In case of a Private Limited Company, It calculates depreciation on assets as per the Depreciation rates given in Income Tax Act, 1961 and does not follow the rates as per Companies Act.
Now after amendments in Companies Act, is it mandatory to comply with the provisions of Companies Act, 2013?
Is it required to calculate depreciation as mentioned in Companies Act, 2013?
18 June 2015
For the purpose of Books and MAT Tax you have to follow the dep calculation as mentioned in the companies Act.
But as far as IT is concerned you need to continue to follow the block of asset concept and apply the rate of depreciation for the purpose of Sec.32 as per the IT provisions.
The Depreciation rates given in Companies Act, 1956 were recommended rates and those were not mandatory.
Higher rates were allowed to be applied for the purpose of calculation of depreciation on assets.
On the basis of this, A private limited company applies the rates given u/s 32 of Income Tax Act, 1961 for the purpose of calculating depreciation in the books of account.
(i.e. there was no difference in the depreciation amount as per Books and as per Income Tax Act till 31.03.2014)
Then what is to be done in this case? Now onwards, Is it still necessary to calculate depreciation as per new method under Companies Act, 2013?
19 June 2015
Dear, The companies Act is concerned with corporate management. Preparation and presentation of final accounts is one of the parts of management. Thus depreciation as provided in the cos act is the final as far as determination of true profit and true loss of a company is concerned. Under I.T act accounts are not prepared what is done is true income or loss for purpose of levy of income tax is determined as per the rates of depreciation provided in I.T act.
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