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Clarification about capital goods

kumar hattanna (Officer - Excise) (525 Points)

04 August 2013

Dear sirs Purchased machinery on 1/4/2005. Taken cenvat credit in two instalment 50% each year. Now planning to sell the same machinery. Pls guide me by giving example.purchased cost of d machinery is 300000.pls suggest by income tax angle too.

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CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 04 August 2013

Dear Kumar Hattanna,

Excise point of View:-
The machinery (capital goods) you sold would be governed by the provision of Rule 3(5A) of Central Excise Rules, 2002 [as amended after N/N: 18/2012].

You are required to pay an amount to the Excise Dept, after following calculation:-
Total CCR claimed                        XXXX
Less: 2.5% for Each Qtr. or part thereof           XXXX
        from date of taking CCR
                                                                                                    ----------
Amount Payable                                                                             XXXX
                                                                                                     ----------

Amount Payable = Transaction Value i.e. Selling Price X Rate of Duty on date of sale
[WHICHEVER IS HIGHER]

Income Tax Point of View:-
the sale of machinery would be governed by the principles of Block of Assets. i.e. if you are selling the machinery above the WDV, or above the purchase price... you would be treated accordingly...
and if you are selling it below that price, no impact it would leave on your income.
Kindly provide more details to get more informed in this regard.

Thanks and regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com
+91-9891400405