Profit or gains from business and profession

Dear Ankush,

1. Prepaid expenses will not be allowed as deduction since it is not pertaining to that year as per accrual concept. It has to be shown in the balance sheet as current asset.

2. For an asset to which full exemption claimed, if it was sold then entire amount of sale consideration would be treated as short term capital gains.

3. Under Block of asset principle, you have caluculate the depreciation on 86000 less 32000 i.e. on 54000/-

4. If it is used for business purpose, then the sale consideration value less wdv will be charged for short term capital gains.

It is only my opinion. 

1. Prepaid Income will be taxable in the year of receipt IF YOU FOLLOW CASH ACCOUNTING BASIS whereas IF YOU FOLLOW ACCRUAL ACCOUNTING BASIS then Prepaid Income will be taxable in the year to which it relates !! If you are following CASH BASIS ACCOUNTING then there will be no treatment for accrued receipt where if you are following ACCRUAL BASIS ACCOUNTING then accrued receipt will be taxable in the year in which it accrues.

2. First of all it will be called DEDUCTION and not EXEMPTION. The whole sale consideration will be taxable as Income from P/G/B/P u/s 41(3)

3. As per section 43(6) WDV shall be calculted as follows :

Opening WDV : 86000

+ Cost of Assets purchased during the previous year : NIL

- Sales Consideration of the Asset Sold : 32000

                                                                           = 54000

4. Profit/Loss on Sale of Car shall be taxable under the head Capital Gains. If Car is a depreciable asset then there will be Short Term Capital Gain and if it is non-depreciable then it will be according to its holding period.

- Ruben Balooni