Assessee is a proprietor
There is only one asset in the block of Motor Vehicles
Asset was sold in the month of February 2017
Sale Value of the asset is more than the written down value of the block
Questions -
1. Will depreciation be charged for 10 months before the asset was sold?
2. What is the accounting treatment of the above transaction?
3. What is the taxation treatment and how to show in the ITR?
No depreciation for 10 months under Income Tax act.
STCG is levied for depreciable assets.
1. Will depreciation be charged in P & L A/C for accounting purpose??
2. And how to show this in the ITR??
As Per Section 32 of the Income tax act, 1961. Depreciation is to be charged at the end of the financial year on the block of Asset. Since The block does not exist at the end of the Financial year, therefore, you cannot charge depreciation on it.
So, Difference between the Sales Amount and the Opening Value of the block of Asset shall be considered as Short term Capital gain.
For Accounting Purpose, You can Charge Depreciation for the 10 months and debit it to P&L A/c and then the difference between Sales Value and Value of assets after providing 10 Months depreciation can be shown as profit in P&L A/c.
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Kolkata
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Gupta Sachdeva & Co. Chartered Accountants
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