13 March 2012
Dear sir, I would like to know that, if the book value of a computer was Rs.6500/- on 01/04/2011 after deducting depriciation. And it has been sold for Rs. 8000/- on 25/02/2012, then where to enter the amount of Rs. 1500/-. Can I show the Rs. 1500/- in the credit side of P&L A/c, as it is an indirect income of business. Thanks in advance.
13 March 2012
as per accounting: u need to charge depreciation for 10 months and 25 days depreciation and resulting gain is credited to P&l account.
as per income tax:
charge depreciation for whole year @ 60% i.e., 3900 and sale value is deducted from gross block of group of computers. if only this computer is remained then the resulting gain i.e., 5400 {8000-(6500-3900)} is considered as short term capital gain.
17 March 2012
as per income tax only criteria is whether the asset is used for more than 180 or less than 180 days. if asset is used for more than 180 days than charge full years depreciation on opening WDV otherwise half years depreciation is charged on opening WDV.
It is always on opening value and not on closing value.
21 March 2012
Dear Rajnikant, do you mean to say that if an asset is sold during the year, even then depreciation is admissible on the asset?
That is not the case.
As per Section 32, depreciation is allowed on the written down value.
Written down value is defined in Section 43(6) as :
Opening WDV Add: Acquisition Less: Sale
Depreciation is calculated on the balance (closing WDV before charging depreciation).
If you say that depreciation is charged on OPENING WDV, then what about depreciation on asset acquired during the year. It does not form part of opening WDV.
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