AS 6 Depreciation accounting

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Savli (Querist)
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14 March 2011 Illustration 1
Mr. X set up a new factory in the backward area and purchased plant for Rs. 500 lakhs for the
purpose. Purchases were entitled for the CENVAT credit of Rs. 10 lakhs and also Government
agreed to extend the 25% subsidy for backward area development. Determine the depreciable
value for the asset.
Solution
Particulars Rs.(in lakhs)
Cost of the plant 500
Less: CENVAT 10
490
Less: Subsidy 98
Depreciable Value 392

Neeraj Bansal CA

Neeraj Bansal CA (Expert)
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15 March 2011 yaa the solution is fine

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Savli

Savli (Querist)
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15 March 2011 bt i dnt understand how the figure of dep is arrieved

Neeraj Bansal CA

Neeraj Bansal CA (Expert)
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16 March 2011 kkk
just see
( Rs in Lacs)
Cost of the plant 500
Less: CENVAT 10 *
490
Less: Subsidy 98
Depreciable Value 392

*(As per income tax act if u take cenvat credit then that amount is not eligible for depreciation)
** subsidy is given by govt and same if u got then that much amount is also reduced from cost of plant

last thing is that depreciation is calculatd on the cost which is really incurred by the company. in ur case as 98 lacs is refunded to the company so this is not the cost to company and cenvat is like a hard cash so that also not part of cost

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Savli

Savli (Querist)
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18 March 2011 thanks neeraj. but see my query is-it is given in the question that 25% subsidy is given. but i dnt understand how the figure of 98 is derieved. because 25% of 490 is nt 98.

Neeraj Bansal CA

Neeraj Bansal CA (Expert)
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25 March 2011 kkk Savli

the Thing is that in the given solution calculation is wrongly done by the author
in place of 25% he took 20% and solve the problem.

Subsidy should be 122.50 in place of 98. kkkk

if u have any other query contact me

Neeraj Bansal
+917760650028

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Savli

Savli (Querist)
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29 March 2011 thanks neeraj.

thanks for your help

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