Capital Gain on Motor Car??

Tax queries 23611 views 10 replies

yashsr

2285 Points Joined April 2011

I have a client who is using Motor Car for his Business Use and has been providing depreciation on the same. Now, he has sold the same exactly after 36 months.(I want scenarios for both less than 36 months and more than 36 months)

WDV is 275000 whereas Sale Value is 250000. Can I provide for capital loss?? Also, which nature, short term or long term??

One thing which is bothering me is the definition of a capital asset which says that personal effects like Motor car are not capital assets.. but does this hold true for a car used in business on which we've provided depreciation also??

Replies (10)

Sandeep Keswani

Tax Consultant

1064 Points Joined August 2008

Dear Yash.....since the Motor Car is a Depreciable Asset used for business purpose, Capital Gain (or loss) would be computed U/s. 50.

As per Sec 50, indexation is not available on Depreciable Assets used for business purpose. Hence the period for which the Motor Car was held is immaterial.

In case there is no other asset in the Block, then WDV will be deducted from Net Sales Consideration and the balancing figure will be SHORT TERM CAPITAL GAIN / LOSS. (it can never be Long Term u/s. 50)

Therefore, STCL u/s. 50 will be 250000 - 275000 = 25000/- (if there is no other asset in the block)

Rushi

Practice

160 Points Joined August 2007

I AM FULLY AGREED WITH THE VIEW OF SANDEEP

yashsr

2285 Points Joined April 2011

Thanks for your quick reply Sandeep.. much appreciated! :)

Pavan Bharadwaj

Practicing Chartered Accountant

353 Points Joined January 2010

Capital gain on all depreciable assets are to considered as Short term capital gain irrespective of period of holding.

For depreciable assets Block of assets method is to be followed. If motor car is the only asset in the block, then loss of rs. 25000 is to be treated as STCL, which can set off against any capital loss. If there is any other assets in the block then deduct rs.250000 fron WDV of the block and clain depreciation on balance amount.

Personal effects includes assets used for pesonal use but not for business use.