Loss on sale of fa/fa write off - disallowed u/s???

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 URGENT:
Loss on sale of fixed assets or fixed writeen off debited to profit and loss account; the same will be disallowed while computing the taxable income from business/professions.

CAN ANYBODY TELL UNDER WHICH SECTION OF INCOME TAX ACT, LOSS ON SALE OF FA OR FA WRITTEN OFF WILL BE DISALLOWED.

ALSO PROVIDE THE CITING OF ANY CASE LAWS WHICH SPEAKS ABOUT THE DISALLOWANCE OF LOSS ON SALE OF FA OR FA WRITTEN OFF EXPLICITLY WHILE COMPUTING TAXABLE INCOME..

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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22 September 2011 Under the Income Tax Act, concept of block of assets is provided for fixed assets.

This means that all the assets belonging to a particular category are clubbed together and known as block of assets.

Whenever an asset is sold from this block the sale price is reduced from the written down value of the block (WDV).

Profit or loss is computed only when the block ceases to exist.

Otherwise no profit or loss is allowed as deduction.

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Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 HELLO..
I have asked for section and case law, Please provide if available..the answer provided by you is of no use..

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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22 September 2011 Section 43(6)(c)(i) of the Income Tax Act provides that the WDV of the block of assets will be computed by reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year.

So, once the sale price is already reduced from the WDV you cannot claim it as a loss.

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 still answer provided by you is fully wrong...nonetheless thanks..

Any body on CCI, Please give the relevant section of income tax act under which loss on sale of fixed assets/fixed assets written off(when debited to profit and loss account) will be disallowed (or added back) while computation of total income and tax from business and profession. and relevant case law which justify the same.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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22 September 2011 Also for you information, Section 37 provides that an expense of capital nature shall not be allowed as deduction.

Loss on sale of fixed assets is a capital loss and accordingly not allowed as deduction.

Combined reading of Section 43(6)(c)(i) and Section 37 will tell you that sale price of fixed asset has to be reduced from WDV & cannot be claimed as an expenditure.

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Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 thank you very much:)

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