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Capital Gain on Motor Car

Sales Consideration:                230000

Less: WDV of Motor Car            194250(210000-15750) for depreciation

STCG                                        35750

regards,

ratan

Please not that depreciation is not chargeable on the assets sold in a year.

1. Capital gain arises only when a block of assets ceases to exist or when the wdv of the assets becomes zero. In this case the block of motor car doesn`t cease to exist. So amount of depreciation is  Rs 0.6 lacs calculated on Rs 4 lacs i.e, (opening WDV Rs 4.2 lacs+ Purchases Rs 2.1 lacs- Sales Rs 2.3 lacs).

2. In this case no depreciation is chargeable as complete block of lorries ceased to exist. You get a short term capital loss of Rs 13.5 lacs i.e ( Opening Rs 6 lacs+purch in jul Rs 1.5lacs+ purch in Jan Rs 17lacs- sales Rs 4lacs)

I`ve calculated as per Income Tax Act, 1961

No capital gains in motor car as the block having balance and can be depreciated in next years

I agree Mr. Naga Praveen........

Please see this......

Dear Praveen,

Depreciation is not chargeable in the year of sale is applied when the block cease to exist or where there is a gain. In the given case the Motor car's block doesnot cease to exist and the remaining balance of the block after calculating the sale consideration is offered to depreciation.

I would also like to explain the rationale behind no depreciation in the year of sale:

Depreciation goes to P&L a/c which comes under the basket of normal slab rate and

the short term capital gains is also taxed by normal slab rate

So the point to ponder is even if you provide for the depreciation there will not be any change in tax liability. It will remain same in both the case.

Kaushik

As all lories have been sold so the block cease to exist and the block is nil. So the resultant balance is short term capital loss

Praveen's answer is right and i agree with him that depreciation is not chargeable on an asset sold within the year

NOW PLZ ANY ONE FROM ABOVE WILL LET ME KNW IF MOTOR CAR IS COVERED UNDER DEFINITION OF CAPITAL ASSET AS PER SECTION 2(14)

Motors cars used for business comes under Capital Asset.

it hell to see such mistakes..... ha ha ha