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Sale of an asset in block of assets

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VIJAYA SARATHY (Querist)
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23 September 2009 An asset is sold in a block of assets. wat is the accounting treatment for it? explain tax liability? whether deferred tax concept arises?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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23 September 2009 The particular asset account should be credited by the sales consideration and profit or loss on sale of the asset is transferred to P&L A/c as normally such accounting is done.
The WDV and depreciation for accounting purpose and for IT purpose may be different and as such no special entries are required to be made.

The concept of block is generally maintained for the purpose of tax computation only and for Income Tax purpose Depreciation is calculated after deducting the sale proceeds of particular assets from the wdv and additions if any made during the year in the said block.
If the sale proceed is more than the total block wdv, excess is treated as short term capital gain so as to reduce the block value to Zero.
Deferred tax concept arises -Yes.

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