Sale of gross block

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Anil Bhandari (Querist)
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09 March 2012 Dera sir,

We have some assets having zero(nil) value as per Companies Act because in case of some of assets the accrued depreciation has reach to the level of original value of the assets and remaining have been sold. Now as per Income Tax(IT) there is still some value in first type of above mentioned assets and negative(-ive)value in second type of above mentioned assets after providing sale value in IT Depreciation chart.

How this situation will be tackled in Balance Sheet and Income Tax Computation?

I need detailed Illustration on this Topic.

CA Ghanshyam Joshi

CA Ghanshyam Joshi (Expert)
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09 March 2012 In the books of accounts -
1. Reverse the original book value
2. reverse the accumulated depreciation
3. provide for Profit / Loss as the case may by = Sale Value less net block = Profit.
Net Block less Sale Value = Loss

In the Income Tax -
If the sale value is greater than the closing WDV then show it as a short term capital gain.

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Anil Bhandari

Anil Bhandari (Querist)
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09 March 2012 Dear sir, Which amount to be shown as short term capital gain.

and WHAT IS TO DO OF THOSE ASSETS WHICH HAVE STILL SOME WDV BUT HAVING NIL VALUE AS PER COMPANIES ACT SIMPLY BECAUSE OF REASON THAT THE ACCRUED DEP. IS NOW EQUAL TO ORIGINAL COST OF THE ASSETS.

Please also suggest relevant section for more detail.

CA Ghanshyam Joshi

CA Ghanshyam Joshi (Expert)
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09 March 2012 Please refer the Accounting Standard for the Fixed Asset for accounting. Keep the neel value assests at a token value of 1 Rupee in your Fixed Asset Register. Whenever you discard these assets at that time the net realizable value will be your profit from sale of the assets for accounting purpose. That profit will be taxable as capital gain in the income tax.

In your first query you mentioned about negative WDV. for income tax you have to show that negative WDV as short term capital gain as your WDV can not be negative.

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Anil Bhandari

Anil Bhandari (Querist)
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24 May 2012 Dear sir,

Kindly also suggest the relevant section to refer for INCOME TAX purpose.

CA Ghanshyam Joshi

CA Ghanshyam Joshi (Expert)
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24 May 2012 Sec 32 of Income Tax Act deals with deprecialtion.
Sec 42 of Income tax Act deals with Capital Gain.

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