Query ????

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CA. J. RAJGANESH (Querist)
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06 August 2011 For Eg:
If ABC Ltd., purchased a land on 01.01.2006 for 500000 and recorded in the Books as an (Land) Asset.

On 01.05.2009 It constructed a building on the land purchased on 01.01.2006 for 1500000.

In the Asset Side of The Balance Sheet :- Land 500000 & Building 1500000

Depreciation as per IT Act:
Depreciation Should not provided for Land. Hence ABC Ltd. Can claim Dep. only on Building.

MY QUESTION IS.....

Question 1:

In case If ABC Ltd., purchased Building for 2000000 (Including Land) and recorded in the Books as Land & Building 2000000.

In this Situation... How to Calculate Depreciation Amount ?? Because the land value is included in the Building.

Question 2:
In the above Example

How to Calculate Capital Gains if ABC Ltd. sold the Building on 31.03.2011 for Rs. 2500000??
Because In this Case Land is Long Term Capital Asset & Building is Short Term Capital Asset (Depreciable Asset u/s 50) ?

Thanks in Advance...................

CA Navin Jain

CA Navin Jain (Expert)
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07 August 2011 MY QUESTION IS.....

Question 1:

In case If ABC Ltd., purchased Building for 2000000 (Including Land) and recorded in the Books as Land & Building 2000000.

In this Situation... How to Calculate Depreciation Amount ?? Because the land value is included in the Building.

ANS:- CALCULATE THE DEPRECIATION ON RS. 2000000 AS PER COMPANIES ACT AND AS PER INCOME TAX ACT

Question 2:
In the above Example

How to Calculate Capital Gains if ABC Ltd. sold the Building on 31.03.2011 for Rs. 2500000??
Because In this Case Land is Long Term Capital Asset & Building is Short Term Capital Asset (Depreciable Asset u/s 50) ?

ANS;- IF YOU HAVE PURCHASED THE FIRST LAND AND THEN CONSTRUCTED THE BUILDING THEN DEPRECIATION WILL BE CALCULATED ON BUILDING VALUE NOT LAND VALUE AND THIS CASE CAPITAL GAIN WILL BE CALCULATED SEPARATELY ON LAND AND BUILDING

HOWEVER IF YOU HAVE PURCHASED CONSTRUCTED BUILDING THEN DEPRECIATION WILL BE CALCULATED ON FULL VALUE HENCE IN THIS CASE SHORT TERM CAPITAL GAIN/ LOSS WOULD BE ARISE.

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