View Full Version : Depreciation in case block of assets ceases to exist but WDV at the end exists

Income Tax
11-05-2010, 03:36 PM
Q. A block of assets was consisting of Plant X and Y. Itís WDV as on 1 April 2009 was Rs. 950,000. A new plant Z was purchased on 1 June 2009 for Rs. 450,000. All the existing Plants were sold on 15 Nov. 2009 for Rs. 1,250,000. Cost of transfer is Rs. 100,000. Calculate the amount of depreciation allowed for the Assessment Year 2010-11? Is there any liability on account of Capital Gain also?<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>

Income Tax
11-05-2010, 03:42 PM
Calculation of depreciation for AY 2010-11<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>
WDV of block of assets as on 1 April 2009 (X &Y) = Rs. 950,000<o:p></o:p>
Add: Cost of asset acquired during the year (Z) = Rs. 450,000<o:p></o:p>
Less: Sales Consideration without Cost of Transfer(X,Y&Z) = Rs.1,250,000<o:p></o:p>
WDV for claiming depreciation for AY 2010-11 = Rs. 150,000( but it will be considered as NIL)<o:p></o:p>
Depreciation for AY 2010-11 = NIL( As block ceases to exist)<o:p></o:p>
WDV as on 31 March 2010 (No asset exist) = NIL <o:p></o:p>
Calculation of Capital Gain U/S 50(2)<o:p></o:p>
Sec. 50 (2) states the procedure of calculating capital gain in case block of assets ceases to exist. In that case, it is mandatory to calculate Short Term Capital Gain or Loss which is given below. There can be short term loss as well as gain u/s 50 (2).<o:p></o:p>
Sales Consideration = Rs. 1,250,000<o:p></o:p>
Less: WDV as on 1 April 2009= Rs. 950,000<o:p></o:p>
Less: Cost of asset acquired = Rs. 450,000<o:p></o:p>
Less: Cost of transfer = Rs. 100,000<o:p></o:p>
Short Term Capital Loss = Rs. 250,000<o:p></o:p>
Note: There will always be short term capital gain/ loss not long term capital gain/ loss on the depreciable assets. <o:p></o:p>
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