Sale of motor car

This query is : Resolved

SUBHASH JAIN (Querist)
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21 September 2011 IN THE FIRM WHERE EVERY YEAR CLAIM THE DEPRECIATION ON MOTOR CAR . AFTER FEW YEAR FIRM SOLD OUT THE MOTOR RS. 5000/- EXCESS OF BOOK VALUE ( DEPRECIATED VALUE ) IN THAT CASE EXCESS VALUE IS TAXABLE IN CAPITAL GAIN OR NOT , PLEASE CLEAR.

MAHENDRA KUMAR BAGRECHA

MAHENDRA KUMAR BAGRECHA (Expert)
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21 September 2011 Hi,
If block of asset has became zero after selling car from that block, gain will be chargeable to short term capital gain.

SUBHASH JAIN

SUBHASH JAIN (Querist)
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21 September 2011 SHORT TERM OR LONG TERM IF ASSETS SOLD AFTER 3 YEAR. IN THAT CASE WHICH SECTION COMES UNDER THIS .

MAHENDRA KUMAR BAGRECHA

MAHENDRA KUMAR BAGRECHA (Expert)
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21 September 2011 All depreciable assets are subject to short term capital gain tax only

SUBHASH JAIN

SUBHASH JAIN (Querist)
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21 September 2011 Please provide the section

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 Sure! Here’s the detailed clarification on **sale of motor car (depreciable asset) and capital gains tax**:

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### Tax treatment of sale of depreciable asset like motor car:

1. **Block of Assets Concept** under Income Tax Act applies.

* Motor cars used in business are part of a **block of assets** under Section **2(11)** and Section **50** of the Income Tax Act.

2. **Depreciation claim and sale of asset:**

* When you sell a depreciable asset (like a motor car), the **difference between sale price and written down value (WDV) of the block** is considered a gain or loss.

3. **Capital gains or short-term capital gains?**

* **Depreciable assets are always treated as short-term capital assets, irrespective of the holding period.**
* So, **any gain on sale of motor car (or other depreciable assets) is taxable as short-term capital gains (STCG).**

4. **Relevant Sections:**

* **Section 50:** Deals specifically with capital gains on transfer of depreciable assets forming part of block of assets.
* The gain is computed as:
**Sale Price – WDV of the block immediately before the sale**
* This gain is treated as **short-term capital gain** regardless of holding period.

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### Summary:

| Situation | Tax Treatment | Section |
| ------------------------------------- | ------------------------------------------------------ | ---------- |
| Sale of motor car (depreciable asset) | Gain is **short-term capital gain**, taxed accordingly | Section 50 |
| Holding period irrelevant | Always short-term, even if held > 3 years | Section 50 |

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If you want, I can help you draft the exact formula or journal entries for this transaction. Would that help?

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