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Depreciation - sec 50 and sec 30 related

smegam (Chartered Accountant) (89 Points)

28 January 2016

As per the Income Tax Act, motor car is not eligibile for additional depreciation allowance though it is classfied under Plant and Machinery at the rate of 15 % depreciation.

In case if the sales consideration received for the disposal of Plant and Machineries is more than the WDV of Plant and Machineries, can we adjust this excess consideration in motor car WDV block for the purpose of depreciation calculation and profit /loss on sale of plant and machineries under the Income Tax Act.?

Kindly clarify.

Thanking you

S Megalingam

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CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 28 January 2016

Opening WDV xxxxxxxxxxxxxxxxxxxxx

Add: Cost Of Acquisition of New Asset xxxxxxxxxxxxxxxxxxxxx

Less: Sale Consideration xxxxxxxxxxxxxxxxxxxxx

Value of Block xxxxxxxxxxxxxxxxxxxxxx

Less: Depreciation xxxxxxxxxxxxxxxxxxxxxx

Closing WDV

Where some assets are left in block of assets: If a part of such capital asset forming part of a block of asset has been sold and after deducting the net consideration received from sale of such asset from the written down value of the block of such asset the written down value comes to NIL then the gain arising shall be treated as short term capital gain and in such case where written down value has become NIL no depreciation shall be available on such block of asset even if some assets are physically left in the block of assets.

When no assets are left in block of assets: If the whole of the capital assets forming part of a block of assets have been sold during a year and the assessee has suffered a loss after deducting the net sale consideration from the written down value of the block of assets then such loss shall be treated as short term capital loss and no depreciation shall be allowed from such block of assets.