Ayushi Agarwal (Article) (161 Points)
01 September 2012A buliding was acquired for rs.50 lacs and furniture for rs.5 lacs. after a couple of years the building alongwith furniture is sold for rs.80 lacs. what will b the capital gain tax treatment??
Also how will the sale consideration be deducted from the block of assets?
Sumit Grover
(Chartered Accountant )
(3652 Points)
Replied 01 September 2012
1) Total Short Term Capital Gain(being depreciable asset), if both blocks ceases to exist will be
Sale consideration 80
less : TOtal WDV of furniture & building sold ---- XX
STCG
2) If Blocks are still existing, then while deducting the amount of sale consideration, the sale consideration(i.e. Rs. 80) should be bifurcated in ratio of cost of asset sold(i.e. in ratio of 50:5)
and the capital gain(for each block) will be calculated as follows:
Opening WDV XX
Add: additions XX
less: deletion(i.e. sale consideration) XX
Closing WDV XX
If the resulting WDV is positive, then no capital gain arises, infact the resulting WDV will be eligible for the depriciation
If the resulting WDV is negative, then the same shall be taxable as Short Term Capital Gain
CA Saiyum khan
(Practicing CA)
(685 Points)
Replied 01 September 2012
It is not calrified the use of building and furniture. If it was for business purpose and had been grouped as depreciable assets then the treatment suggested by CA Sumit Gover is ok. But if it was personal use Assets then the entire gain would be considred as STCG. The salses consideration entire furnished flates has to be taken and cost of acquisition of both building and furniture has to be taken in to account. Alternatively the estimated furniture value may be reduced from the total consideration to save the stamp duty to that extent. But in both the cases STCG will remain same.
Sumit Grover
(Chartered Accountant )
(3652 Points)
Replied 01 September 2012
Dear Saiyum Khan,
In case furniture is used for personal use, then the same doesn't fall in the definition of capital asset(refer Section 2(14)(ii) for the same). in that case, no capital gain will airse on furniture.
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