Depreciation

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Suppose a firm purchased machinery on 01-05-2008 and sold the same after using it for 3 months only in the same financial year.  Whether depreciation is to be calculated on the machinery purchased..???

Replies (5)

As per IT depreciation should be applicable from the date of Installation so calculate depreciation for 3 months period

Hi Meeta,

Pls clarify whether you want to know according to income tax act or companies act.

In any case depreciation is to be calculated and will contribute to the profit on sale of asset.

Although, the rate of depreciation will be different for Companies Act and IT Act.

However, as your question is incomplete, and as a practice of Indian Parnership Firms, I assume that your firm is following Income Tax Act for depreciation calculation. You can calculate the Profit/(Loss) on sale as below:

Selling price: ???

(-) Cost of acquisition: ???

(-) Depreciation upto date of sale: ?

Balance (Surplus or Deficit) {Short term capital gain}

 

The treatment mentioned above is correct if the mentioned machinery is only asset in the block, if there are other assets in the same block than no profit or loss is required to be calculated. The sale value will be deducted from the concerned block.  

Only companies have the mandatory requirement of calculating Profit or loss on sale of assets. In case of firms which follow the IncomeTax act for Depreciation the STCG will be attracted only if the WDV of the Block of assets to which that asset belongs is NIL as on 31st march...


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