Taxability of income from sale of fixed asset

This query is : Resolved

CA ROSHAN TIWARI (Querist)
Follow

30 September 2011 Dear Sir,
i have query on the above subject and i seek your help.

when depreciation is allowed as deduction from income from business , why income from sale of same depreciable asset is charged or covered by section 50 as STCG under capital gain and not as an income from business?

where as when a telecom licence fee is amortised and sold subsequently . the difference from cost on date of sale and sale proceed to the extent taken deduction from business income is taxed as business income and balance is taxed as capital gain?

i hope the query is clear.. waiting for your reply

thanks

Zeeshan

Zeeshan (Expert)
Follow

30 September 2011 Agrawal Saahab,

Your query is clear and logical but your concepts are not.

First of all, when an act in India says something then it is not necessary that the same should be logical or there should be some background for that.

Answer for both of your queries is:
"Because the Act/Provisions said so."

Unfortunately we will keep this query open, if someone can throw some more light on it. (as there may be some history behind the making of such provision, which i am not aware of).

CA. Deepak Narula

CA. Deepak Narula (Expert)
Follow

30 September 2011 An asset when sold is taxable under capital gains and not in BGBP because fixed assets are not directly revenue generating items like stock etc. So, depending upon the depreciabe and non depreciable assets, gain/loss is covered under capital gains and not in PGBP.

Telecom license is directly revenue generating asset for the company because the company cant operate without that and when this is sold, it's gain/loss is taxable/deductible under PGBP and gain above cost is taxable under capital gains.

Hope it clarifies.

Upgrade to CAclubindia Pro. Subscribe Now!

Zeeshan

Zeeshan (Expert)
Follow

03 October 2011 Fact given by Mr. Narula sounds logical that the basis of bifurcation of business income and capital gain may be on operational nature of assets. However there may be many assets which may directly generating the revenue for the assessee. e.g. Hiring Equipements, Manufacturing equipments etc. so as the telecom license.