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Depreciation under Companies Act (Corporate Law)

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This query is : Resolved



( Author )
18 May 2009

Can We Provide Depreciation at the rates as prescribed by the Income Tax Act in the Companies Books or we need to follow the rates as prescribed by the Companies Act? Also, the depreciation as per income tax is on 6 months basis and that as per companies act is on pro rata basis, can that be done? for eXAMPLE the depreciation on Computer purchased for 25000/- put to use for 30 days comes to 822/- (25000x40%x30/365) but that as per income tax act comes to 7500/- (25000x60%x6/12). Can i charge 7500/- in the books?


B.Chackrapani Warrier

( Expert )
18 May 2009

The rate charged should not be less than the rates prescribed under schedule XIV of the Companies Act,1956.


CA Devanshi Gandhi (Ajani)

( Expert )
18 May 2009

agree with the expert


taxindiaconnect

( Expert )
18 May 2009

You can charge rate higher then the rate charged in companies Act, However, this will not serve any purpose as the method of tax depreciation and the computation companies Act depreciation is not same. IN case of companies Act the deprecation will be charged or the usage period of the assets while in cane of IT Act, the depreciation is charged on assets being used for less then 180 days or > 180 Concept. This means that for the purpose of tax books, the amount of depreciation will differ from the book depreciation. Or I ask a question from experts whether the we can simply use the method provided in the Income tax Act as the deprecation in Tax method will always be higher.


CMA KNVV Sri Vidya - Sri Kanth

( Expert )
18 May 2009

Agree with experts


UMESH BHATTAR

( Author )
18 May 2009

Can We Provide Depreciation at the rates as prescribed by the Income Tax Act in the Companies Books or we need to follow the rates as prescribed by the Companies Act? Also, the depreciation as per income tax is on 6 months basis and that as per companies act is on pro rata basis, can that be done? for eXAMPLE the depreciation on Computer purchased for 25000/- put to use for 30 days comes to 822/- (25000x40%x30/365) but that as per income tax act comes to 7500/- (25000x60%x6/12). Can i charge 7500/- in the books?


Deepak Agrawal

( Expert )
18 May 2009

Depreciation rates prescribed by schedule XIV of companies act is the minimum rates. So you can charge as per income tax rate provided its more than companies act. Only thing is that you will have to disclose the depreciation rates seperately in the annual report.


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