Capital Gain Query

Friends,

If a depriciable asset is gifted and if depreciation has been claimed by the previous owner  (say Mr. X), however no depreciation has been claimed by transferee (say Mr. Y) than when Mr. Y transfers this asset, what will be cost of acquisition? Will it be cost to previous owner u/s 49(1) or WDV in books of Mr. X when he gifted it? Will Indexation be available to Mr. Y since he has not claimed any depreciation on it???

Friends,

If a depriciable asset is gifted and if depreciation has been claimed by the previous owner  (say Mr. X), however no depreciation has been claimed by transferee (say Mr. Y) than when Mr. Y transfers this asset, what will be cost of acquisition? Will it be cost to previous owner u/s 49(1) or WDV in books of Mr. X when he gifted it? Will Indexation be available to Mr. Y since he has not claimed any depreciation on it???

Dear Chintanshah,

Explanation 2 to Sec 43(1) which defines "Actual Cost" AS UNDER -

Where an asset is acquired by the assessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by the amount of depreciation actually allowed ...

Now Indexation cannot be done because the Transferee has simply step into the shoes of transferor & the fact that transfree has not claimed any depreciation will not affect, computation will be made u/s 50 only...

Dear friends,

what is the position if, the assessee is proprietor, has a motor car used for business.

It is used for business for 6 year upto 2008-09 claiming depreciation as Rs.3 lakhs over 6 years. Its WDV on 31.03.2009 is Rs.8 lakhs. on April 1 2009, he withdrew the car from business by crediting motor car and debiting drawings - A book entry.

Then he used the car for personal purpose for 365 days of the year and sold it for Rs10 lakhs on 31st march 2010.

Can he claim tax free receipt as car is now a personal effect?

dude...it wont b tax free...it wil taxable under income from other sources..:)

i think car cannot claim as personal effect.

So, Capital gain will be taxable.

Me. Mankaran

If u want to save capital gain Tax, u have to invest in same block of asset equal to or more than the value of STCG.

Mr. Mankaran

If u want to save capital gain Tax, u have to invest in same block of asset equal to or more than the value of STCG.

The transaction can be cloured as slump sale and subject to LTCG .When you are selling a business unit for lumpsum value the the difference in networth and sale proceeds will be treated as LTCG irrespective whether the assets was depriciable assets. Have a relook at facts and plan accordingly.

-CA...Innovative....

Dear G.K,

                                Sec 50 regards the gain as sort term only for computation prescribed u/s 48 and 49. Therefore for all other purposes it will be a case of longterm gain. You are entitled to all benefits which you would have been entitled had SEc 50 was not there.

siva208 @ yahoo.com

I am of the opinion that there will not be any CG on sale of car. The charactor of the property at the time of its transfer is very relevant.In this case at that time it was clearly his personal property. More over at the time of its withdrawl, his block of assets would have been reduced to that extent and gain if any has already been booked indirectly in the block. Its impact shall be known when the whole block is transferred.

siva208 @ yahoo.com