MY CLIENT SOLD SOME OF THE FIXED ASSETS LIKE LAND, BUILDINGS ETC. THE COMPANY EARNED HUGE PROFITS ON THE SALE OF SUCH FIXED ASSETS. NOW THE COMPANY WANTS TO TREAT THE PROFIT ON THE SALE OF FIXED ASSETS AS "CAPITAL RESERVE" WITH OUT CREDITING TO THE PROFIT AND LOSS ACCOUNT.
PLEASE HELP ME WHAT ARE THE IMPLICATIONS AND COMPLICATIONS OF DOING SUCH TREATMENT.
profit from sale of land & buildings and other fixed assets used for the purpose of business are taxable profits and profits arising from these need to be offered for taxation.
further AS-10 also states that the profits from sale of assets need to be credited to P&L acct. hence these can't be credited to Capital Reserve.
All reserves shall be made out of Profits only. So no option for u to create Capital reserve witout transfering to P&L A/c.
But think of the way to get exemption on that.
Naveen Fintech Pvt Ltd
Kolkata
CA Inter
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Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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