Selling of Fixed Assets

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lalit mohta

PCC STUDENT

30 Points Posted on 25 January 2010

A Ltd. renovated a place for opening a retail showroom. They invested 50 lakhs for all renovation, equipment, interiors etc. After 2 years, A Ltd is selling the same business to B Ltd. B ltd assure A ltd to pay whole amount of investment in fixed assets which is made by A Ltd before two years. Now A ltd has to make a invoice on B Ltd. Whether VAT will apply on it. If yes, then what rate of VAT, the rate which they have paid when they bought the material or the rate which is applicable on Ready assets. How A ltd will treat this whole transaction in their books of accounts. If the date of sale of business is 1st december, but B ltd approved and accepted all details on 23rd January, what will be the date of bill and what will be A ltd`s liability?

Replies (2)

Amir

Learner

4898 Points Posted on 25 January 2010

Dear Lalit,

I think VAT will not apply in this case because A ltd. has not sold it;s stock in trade..It was Capital Asset i:e A ltd. is not in the business of selling Showrooms.

Capital Gains will be computed.

Regarding ur second query I couln't understand how can business be sold at a earlier date when Bltd. has accepted the term only at a later date.

Kiran Kumar V

C.A. Final

177 Points Posted on 26 January 2010

Mr.Amir is Correct, Show room will not come under the definition of goods and not only that the intention of seller is not to sell as stock in trade. Therefore, VAT may not apply in this transaction Capital Gains U/s 45 will attract.

Regards,

Kiran Kumar V