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FBT on Motor Car (Depriciation)

Paresh (Tax Consultant) (44 Points)

12 March 2009

Gross Block of Assets (Motor Car) ceases to exist totally during F.Y.: 2008-09 (03-Dec-2008), Now whether FBT is chargeable on Block of assets, when the Gross Block shall not be appearing in Balance Sheet as at 31st March, 2008.

As per Sec 50, Income received or accruing as a result of transfer (of block) shall be deemed to be the capital gains. WHAT IF THE TRANSFER RESULTS IN LOSS, can the section be interpreted to consider the loss as Capital Loss.

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6 Replies

RITESH KHANDELWAL (Corporate Taxation) (168 Points)
Replied 12 March 2009

Dear Mr. Paresh

Well in regard to ur 1st query, i believe that if the Motor car is sold during the year no depreciation can be provided as the block of Assets cease to exist at the end f the year. Since FBT is paid on the expenses incurred during the year in running, operating & maintaing Motor car and since Depreciation is alwayz provided at the end of the year so you need not pay FBT on the expenses which you have not incurred during the year.

In regards to your 2nd query, yes ur contention is absolutely correct Capital gain included capital Loss.

Atul Kumar (CA) (504 Points)
Replied 24 April 2009

Right, in the Law, where there is Income/Gain, it shall include negative Income/gain.

vijay (.) (212 Points)
Replied 25 April 2009

Hi Paresh,

As Mr. Ritesh Told you there is not need to pay FBT as there is no expenditure because you cannot claim depreciation as the Gross block of assets become nil.

Regards

Vijay Kumar

Vrnanda (auditor) (110 Points)
Replied 26 April 2009

Dear friends, my view will be

1. As the asset is the block is transferred during the period, the assessee can claim the capital gain loss.

2. As far as FBT is concerned

a) though the asset is not there as at the end of the period, FBT shall be payable on the running, running and maintenance of motor cars till the period car is used during the period.

b) FBT on depreciation need to be paid as there the capital gain would be calculated on basis of the net wdv block (charges depreciation till the period of sale). Hence i believe that need to be paid.

Any way i will quote the relevant section tomorrow.

Vrnanda (auditor) (110 Points)
Replied 26 April 2009

Dear friends, my view will be

1. As the asset is the block is transferred during the period, the assessee can claim the capital gain loss.

2. As far as FBT is concerned

a) though the asset is not there as at the end of the period, FBT shall be payable on the running, running and maintenance of motor cars till the period car is used during the period.

Any way i will quote the relevant section tomorrow.

vijay (.) (212 Points)
Replied 27 April 2009

Dear Mr. Vrnada,

I am not agree with you on the 2 (b) point put by you because FBT will be calculated on the amount of depreciation and depreciation can't be claimed as the Gross block of Aseets is NIL.

My question is this if there is no amount of Depreciation then how will calculate FBT on that. Please Clarify.

Regards,

Vijay Kumar