Suppose a firm purchased machinery on 01-05-2008 and sold the same after using it for 3 months only in the same financial year. Whether depreciation is to be calculated on the machinery purchased..???
CA. Rashi Goyal
(Chartered Accountant)
(512 Points)
Replied 17 June 2009
Hi Meeta,
Pls clarify whether you want to know according to income tax act or companies act.
CA. Dashrath Maheshwari
(TaXpert)
(15103 Points)
Replied 18 June 2009
In any case depreciation is to be calculated and will contribute to the profit on sale of asset.
Although, the rate of depreciation will be different for Companies Act and IT Act.
However, as your question is incomplete, and as a practice of Indian Parnership Firms, I assume that your firm is following Income Tax Act for depreciation calculation. You can calculate the Profit/(Loss) on sale as below:
Selling price: ???
(-) Cost of acquisition: ???
(-) Depreciation upto date of sale: ?
Balance (Surplus or Deficit) {Short term capital gain}
CA. Rashi Goyal
(Chartered Accountant)
(512 Points)
Replied 18 June 2009
The treatment mentioned above is correct if the mentioned machinery is only asset in the block, if there are other assets in the same block than no profit or loss is required to be calculated. The sale value will be deducted from the concerned block.
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