Unabsorbed Dep--C/fwd in event of Change in shareholding pattern

Hi Ravi,

Here're point-wise replies to your queries:1) Yes, of course. Land being a non-depreciable and therefore a long-term capital asset will entail LTCG. The building being adepreciable asset will entail STCG. The WDV of Rs 40 lacs you'vementioned is obviously the depreciated value of building. The saleconsideration of Rs 1.25 crore must have been segregated into landand building by the buyer. The buyer too needs to determine thefigure of building separately in order to be able to claimdepreciation on it. Bifurcate the Sale consideration of Rs 1.25crore into the price for land and the price for building. Thencalculate the STCG and LTCG on the sale of building and landrespectively.You can't set off the brought forward business loss against yourincome under the head Capital gains by virtue of the provisions ofSection 72(1). However the unabsorbed depreciation can be utilizedto knock some portion of your capital gains figure off. We are ableto carry forward Depreciation if not fully absorbed in a particularyear till eternity. This is possible because in reality there's nosuch thing as "Brought forward depreciation". Depreciation nothaving been written off fully in a year owing to insufficiency ofprofits merges with the depreciation of the following year and soon. Depreciation never gets old or dies; it keeps reincarnatingitself.2) Regarding the eligibility to claim carry forward of unabsorbeddepreciation consequent to the change in the shareholding pattern ofthe company, no, you aren't correct. The word "loss" mentioned inSection 79 doesn't include unabsorbed depreciation. When wesay "loss" in the context of the taxation law, we mean the businessloss sans depreciation. Here's a case law:[The word `loss' mentioned in section 79 does notinclude `unabsorbed depreciation' or `unabsorbed developmentrebate'. Accordingly, the bar imposed under the main part of section79 is not attracted as far as `carry forward and set-off ofunabsorbed depreciation' or `unabsorbed development rebate' isconcerned - CIT v. Kalpaka Enterprises (P.) Ltd. [1986] 24 Taxman167/157 ITR 658 (Ker.).]The new management stands to lose the benefit of brought forwardbusiness losses only.Thanks,CA Sanjeev Bedi--- In http://finance.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA/post?postID=EiEkCAsBsw4Z69JEfuSizXAPb_P1OIohqb3qCp_c6LhDFvu-aTUQzdJaj8US9vzvc6SP_1mX2zyKOozO-DMautpwHtE-9-MD5tGa, selvaganapathyravichandran wrote:>> Dear Sanjeev,>> Warm Greetings to you,>> We need your advise on the following matter.> 1.One of our client a Pvt Ltd co, sold land & Building for 1.25Crores and Depreciated value of the Asset (Block ) is Rs. 40 Lakhs.> How to determine the capital gain, whether- Land & Building is tobe separately calculated. If so the gain arising from the sale ofassets can be set off against the C/f losses of about 90 lakhs(Business Loss & Depreciation Loss).>> 2, Suppose the shares of the company is sold to other partyentirely ,is the new management is allowed to get the benefit of C/fdepreciation Loss , since my view is that the new management cannotclaim C/f loss.>> We shall be highly thankful if you could clarify the above mattersat the earliest.>> Regards> Ravi