sale of motor car

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 August 2010 A FIRM SOLD MOTOR CAR AMOUNTING RS.350000/ON 4-8-2010 WHOSE WDV AS ON 1-4-2010 RS.275000/-. A FIRM HAS BLOCK OF ASSETS OF MOTOR CAR, NOW RS.75000/ PROFIT IS TREATED AS BUSSINESS INCOME OR CAPITAL GAIN. PLEASE EXPLAIN ENTRIES IN BOOKS & DEPRECIATION CALCULATION.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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10 August 2010 Gain on sale of a depreciable asset will be short term capital gains taxable u/s 50(1) and liable to be taxed as such on normal slab rates.

Since the block in zero no depreciation for the year allowable.

CA. Pradeep Nayak

CA. Pradeep Nayak (Expert)
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11 August 2010 In the books of accounts, you have to show Rs. 75,000 as Profit on sale of asset.

For Income-tax purpose :
a) Profit on sale of asset Rs. 75,000 shall be excluded from the business income.
b) Rs. 3.5 lakh(sale value) shall be reduced from the block of asset of motor car as on 01-04-2010. Depreciation will be calculated on the balance if any, in the block after such reduction.
c) If the sale proceeds exceeds the opening WDV + additions if any during the year, the difference will be Short term capital gains.

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