Short Term Capital Gains on Depreciable Assets

1686 views 2 replies

Ajay S.Yadav

Student

148 Points Joined January 2009

Dear experts,

I have a one query which I am sharing here for your valuable guidance:-

Company XYZ has bought a office premises in 2012 for Rs. 10 Crore and also charged depreciation over a period of time and now in 2017 the wdv of office premises is 9crore the company is selling is at ₹ 13crore. Since company is selling the depreciable asset the capital gain will be short term capital gain.

Now my question :
1) how to compute capital gain?
2) if the block of office premises is still there then how to compute capital gain in such case.

Since the amount is quite big so I need to take precaution before giving any suggestions to client.

Kindly suggest
Thanks

Replies (2)

Sahil Jain (FAFD, DISA, CA)

Practicing Chartered Accountant

2481 Points Joined June 2013

As per IT Act, Short Term capital gain will attract in following 2 cases :

1. Either block cease to exist - In your case if you still have any other premises then block has not cease to exist and no capital gains.

2. Value in block becomes negative - Here you will have to make working and see whether value of your block goes negative i.e. Closing WDV. If yes then you will have to pay Short term capital gain tax irrespective of block being in existence.

Working :

Opening WDV of Block XXX

Add : Purchase value during the year XXX

Less : Sale value during the year -XXX

Closing WDV of Block XXX