Assets and Depreciation Chapter- 10
Solution Rs.
Consideration paid for purchase of asset 700,000
Less: Exempt Government grant 420 ,000
Cost of asset 280 ,000(^)
CONSIDERATION RECEIVED UNDER VARIOUS SITUATIONS [U/s 77]
The Board may prescribe rules for determination of consideration received for any asset, however except
otherwise provided in the Income Tax Ordinance, 2001 the disposal consideration shall be determined as
under.
10. Disposal consideration on sale:
The consideration received by a person on disposal of an asset shall be the total amount received
by the person for the asset or the FMV thereof, whichever is the higher, including the FMV of
any consideration received in kind determined at the time of disposal.
Example: Mr. Jamshed sold his factory building to Mr. Amir for Rs. 1,000,000. However, the fair
value of building was Rs. 1,200,000. Compute gain / loss on disposal if WDV of building is
Rs.600,000.
Solution:
Rs.
Consideration received
(Higher of actual amount or fair value) 1,200,000
Less: WDV 600,000
Gain on disposal 600,000
11. Disposal consideration for lost or destroyed asset
Where an asset has been lost or destroyed by a person, the consideration received for the asset
shall include any compensation, indemnity or damages received by the person under:-
an insurance policy, indemnity or other agreement;
a settlement; or
a judicial decision.
Example: Mr. Jamshed’s factory building was destroyed because of earthquake during the tax year
2023. He received Rs. 500,000 from insurance company in respect of this building. Compute gain /
loss on disposal if WDV of building is Rs. 1,600,000.
Solution:
Rs.
Consideration received
(Amount received from insurance company) 500,000
Less: WDV 1,600,000
Loss on disposal 1,100,000
12. Disposal consideration for business asset applied to personal use or discarded or ceased to
be used
The consideration received for an asset treated as disposed shall be the FMV of the asset
determined at the time it is applied to personal use or discarded or ceased to be used in
business, as the case may be.
Example: In tax year 20 23 Mr. Khan discarded his business car from business and applied that car
for his personal use. Fair Value on the date of application to personal use was Rs. 500,000. Compute
gain / loss on disposal if WDV of car at the beginning of tax year is Rs. 400,000.
Solution: Consideration received Rs.
Fair value 500,000
Less: WDV 400,000
Gain on disposal 100,000