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CA Intermediate · Taxation · Profits and Gains of Business or Profession

Rohan, a trader, has a block of plant and machinery (rate 15%) with opening WDV of Rs 5,00,000 on 1 April 2026. On 20 August 2026 he bought a machine for Rs 2,00,000 and used it immediately. On 5 January 2027 he sold an old machine of the block for Rs 1,00,000. What is the depreciation for tax year 2026-27?

Depreciation is Rs 90,000. The closing block value is opening 5,00,000 plus addition 2,00,000 less sale proceeds 1,00,000, giving 6,00,000, and since the new machine was used for at least 180 days, the full 15% rate applies to the block.

  1. ARs 90,000Correct
  2. BRs 1,05,000
  3. CRs 1,20,000
  4. DRs 75,000

Explanation

Block WDV = 5,00,000 + 2,00,000 - 1,00,000 = 6,00,000. The machine was used for 180 days or more, so full rate applies: 15% of 6,00,000 = 90,000. Option B wrongly ignores the sale proceeds (7,00,000 x 15%). Option C uses half rate on additions wrongly, and D ignores the addition.

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