What will be Cost of Acquisition in Case of Depreciable Asset

Section of 50 the Income tax act 1956 is applicable to Capital Asset which is forming the part of a block of assets in respect of which depreciation is allowed under Income Tax Act. However this provision is not applicable in case of power-generating unit claiming deprecation on SLM method.

Situation

Description

Section

Situation 1

On the last day of the previous year, WDV of block is Zero

50(1)

Situation 2

When block of asset is empty on the last day of previous year

50(2)

Situation 1– when WDV is Zero [sec50 (1)]

When written down value of block of asset on last day of previous is zero

Step 1

Find out full value of sale consideration of depreciable asset

Which have been transferred during previous year and within same block

Step 2

Find out-

  1. Expenditure incurred wholly or exclusively in connection with transfer
  2. WDV of block of asset at the beginning of previous year
  3. The actual cost of asset falling within same block

If step 1 is more than step 2 then difference taken as STCG & conversely, if step 1 is equal or less than step 2 then sec54 (1) is not applicable

Situation 2-Block is empty [sec 50(2)]

Section50 (2) is applicable when block of asset cease to exist on last day of previous year because all the asset in that block are empty

  • Cost of acquisition –

Step 1

Find out written down value of block at the beginning of previous year

Step 2

Add- actual cost of asset falling in that block acquired by assee during previous year

  • Compute capital gain/loss-

Find out full value of consideration of those depreciable asset which has been transferred during previous year

Less-

Cost of acquisition

Expenditure incidental to transfer

××××××

 

××××××

××××××

STCG/Loss

××××××


 

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