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Transfer of Depreciable Assets

Transfer of Depreciable Assets

Depreciable assets are assets owned by the tax payer and used in his business.

Whatever be the period for which a depreciable asset was held by the transferor, the capital gain arising from the transfer is always short term capital gains. Capital Gains is calculated with reference to the block of assets of the transferred asset(s).

Excess of full value of consideration for transferred asset(s) over (expenditure for transfer(s) + Written Down Value (WDV) of the block of assets at the beginning of the Previous Year + Actual Cost of any asset falling within the block of assets and acquired during the previous year) will be the short term Capital Gains.

Slump Sale

Slump sale means transfer of one or more undertakings as a result of the sale for a lumpsum consideration without values being assigned to the individual assets and liabilities in such sale. Undertaking includes any part of the undertaking or a unit or division of the undertaking or a business activity as a whole but does not include individual assets or liabilities or any combination thereof not constituting a business activity.

Any profit arising from slump sale shall be chargeable to LTCG if the undertaking(s) is/are owned or held by an assessee for more than 36 months and as STCG if they are held for not more than 36 months.

The net wealth of the undertaking (aggregate value of the total assets of the undertaking minus the value of the liabilities as appearing in books of accounts) shall be deemed to be the cost of acquisition and the cost of improvement for the purpose of computation of capital gains. No indexation would be given even in the case of LTCG.

A report of an Accountant has to be furnished along with the return of income indicating the computation of net worth of the undertaking and certifying that the net worth has been correctly arrived at.

Capital Gains on purchase of its own shares or other specified securities by a Company

Purchase of its own shares or specified securities by a company leads to Capital Gains in the hands of the share holder or holder of the specified securities. The Capital Gains has to be computed in the same manner as transfer of shares or specified securities. However, no deduction towards cost of transfer would be allowed.

Fair Market Value

While dealing with the computation of capital gains we come across certain situations where fair market value of an asset has to be taken. Fair Market Value is the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date and where such price is not ascertainable the price as may be determined in accordance with the rules made under the I.T. Act. For the purpose of determining the fair market value the assessing officer may refer the valuation of a capital asset to a valuation officer.

Transfer of Depreciable Assets

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