Whether loss on sale of asset is allowed for a company .

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

20 August 2013 Dear Sir,
whether loss on sale of asset is allowed for a company, if block ceases to exist and there is two losses one is for the income tax purposes and the other one is for the companies act purpose.
whether loss on sale of assets as per companies act is added and the loss as per income tax es deducted while calculating taxable income. please provide the treatment thereof.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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20 August 2013 The block ceases to exist. I can assume that such block is of Depreciable Assets.
.
In the P&L A/c loss as per Companies Act is debited - say at Rs. 75000. After giving effect to this capital loss the Net Profit of the Company is -say Rs 100000/-
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Loss as per Income Tax Act on sale of the Block of Assets- is say Rs. 50000/-
.
Now if you want to compute the Total Income of the company-
Business Income
---------------
Net Profit as per P&L A/c ..... 100000
Add: Loss on Sale of Assets ....75000
(As per Books) --------
Total Business Income 175000
Short Term Capital Gains
------------------------
Loss on Sale of Block of Asset -50000
.
STCL can not be set off against business income.
.