INTRODUCTION OF A VEHICLE IN A PROP BUSINESS

This query is : Resolved

Akhil Agrawal (Querist)
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19 May 2008 IF MR X INTRODUCES HIS VEHICLE PURCHASED BY HIM 3 YRS AGO FOR RS 5,00,000.00 IN HIS PROPRIETORY BUSINESS WHAT SHOULD BE THE VALUE OF THE INTRODUCTION. ALSO IF THE RATE OF DEP AS PER THE I.T ACT IS TO BE APPLIED THAN SHOULD WE CONSIDER THE 182 DAYS CRITERIA.

CA. Vineet Grover

CA. Vineet Grover (Expert)
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19 May 2008 Hi Akhil,

The Vehicle need to be introduced at WDV of 3 years at income tax rate.

The criteria of 180 (not 182) days shall apply for judging 50% or 100% of the depreciable amount.

Rgds/
Vineet

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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19 May 2008 i think 180 days criteria applies where new asset is purchased and put to use in same year. present case is different as vehicle was purchased earlier. introduction to prop. business does not mean new purchase, it is just capital addition.

so, 180 days criteria should not apply for prop. firm now.

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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20 May 2008 Written down value of an asset is calculated after reducing the deprecation allowed/claimed .In case of vehicles for personal use , no depreciation is claimed/allowed . Therefore the wdv of the vehicle is cost of acquisition.

The date put to use is relevant for calculating 180 days crieria . The date put to use for business purposes for calculating deprectiation will therefore will be relevant

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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20 May 2008 i disagree with both gentlemen on 180 days criteria.

i copy an explanation from section 32:

"Provided further that where an asset referred to in clause (i) or clause (ii) 53[or clause (iia)], as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in "that previous" year,......."

the language clearly says that 180 days condition will apply where asset is purchased and put to use for less than 180 days in same previous year.

suppose, if asset is purchased in Oct.06, but put to use in Mar.07, half year's dep. will be allowed in p.y. 06-07.

if it was put use in Mar.08, no dep. is allowed in p.y.06-07 and full years' dep. will be allowed in p.y. 07-08.

on cost of acquisition, i agree with Mr. Sampat.

CA. Vineet Grover

CA. Vineet Grover (Expert)
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20 May 2008 Hi Akhil,

I think the issue is resolved.
To sum up:

WDV to be considered after writing it down for three years
Put to use in business: 180 days concept shall aplly.

Rgds/

Vineet

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