Good Morning, Good Afternoon, Good Evening to all who are
watching this live stream.
How are you friends? How is your life going?
Are you able to understand everything?
Do you remember what we were discussing?
Hope you didn't become a Ghajini. Hope you didn't lose your
short term memory.
Friends, we were discussing about Profit and Gain from
Business and Profession, whose short form is PGBP.
We were discussing on that head.
What I had told you, I will take 1.5-2 minutes to revise
what we have done till now.
The tax that is charged on PGBP head, your tax is charged
on profits.
What are profits?
You have shown your sales, you have removed your expenses
and purchases from sales.
What you will do is, you will take out your profit
according to your accounts.
You will enter into accounting, your profit will come out
according to that.
But what do income tax people say?
They say, you may have put some fake expenses, some
personal expenses, which have nothing to do with business.
You remove those expenses from there.
Remove means, add those expenses to the profit, so that the
profit increases.
And if you have put the income of some other head of income
in that profit, then you will remove that income also.
Then we discussed about some expenses allowed and expenses
disallowed.
Those which are allowed, they don't have any adjustment.
They will remain as it is.
But the disallowed income tax department is doing your
expenses, you will have to add it to your profit again.
Then we talked about some expenses, like rent, like repairs.
I had told you that if you rent a shop, the expenses
related to business will be allowed.
You can reduce it from your profit, I mean from your sales.
There is no problem.
Repairs.
I had given an example of a tap.
If he had not repaired the tap, then floods would have come
to the entire city.
And because of this, he repaired the tap.
He will also get his expenses.
Then we discussed about a very important topic, whose name
was depreciation.
And our 5-7 lectures, this topic was completely wasted.
But tell me one thing, was the point of depreciation clear?
What was depreciation?
If you had an asset, like a car or any other plant and
machinery, the value of that asset used to decrease.
Who used to get it?
The owner used to get it.
Because who has the asset?
The owner has a stick and a buffalo.
The owner used to get the expenses.
I mean, to get the expenses, whatever I will put in the
profit and loss account will be allowed.
Then I had told you that companies impose depreciation
according to their company's act.
But who are we?
We are the income tax people.
So, once their depreciation expenses, in their profit and
loss account, if you add it back to their profit, increase
the profit a little, according to that, we, the income tax
people, will impose depreciation according to our own
expense.
We will give them the expenses according to our own expense
and will reduce their profit from there.
There used to be a difference in rates.
That is why we were doing this.
I had told you about depreciation that there are blocks in
it.
Earlier, I had told you that in this world, friends, all
the assets that we had, we had divided them into four
categories.
One was, first of all, furniture.
Very good.
Well done, you have studied and revised.
Very good.
Second, building.
Very good.
Third, planted machinery.
And fourth, intangible assets.
Their rates were different.
There used to be depreciation on the block.
Then I had told you what the block means.
It is one class of asset.
It is one type of asset.
And the same rate is imposed on it.
So, the confusion here was that there is plant and
machinery.
On some, 15% rate was imposed.
Like some computers, 40% rate was imposed on them.
So, I had said that a block, like in the case of plant and
machinery, first of all, both, in that, make two blocks.
One of 15% and one of 40%.
It was clear till here.
This was written down on the value of the asset.
What was the written down value?
The same opening plus actual cost.
If you have bought an asset in a year, you have added its
cost.
If you have sold something, you have minused its value.
And you have imposed depreciation on the value.
If you minus the depreciation figure from WDV, you will get
closing WDV.
And the depreciation that you have calculated, this is the
cost.
The cost that you had originally put in your books, that is
not the cost in the eyes of income tax.
Income tax said, take the depreciation that we are telling
you.
Don't take it according to your own.
The depreciation that you have put in your books, add it
back first.
After that, the depreciation that we are giving, minus that.
Okay? No problem.
Then, I gave you my personal example.
I had ordered a machine from America.
I had ordered it from USA.
I had to make a payment of 1 lakh dollar.
At the rate of 80.
The rate increased later.
How much? 83 rupees.
The rate of 3 lakhs had increased.
So, the government said, whatever you are paying, add it.
Because of foreign exchange, the profit or loss that you
are getting,
I had lost 3 lakhs.
So, the government said, add it to your cost.
I had to consider it as a machine worth 83 lakhs.
What benefit was I getting from it?
Since it is a machine worth 83 lakhs,
I will get depreciation above 83 lakhs.
Not above 80 lakhs, but above 83 lakhs.
I will get more expenses.
What is the benefit of getting more expenses?
My profit will be reduced.
What is the benefit of reducing profit?
My income tax will also reduce.
Am I clear?
We had discussed this.
We were discussing the actual cost.
We were discussing the expenses of getting the machine
installed.
Like interest, transportation, all these things, you add it
to your actual cost.
I think we had discussed this.
We had discussed these points in the last 4-5-6 lectures.
Now, our job is to continue this discussion with you.
Friends, keep supporting me.
Before I start my lecture, my topic,
I just want to say one thing.
In life, always do what is right.
Never do what is easy.
Anyone can do easy work.
But always do what is right.
What is right for you, for your society, for your family,
do that only.
Do hard work in life.
It is right to do hard work.
It is easy to sit idle.
Do hard work.
Hard work can help you achieve that level in life.
Sir, do you remember Nawazuddin Siddiqui?
Have you seen the movie,
Salman Khan?
He was the villain in that movie.
He used to do like this.
He used to be a watchman in his time.
He used to work hard on his aim.
He did not wander here and there.
He became a superstar today.
He gets offers from Hollywood.
Sir, what do you lack?
Wake up.
What are you doing in your life?
Come on.
Start the topic.
We were talking about actual cost.
Actual cost and WDV, that point was pending.
Now, tell me one thing.
For example,
I have a closing WDV of any asset.
There is a block.
The WDV of that block is Rs.
5 lakh.
I have given depreciation and all.
The closing value is Rs. 5 lakh.
And you know that it is not necessary to have only one
asset in a block.
There can be many assets whose rates are same.
Is it clear?
Assume that my WDV was of Rs. 5 lakh.
Okay.
Assume that it had only 5 assets.
How many assets were there in that block?
There were only 5 assets.
And I took the entire block and sold it.
I got a good offer from somewhere.
And someone said,
Mr. Gupta, this is a very good machine.
Do one thing.
Take the entire block and give it to me.
And the value that I will give you, that will be around Rs.
6 lakh.
What am I saying?
I am saying that
I got a closing WDV.
The closing WDV was of Rs. 5 lakh.
And the assets were 5 assets.
Assume that it was a plant and machinery.
There were different types of machines whose rates were
same.
That is why it was the same block.
This is how I got a closing WDV.
I have given depreciation and all.
Now I get an offer that
I need these machines.
And these machines worth Rs.
5 lakh,
I will give you Rs. 6 lakh.
And give me these machines worth Rs. 5 lakh.
Now tell me, because I told you that in the calculation of
WDV, add the actual costs.
And minus the assets that you are selling.
Okay sir, I will minus it.
Sale price.
What is the sale price? Rs. 6 lakh.
Simple. I will minus it.
Am I selling all the assets?
Yes, I am selling all the assets.
I have sold 5 assets.
Now tell me, how many assets are left? Zero.
When I don't have any assets.
I don't have any assets left.
Think and tell me.
Should I get depreciation?
The answer is, no, when I don't have an asset, what do I
give depreciation on?
I give depreciation on the value of the asset that is
reduced.
When I don't have an asset, then what value and what should
be reduced in it?
When I don't have a car, then what value will be reduced?
Nothing will be reduced.
So, in this case, I won't give depreciation.
But sir, tell me one thing, you sold something worth Rs. 5
lakhs for Rs. 6 lakhs.
So, you must have made a profit somewhere.
You must have made a profit somewhere.
When am I denying that I didn't make a profit?
I made a profit of Rs. 1 lakh.
When did I tell you that I won't make a profit?
I am saying that it is a profit.
So, sir, if you made a profit, then you should also pay
income tax on it.
What a thing you have said!
Very good, you are going absolutely right.
You will pay income tax.
So, sir, will you pay income tax on the head of profit and
gain?
I said, son, tell me one thing.
What am I telling you from the beginning?
In the head of profit and gain, income tax is paid when you
have business income.
In the head of business profits, income tax is paid.
Profits earned from business.
Think about this profit and tell me.
Have I earned this from business?
Sir, I have earned from business.
If I don't have business, then where do I get assets from?
Sir, you have assets because of business.
You are not able to understand my question.
My question is, is this my business profit?
Listen, listen, listen.
What am I saying?
Is this my business profit?
What is the meaning of business profit?
Is this my business?
To bring and sell assets?
Is this my business?
That I bring and buy an asset and later sell that asset?
This is not my business.
What is my business?
To manufacture something?
To sell a product?
But this is not my business that I bring an asset and sell
it.
Do I do this business regularly?
Do I do this every day?
Do I sell my assets to my customers every day?
Take this building.
Take this car.
Take this light.
Take this machine.
Is this my business?
These things happen occasionally.
What is the meaning of business?
These are regular transactions.
These are not regular transactions.
Tax will be imposed on this.
But where will it be imposed?
On capital gains.
Capital gains.
Long term, short term.
Always short term.
Short term capital gain.
We will see what is the treatment of capital gain.
But the capital gain that will be imposed on this will
always be short term.
Sir, it is also possible that instead of 6 lakhs, let's say
60,000 would have been there.
Let's say 60,000 would have been there.
What would I have done now?
If 60,000 would have been there, you would have incurred a
loss of 4,40,000.
So, instead of capital gain, what would have been the
figure?
Short term capital loss.
4,40,000.
I will have to remove this from my profit and loss account.
Means gains and loss.
Short term.
Because capital gain is involved here.
Capital gain is involved here.
And let's say I have put these things in my profit and loss
account.
So, I will have to remove it from there.
Why will I have to remove it?
Because this is not my business income.
This is my capital gain income.
If this is the treatment, then I will go to some other head
and do it.
Is the point clear?
Shall I move on?
Second case.
Same example.
Case no. 2.
One second.
Case, friends, is this.
Let's say, this time,
Modi government.
This time, Modi government.
No, I am saying, this time, try to understand what I am
saying.
This time, Modi government.
Closing WDV, for example.
In this case, there was 5 lakh rupees.
And what were my assets?
These are my assets.
How many were these?
These were 5.
I have 5 assets.
A person comes to me and says,
Sir, do one thing, Mr. Gupta.
You sell me 3 assets.
And for 3 assets, you take 6 lakh rupees from me.
How many assets should I sell? 3.
How much money should I take?
6 lakh rupees.
Now, see the case.
Now, what do I have to do?
I have sold 5 lakh worth of goods for 6 lakh rupees.
What is it for me?
Profit.
Is it for business?
Nikambo, say it correctly.
Whose profit is it?
Is it for business?
Son, if you say that it is for business,
I will stop teaching you since that day.
Even if you explain this much, whose profit is it?
It is for capital gain.
Because I don't have a business.
I have to bring the assets and sell them.
I don't have this business.
So, this profit of 1 lakh rupees will become my capital
gain.
Short term.
STCG.
This will become my capital gain.
There is no problem here.
I don't have a problem with this.
My concern is here.
This is my concern.
That I have 2 assets left.
My concern is that I have 2 assets left.
But depreciation.
Now, tell me whether depreciation should be applied or not?
Who all say that it should be applied?
And who all say that it should not be applied?
You are saying that it should be applied.
You are also saying.
You are saying that depreciation should be applied.
You are saying that it shouldn't be applied.
You are also saying that it shouldn't be applied.
And the one behind you, yes, that one.
The one with the red shirt.
What is he saying?
That it shouldn't be applied.
Why shouldn't it be applied?
And why shouldn't it be applied?
Sir, you have just said that.
What? You have said, because assets are over.
That is why.
Because assets are over, that is why depreciation should be
applied.
This is your point.
What point is yours?
Because assets are over.
That is why this depreciation.
All that is left should be completed on the assets.
What is yours?
Yours is that depreciation should not be completed.
Why it should not be done?
Do you want to hear my answer? Do you want to hear my
answer? My answer is this.
Understand my point.
What is depreciation based on?
What is the percentage based on? Based on written down
value?
Is depreciation based on WDV?
Look carefully at this whiteboard and tell me, is there any
WDV left in this?
Is there any WDV in this?
Sir, this WDV of 5 lakhs has already finished.
There was a WDV of 5 lakhs and I sold those assets for 6
lakhs.
Let's assume that they were not sold for 6 lakhs but for 5
lakhs.
There was a WDV of 5 lakhs and 5 assets were sold.
What is the WDV now?
Zero.
How many assets are left?
Two.
Sir, what is depreciation based on?
Is it based on a value?
I told you that I bought a car worth 20 lakhs in Tata
Harrier and its value was 17 lakhs.
I am telling you that its value decreased by 3 lakhs.
If I tell you the value and its value decreased, then on
what will you apply depreciation?
Do you have the courage to apply depreciation without
knowing the value?
Has there ever been a person in this world who, without
knowing the value, can tell you how much the value has
decreased?
Can anyone tell you this?
I will tell you that I bought something and its value
decreased.
Tell me how much the depreciation was.
You will say, what did you buy?
How much value did you buy?
What is the value now?
Only then will I tell you the depreciation.
When my WDV became zero, I sold all my assets.
I sold all my assets and with that money, I watched my
movies.
Dhamang, Munni Banda Muhi, Darling mere liye.
My WDV became zero.
So, on what should I apply depreciation?
This is the simple point.
I know that your assets are standing, but we don't know
your value.
The value has become zero.
According to books, the value of this asset has become zero.
It was a block.
We are talking in terms of blocks.
We are not talking about single assets.
When my value becomes zero, then on what will I apply
depreciation?
Assets will remain standing.
Depreciation will not be applied.
Short term capital gains will be applied.
This is the point.
Sir, could it have been that WDV would have remained?
Absolutely.
This is the right question.
Assume that instead of 6 lakhs, there would have been only
60,000 rupees.
So, first of all, tell me this.