Profit/loss on sale of fixed assets

We can open an a/c viz., Profit/Loss on Sales of Asset or Fixed Asset.

Profit can be treated as income & in vice versa.

Dear Ankit,

For Depreciatiable Assets:

As far as accounting is concerned you have to calculate the profit/loss on sale of fixed assets after charging the depreciation till the date of sale of fixed assets.

In Income Tax you have to deduct the sale consideration from the block of assets as mentioned in the Section 32 of the Income Tax Act, 1961 and charge depreciation on the remaining value of the block.

If sale consideration exceed the entire value of the block then the difference between the sale consideration and the actual cost of acquisition of bleck is taxable in the head capital gain as short term capital gain. The difference between actual cost and WDV is taxable as PGBP income.

e.g

COA 100

WDV 50

SALE CONSIDERATION 110

PGBP INCOME Rs. 50

STCG Rs. 10.

i could have almost answered like VP  and omitted the word Income tax from your question ... 

a big reading mistake !  but whatever CA kanj goel said is correct and no rectification needed.

actual cost would be calculated as per section 43(1) and then capital asset chargreable for the excess amount. 

Here, accounting treatment and tax treatment are diffferent.

In the accounting treatment, e.g.purchased cost of depreciable asset is 2 lac. and depreciation on that till date is 1.5 lac. and now written down value is 0.50 lac. and you have sold it for 2.1 lac. then accounting treatment will be :-

Bank A/c Dr..   2.1 lac

  To profit on sale of asset.   1.5 lac

  To Capital Reserve            0.1 lac

  To Asset                          0.50 lac

and in the tax it will depend on block of asset. If block of asset is go to nil or if sale consideration more than written down value on selling of depreciable asset, then STCG will be arised u/s 50. if there block of asset not nil or sale consideration is less than, then no tax. only depreciation amount will be reduced on account of written down vale reduced.

Dear Arif,

I disagree with you about the accounting traetment as the entire profit is to be credited to profit and loss account and no amount will be transferred to capital reserve.

For Income Tax you can refer to the example quoted by me in my earlier post.

Dear Sir,

If block of asset is go to nil or if sale consideration more than written down value on selling of depreciable asset, then STCG will be arised u/s 50. if there block of asset not nil or sale consideration is less than, then no tax. only depreciation amount will be reduced on account of written down vale reduced. Is there any chance to arise the STCG when the block of asset not nil or sale consideration is less than block of assets

pls correct me if I am wrong AND plz give your suggetion if any_

Assesse has sold factory building, as per sec 50 if any depreciable assets sold then Capital gain is short term capital gain.

but if cost of purchase is more than WDV......

1) how much amount I shall  take for STCG-

         1) 11,54,354 or 2) 8,21,324

2) if we consider 8,21,324 as STCG thn what shall be the treatment of difference amount between (11,54,354-8,21,324 = 3,33,030)

plz suggets its little urgent. many thanks in advance..

Dear Pooja, 

Presuming  block of the asset is go to nil,  STCG will be 2790604 (5000000-2209396) as per section 50. Cost of purchase is always more the wdv.  Cost of purchase 3363750 has no any relevance here.

will STCG be applicable if the block is not nil