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Claim of Depreciation (Income Tax)

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This query is : Resolved


( Author )
19 October 2010

Whether it is mandatory to claim depreciation? What will happen if a pvt. ltd. company does not claim any depreciation in its accounts?


CA Shivang

( Expert )
19 October 2010

No its not compuslry... its compulsory not to claim higher depreciation.


B.Chackrapani Warrier

( Expert )
19 October 2010

The principle underlying the charge of depreciation to revenue is to match the cost of the asset with the revenue it produces. If not provided, the financial statements will loose the matching principle concept. Moreover it may lead to non compliance of AS-6 inviting non compliance of section 211(3C) of the Companies Act,1956 meaning thereby the accounts are not true and fair. In view of that the measure of depreciation is indirectly becomes mandatory especially for corporates.


taxindiaconnect

( Expert )
20 October 2010

The query seems to be claim of depreciation under IT Act 1961. The claim of depreciation as per Income tax is now mandatory vide amendment in IT Act by Finance Act 2001 with effect from 01.04.2002 as following -

Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;]

So Claim the Depreciation claim as per section 32 is mandatory. There is no provision for claim of higher depreciation under IT Act.


Kishanlal Paliwal

( Expert )
20 October 2010

The query initially raised to claim the depreciation in the account (i.e.passing entries) of a Pvt.Ltd. company.

I agree with Shri Chakrapani Ji that entries of depreciation is passed according to the provisions under Companies Act.\

However, as per Income Tax Act, the Gross Blocks are maintained separately for assessment purpose. Charging depreciation is not mandatory under Income Tax Act. One should charge depreciation in the Gross Block chart at the rates prescribed in other words one cannot Charge the depreciation at higher rates.

Regards
K.L.Paliwal



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