Deduction under section 32

Tax queries 318 views 1 replies

A ltd is a power generation and distribution company. A new distribution lines were laid out in 2011-2012 in an area cost of such distribution lines amounted to 100 Crore.

 

As per the govt. Regulations such company is allowed to recover 30% of the cost from the customers of that area including in electricity bills .

The company recovered the cost as follows:-

 

in 2013-2014 rs 5.00 Crore

in 2014-2015 rs 4.00 Crore.

 

The company claims depreciation on original cost method under section 32(1)(i).

Rate of depreciation  –15%

 

How can you compute depreciation on allowance under section 32(1)(i) for the A.Y. 2016-17

 

 

Replies (1)
As per sec 43 (1) actual cost of asset is actual cost reduced by such cost amount met by others. Since the company is recovering cost the same should be deducted from the cost of the asset and depreciation shld be calculated. The company should have calculated depreciation on 70 cr if the term of agreement with govt clearly stipulated 30% is to be collected from customers. So depreciaion should be calculated on 70 cr if there was certanity in collection of cost from customers


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