Limit of actual cost while allowing depreciation

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... n of income. (a) The total amount of depreciation allowed on various assets including initial depreciation was not limited to the cost of the asset. (b) While computing profit under Section 41(2) on the sale of an asset, an estimated profit of 50% of the sale price was taken instead of treating the entire sale proceeds to the extent of cost of the asset as profit and the balance as capital gains .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... fit under this Section will be the difference between the sale price land the written down value of an asset to the extent of actual cost of the asset. The sale price in excess of the actual cost of the asset should be taxed as capital gains. In view of this the method adopted by the Income-tax Officer in estimating the profit under section 41(2) as 50% of the sale price is highly irregular. 4. T .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... eater details than hitherto. The Board desires that you should ensure strict compliance of the above instructions. 6. Necessary instructions may please be issued to the Officers working in your charge. The Board would also like a general review of cases decided to be undertaken to ascertain whether this irregular practice of estimating profit under Section 41(2) has been followed in other cases. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X