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FBT ON MOTOR CAR - SOLD DURING THE YEAR

B KANRAR (SERVICE) (57 Points)

13 February 2009

FOR PARTNERSHIP FIRM / COMPANY

QUERY: I AM CALCULATED FBT ON DEPRECIATION OF MOTOR CAR @ 20% FOR THE 1ST QTR 08-09. BUT THE CAR SOLD NEXT MONTH. WHEN WE FINALIZE THE ACCOUNT WE CAN NOT CALCULATED DEPRECIATION THOSE CAR IS SOLD. IF MY CLCULATION IS WRONG OR WHAT IS THE ADJUSTMENT FOR THIS PUPOSE?

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7 Replies

Bal Krishna Pathak (Qualified Chartered Accountant) (31 Points)
Replied 13 February 2009

As per my opinion you have done correctly.

FBT and Income tax both are separate and u should not confused in both the calculation. Even u incur loss u have to pay FBT on the expenditure. When u incur any expenditure (liable for FBT) u are liable to pay FBT. Depreciation is also an expense during the period when u use the car therefore it is liable to pay FBT.

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Jagadish (Student) (368 Points)
Replied 13 February 2009

As per my opinion bal krishna pathak is correct

madhur gupta (student/article ) (1022 Points)
Replied 13 February 2009

rates of dep r to be taken as per income tax

but for f.b.t purpose dep.is to be cal.even assets is not held on march31

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 14 February 2009

As per Circular No. 8/2005 dt. 29-08-2005 (Question No.83 of FAQ’s for FBT), depreciation for FBT purpose shall be calculated according to the provisions of Sec.32. If there is no depreciation on car as per sec.32, nothing is liable for FBT.

CA Sakshi (CA Practice) (309 Points)
Replied 15 February 2009

Repair, running and maintenance exp. on motor car is liable for FBT. As you have charged depreciation earlier for the year in which car sold, you deduct that amount of depreciation from your next calculation of FBT liability. As no depreciation on motor car charged in P & L A/c so no FBT will be payable on depreciation. FBT and Income tax are different , yes its true but make it clear that you can't pay FBT on deemed expenses as they are not actually debited to P & L A/c. So, you take the credit of FBT paid by you on depreciation for next calclution if they lie within same year (as per your query).

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Bal Krishna Pathak (Qualified Chartered Accountant) (31 Points)
Replied 16 February 2009

THIS REPLY IS IN CORRECTION OF MY PREVIOUS REPLY PLEASE IGNORE MY PREVIOUS ONE.

However FBT is only payable on that part only which is allowable as expense. For the purpose of FBT Depreciation will be calculated in the manner as provided u/s 32 in Pro-rata basis. If at the end of the year block of asset doesnot exit or the value of block of asset is in negative then there will be no depriciation hence no FBT will be payable.

Even though if u have paid FBT on estimated basis then u r required to adjust the FBT and eligible for credit. I think you should claim refund of FBT in the return.

kapil agrawal (Audit officer) (95 Points)
Replied 19 September 2009

Originally posted by :Bal Krishna Pathak
"	As per my opinion you have done correctly. FBT and Income tax both are separate and u should not confused in both the calculation. Even u incur loss u have to pay FBT on the expenditure. When u incur any expenditure (liable for FBT) u are liable to pay FBT. Depreciation is also an expense during the period when u use the car therefore it is liable to pay FBT.	"