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Loss on Sale of Fixed Asset

sanjeev (Manager- Accounts/Tax/Finance) (229 Points)

13 October 2007

Hi friends,

During the course of audit i have come accross the following problem that is there is loss on sale of fixed asset which has been debited to the profit and loss account. The block of fixed asset yet exists as per provisions of income tax act. My question is whether the loss on sale of fixed asset would be added back while making the provision for taxation as per provisions of income tax act even though the block exists as per income tax act?

What would be the situation in case block of that fixed asset does not exist?

I have come accross this problem in almost every company the audit of which i have done?

So please send me the reply as soon as possible with reference to any particular section or circular if any,.

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11 Replies

(Guest)

If the asset is ceases to exit , than it is a short term capital gain.

Vikas K Dhameja (Credit Research) (81 Points)
Replied 17 October 2007

Profit / Loss on sale of fixed assets cannot be credited / charged to profit & loss a/c under Income tax act, if the block continues to exist ( i.e. there are still some assets in that block ). You can refer - Section 50 of Income Tax Act, 1961

(Guest)

............

(Guest)

required crystal clear information regarding TRANSFER PRICING AUDIT. i)meaning ii)purpose and related topics

CA. Gurdeep Singh Chawla (C A) (7080 Points)
Replied 22 February 2008

If block of assets exists there is no question of profit & loss . If block of assets not exists then there is short term profit/loss

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(Guest)

Originally posted by :sanjeev
"	Hi friends, During the course of audit i have come accross the following problem that is there is loss on sale of fixed asset which has been debited to the profit and loss account. The block of fixed asset yet exists as per provisions of income tax act. My question is whether the loss on sale of fixed asset would be added back while making the provision for taxation as per provisions of income tax act even though the block exists as per income tax act? What would be the situation in case block of that fixed asset does not exist? I have come accross this problem in almost every company the audit of which i have done? So please send me the reply as soon as possible with reference to any particular section or circular if any,.	"

Pulkit Agarwal (CA. Final) (455 Points)
Replied 31 August 2009

Originally posted by :sanjeev
"	Hi friends, During the course of audit i have come accross the following problem that is there is loss on sale of fixed asset which has been debited to the profit and loss account. The block of fixed asset yet exists as per provisions of income tax act. My question is whether the loss on sale of fixed asset would be added back while making the provision for taxation as per provisions of income tax act even though the block exists as per income tax act? What would be the situation in case block of that fixed asset does not exist? I have come accross this problem in almost every company the audit of which i have done? So please send me the reply as soon as possible with reference to any particular section or circular if any,.	"

Mr. Sanjeev,

What the accounts say, is as per the accounting Standards. As per the Income tax act, if the block continues to exist, the loss on sale can't be allowed as a deduction. If the block Ceases to exist, or the value of the block turns out to be negative, then the balance would be termed as the short term capital loss.

Sir, with due regard, it is shocking that you are a CA, call yourself, specifically a tax consultant, and you are seeking advise on such a basic issue.......

jugal chandak (article) (48 Points)
Replied 01 September 2009

as the block exist there will not b capital gain so u dont have any income tax liability further as an accounting treatment such loss shall b debited to p/l account and also such difference shall b considered as timing difference and deffered tax shall b calculated

Veerappa Bendigeri (Ass Manager (Compliance Services)) (38 Points)
Replied 08 July 2012

Dear sir,

I need your suggetion regarding the below question .

loss on sale of asset allowed in the finacial. we got a notice from the IT department saying that that loss is disallowed so you have to pay income tax to that extent. but my question is that is there any case laws saying that the loss shown is allowable expenditure.

Regards

Veeresh