section 41

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Dhani (Querist)

13 June 2011 dear sirs,
If an asset is sold for above its wdv, whether the amount received over and above the wdv is deemed to be income u/s 41 upto the extent of the depreciation claimed for the asset sofar?
Does it make any difference whether the block to which the asset belongs to is nil/empty on that date or not?
wdv as on 1.8.2010 10500
asset sold for 11500
original cost of asset 25000
depreciation claimed sofar 14500
how to treat if
a. the block is empty
b. the wdv is 12000
thank you

CA Suresh Jain

CA Suresh Jain (Expert)

14 June 2011 The relevant provisions are given in section 50 which is as under, hope this will clarify your doubt :-
50. Special provision for computation capital gains in case of depreciable assets.--Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications:--

(1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of assets during the previous year, exceeds the aggregate of the following amounts, namely:--

(i) expenditure incurred wholly and exclusively in connection with such transfer of transfers ;

(ii) the written down value of the block of assets at the beginning of the previous year ; and

(iii) the actual cost of any asset falling within the block of assets acquired during the previous year,

such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets ;

(2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.

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