Treatment of profit on sale of depreciable fixed asset in itr

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Rajendra Sewda

none

89 Points Posted on 07 September 2018

A Pvt. Ltd. Company having WDV of P&M Rs. 83,384 as on 01/04/2016. It sold this P&M for Rs. 125000 on 01/06/2016 (having WDV on 1.4.2016 Rs. 83,384) Till date of Sale i.e. 01/06/2016 Depreciation become Rs. 2,564 for 62 days. Hence profit on sale of P&M becomes Rs. 44,180 (1,25,000-83,384+2564) as per books of accounts. However as per IT WDV value as on 1/4/2016 Rs. 5,10,000 then after deducting sale proceeds Rs. 1,25,000 Depreciation on Block of P&M becomes 57,750. (please note that block of asset is not nil then Capital Gain becomes nil)

What treatment will be in Income tax computation and iTR

in which point of schedule BP or Computation of income from business & profession Profit on sale of Depreciable Asset should be deducted.

Thanks

Replies (7)

Ruchika Somani

Coaching and Practice in Tax Audit Law

4429 Points Posted on 07 September 2018

Profit / Loss on sale of Fixed asset shall be calculated only when entire block of asset is sold.

Depreciation is not charged as per IT on that asset which is sold.

Rajendra Sewda

none

89 Points Posted on 07 September 2018

This profit is calculated after charging depreciation as per companies Act. So this profit is include in profit and loss as per books of account. But what treatment requires because we make adjustments after considering profit as per books

Ruchika Somani

Coaching and Practice in Tax Audit Law

4429 Points Posted on 07 September 2018

As per copmpanies act you need to calculate profit the way you have done but as per Income tax while considering profit such amount of Profit or Loss will be disallowed from Net profit / Loss

Rajendra Sewda

none

89 Points Posted on 07 September 2018

Right that why I have query. Because in computation we start with profit as per book then make adjustments of any add less. So In this situation i. e. profit on sale of fixed asset as books we need to reduce but at which point we should deduct that profit. (assume
I take profit as per books 1 lakh
less other head(capital gain) income credited to P&L a/c 44180)
But while generating ITR X M L error is showing that income from capital gain is Nil but amt. 44180 is shown against capital gain in other head income credited to P&L a/c under head "business"
That's why I am asking