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42. Computation of profit on transfer of a business capital asset
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42. Computation of profit on transfer of a business capital asset.—(1) The amount of profit, where a business capital asset, which forms part of a block of assets specified in the Fifteenth Schedule, is transferred discarded, destroyed or destructed shall be computed in accordance with the formula—
A – (B + C)
Where A = the amount accrued or received in respect of such asset, which is transferred, discarded, destroyed or destructed during the financial year together with the amount of scrap value, if any ;
B = the amount of written down value of such block of assets at the beginning of the financial year ;
C = the actual cost of any asset falling within that block of assets, acquired during the financial year.
(2) The profit referred to in sub-section (1) shall be treated as "nil", if the net result of the computation, thereunder, is negative.
(3) The amount of profit, where a business capital asset other than that referred to in sub-section (1) is transferred, discarded, destroyed or destructed, shall be computed in accordance with the formula—
A – B
Where A = Amount accrued or received in respect of the asset which is transferred, discarded, destroyed or destructed during the financial year together with the amount of scrap value, if any ;
B = The actual cost of the asset.
Clause 42 provides for the method of computation of profit on transfer of a business capital asset in case of any amount, which forms part of a block of assets specified in the fifteenth schedule. It provides that the amount of profit where such capital asset is transferred, discarded, destroyed or destructed shall, be the amount accrued or received in respect of such asset together with the amount of scrap value, if any, as reduced by the amount of written down value of the block of assets at the beginning of the financial year together with the actual cost of any asset falling within that block of assets and acquired during the financial year and in case of any asset not falling in the block of assets the consideration received on transfer less actual cost will be the profit.
The said clause further provides that if the net result of the computation is negative, the profit shall be treated as "nil".
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