Sameer (EXPERT) (173 Points)
19 April 2012Dear friends
we have a sole prorietorship business.we had a block of fixed asset .Now some part of fixed asset from the block had been sold on a profit.so can u pls tell whether i calculate depriciation on op wdv+addition-deletion(gross sale value),& if yes then whether i have to pay tax on the profit made on selling of the asset
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 April 2012
If the block ceases to exist after sale of the asset, then STCG or as the case may be STCL will be there. However tax can be saved on STCL if a new machine is being purchased.
Sameer
(EXPERT)
(173 Points)
Replied 19 April 2012
thx,but what about the pofit as per accounting which arises from sale of asset,whether to be taxable as per incometax or not,or considered for as 22 (deffered tax)
nitin suvarna
(C.A FINAL)
(828 Points)
Replied 19 April 2012
sir,
sec 50 will be applicable in either of 2 cases:
1. there is no asset in block
2. there is no wdv value (nil) .So here sec 32 is not applicable(you need to check the same & accordingly give effect)
the profit from sale of business assets is not taxable (deducted separately) since from the tax point of view the dep aspect (income tax point of view) will be reduced due to the sale ,with a future impact(it gets adjusted)....
pls correct me if i m wrong
regards,
nitin
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 April 2012
Under the I-T Act, we follow the block concept. So if the block ceases to be in existence, then only STCG or STCL arises. otherwise just the deduct the sale proceeds from the block of the assets & calculate depreciation on the balance to arrive at teh closing WDV for the eyar.
Sameer
(EXPERT)
(173 Points)
Replied 19 April 2012
thx u everyone
but can u tell me the accounting treatment on the abfesaid transaction
& again if the fixed asset is purchased against a loan which is due till the date of sale,7 again the interest on the fixed asset after the sale is bear by seller,then what to do
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 April 2012
There is no DTL or DTA created on the sale of the asset, as the block does not ceases to be in existence. So AS22 would not be applicable.
Sameer
(EXPERT)
(173 Points)
Replied 19 April 2012
thx u, but again can u pls tell me the accountng treatment on this
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 April 2012
It wud be as follows:
Bank A/c Dr
To Fixed Asset
If there is an loan running on the concerned FA, then square-off the loan from teh sale proceeds & the balance pay it from teh bank.
CAclubindia
