20 lakhs shall arise as per Section 50.

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