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Disallowance of depreciation

G.E.Sudarsan (Audit Assistant) (97 Points)

27 November 2009

whether disallowance of vehicle depreciation deducted form the depreciation amount in the depreciation statement since we have disallowance vehcile depreciation for computation of total income. is it correct?

For Example., vehicle depreciation for the previous year 2008-2009 Rs.5000,

out fo this amount Rs.5000, we have disallowed @ 25% Rs.1250 for personal use in computation of total income and the same Rs.1250 deducted from Rs.5000, so depreciation allowance only Rs.3750/- s it correct?

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11 Replies

CA Devanshi Gandhi (Ajani) (FCA DISA Mcom CIFRS & LLB) (9058 Points)
Replied 27 November 2009

in p&l u should debit 3750 as allowable dep. and from assest u should deduct 5000 inorder to bring the closing wdv.

satish (student) (41 Points)
Replied 27 November 2009

charge dep. Rs. 5000 in P&L and same amount deduct from op. wdv to reach closing wdv.further while at the time of making computation just add back the amount of depreciation of personal use i.e Rs 1250.

1 Like

machender (student) (190 Points)
Replied 27 November 2009

the disallowance made by u is correct.

but amount of Depreciaton which should be deducted from opening WDV should be the depreciation allowed and not the entire depreciation.

Ameet (L) (1678 Points)
Replied 27 November 2009

Depreciation is basically a writte off the amount of Cost over the life of the asset. Since we consider Rs. 5000/- as depreciation means it should be deducted from the value of the asset ,whether it is used for business or personal but Rs. 3750/- is to be debited to P & L

BALASUBRAMANYA B N (CCI STUDENT....) (44668 Points)
Replied 27 November 2009

Originally posted by :CA Devanshi Gandhi
"	in p&l u should debit 3750 as allowable dep. and from assest u should deduct 5000 inorder to bring the closing wdv.	"

Max Payne (employed) (2569 Points)
Replied 27 November 2009

Yes the treatment by you is correct. Disallow the depreciation in computing the income U/s 38. To the extent depreciation is allowed, the block value will get reduced. So 1250/- you disallow, but reduce the block only by 3750/-.

CA. Rishabh Mittal (CA in Practice) (1077 Points)
Replied 28 November 2009

Accounting entry in Books of Accounts - Dr. Depreciation A/c Rs 3750 Dr. Capital A/c (Treated as Drawings - Personal purposes) Rs 1250 Cr. Asset A/c Rs 5000 For Taxation Purposes - Charge Rs 5000 as depreciation to bring correct closing WDV of asset.

CA. Rishabh Mittal (CA in Practice) (1077 Points)
Replied 28 November 2009

Block value will be reduced by Rs 5000 only & not by Rs 3750

kabirsen (student) (251 Points)
Replied 28 November 2009

in p&l u can have 5000 depreciation...

but at tthe time of computation....

while calculating value of block of assets use 3750 as dep.

also add back to ur profit and loss rs 5000(only if u hv taken 5000 as dep) and then deduct 3750

also modify the closing wdv of the block of assets for the ay, in which income has been assessed by ao u/s 143/147/153 as the case may be...to arrive at the correct opening wdv

amitkewal (accountant) (22 Points)
Replied 31 December 2014

under intimation u/s 143(1), the income tax department has disallowed the depreciation of rs.11550 on mobile of rs 38500 in financial year 2012-2013 and charged tax payble amt of Rs. 760.00. I have paid the said tax payble amount.

now my question is that in financial year 2013-2014 what should i take w.d.v of mobile fixed asset. and what would be the treatment of disallowed deprecaiton of f.y 2012-2013 in current year in computation of income.