CA. Amit G. Chandani (Entrepreneur/Consultant) (1312 Points)
19 February 2010Will additional depreciation of 20% [Section 32(1)(iia)] be still allowed when part of block of machinery (Dep. @ 15%) is sold in excess of opening W.D.V & additions during the year (i.e. W.D.V. of block of machinery is reduced to zero)?
Please reply according to relevant legal provisions as there is difference of opinion in books of some authors!
Amir
(Learner)
(4016 Points)
Replied 19 February 2010
Dear Amit, \
u r bang on.......
Additional depreciation will be allowed even part of the block has been tranferred & consequently WDV falls below the cost of eligible asset or WDV becomes Nil/-ve
Ameet
(L)
(1678 Points)
Replied 19 February 2010
Amounts No. of Mach.
Opening WDV 100 2
Addition 500 3
-Sold 700 4
Balance -100 1
Here i have example presented (assumed). In this case block is still there i.e. 1 machine but Sale Value is more that Opening WDV and Addition.
If this is the csae then Short Term Capital Gain will come and Depreciation will be NIl.
CA. Amit G. Chandani
(Entrepreneur/Consultant)
(1312 Points)
Replied 20 February 2010
I think Amir is correct, as section 32(1)(iia) clearly says 20% of actual cost.
But in practical questions in the book of Dr. Girish Ahuja & in CA. Vinod Gupta notes, they have restricted the amount of additional depreciation to the extent of W.D.V of the block, when it is +ve otherwise zero.
In book of Dr. V.K. Singhania, they have allowed additional depreciation when the W.D.V of block is even zero.
Ameet
(L)
(1678 Points)
Replied 20 February 2010
Can you explain me where i m wrong ?
Why Exception one to the rule will not be applicable in u'r case.
To refer Exception one , read para 109.7-2a. V.K. Singhania Professional Edition
Chintan Shah
(-)
(534 Points)
Replied 20 February 2010
Well, I use Kitret software. I put the dummy data for computation of depriciation in it. Computation that it showed is as below: (Rs. in lacs)
WDV opening 15
Additions 15
sale 35
WDV closing -5
STCG 5
Additional depriciation 3 lacs
Aamir is correct..... Even if WDV is negative than also addn depr would be allowable.
Ameet I referred VK professional... This condition is part of allowability of normal depriciation allowance and not additional depriciation both of which are dealt with by different sub sections hence the condition mentioned in respect of allowability of normal dep cannot restrict additional dep...
Max Payne
(employed)
(2569 Points)
Replied 20 February 2010
Hi Friends
Nice informative discussion going on...
But, both STCG and Additional depreciation arise no...?
Chintan Shah
(-)
(534 Points)
Replied 20 February 2010
Ya GK bhai both will arise..... because addn dep is allowed on actual cost of plant and machinary added during the year....
CA. Amit G. Chandani
(Entrepreneur/Consultant)
(1312 Points)
Replied 20 February 2010
Hi Ameet,
Additional depreciaion is dealt with Sec 32(1)(iia), which says 20% of cost, while normal depreciation is dealt in Section 32(1)(i) which says % of W.D.V & hence, exception to rule is not applicable!
If u are referring D. V.K. Singhania Professional edition, u can see para 109.8-1 & problem109.8-P1.
CAclubindia
