M/s ABC Pvt. Ltd. has sold a machinery for Rs. 3.80 lacs. WDV of the machinery is Rs. 2.50 Lacs. The Profit on Sale of Fixed Asset is Rs. 1.30 lacs. While calculating the Income from Business the Profit on sale of Fixed Asset shall be deducted. Then profit shall be taxed as Capital gain u/s 50 of the IT Act, 1961. ie Rs 1.30 x 30% = Rs. 39000. Whether the above calculation is correct.
Please guide.
Regards,
Devendra
Dear Devendra
As per section 32 sale proceeds should be deducted from block of assets.
Is it correct that in case of a Pvt. Ltd. Co. the profit / loss on the sale of asset cannot be transferred to other Asset in the same block, and the net result should be credited / debited to the P&L A/c?
Regards,
Devendra
As far as IT is concerned,
reduce the amount realised on sale of the asset from the concerned block.
Section 50 implication arises when:
1. Not a single asset left in the block; or
2. Value of the block becomes negative.
While preparing P&L under companies act, only the gain/loss on disposal will come to the P&L.... Gross block and provision for depreciation should be adjusted....
Pass the foll entries:
Bank Dr. 3,80,000
to WDV 2,50,000
to Profit on sale of machinery 1,30,000
Profit on sale of machinery Dr. 1,30,000
to P&L 1,30,000
Instead of WDV, you actually have to pass the entry as crediting the provision for depreciation and debiting the gross value of the P&M... then you can use in sch VI depreciation schedule format.
CAclubindia
