Assets less than rs 5000

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Saravanan (Querist)

23 June 2012 Hi,kindly clarify the details.some asset has been bought by a private company in the financial year 2011-12,having value less than Rs5000.During the financial year, the company has transferred the said assets as sale to another SBU of its parent company.The company has provided depreciation to the asset for the financial year up to its usage and raised the bill for residual value.The auditors of the company says that, asset having value less than 5000 is to be provided with 100% depreciation and should be written off during the financial year. But the company has sold the assets at depreciated value.. kindly clarify what the company should do,kindly clarify as soon as possible... Thanks in advance...

CA Hardik Bunha

CA Hardik Bunha (Expert)

23 June 2012 Yes, Auditor is right, in the company if value of asset is less than rs. 5000 then 100% depreciation followed.

here company law will be applicable hence depreciation will be charged acccording to it but not as per income tax law.

you can take safeguard as director has decided to maintain this asset still it becomes scap. you have to mention this in director's report when company has purchase the asset

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Saravanan

Saravanan (Querist)

23 June 2012 Thanks, then what will be the value of assets in the books of SBU which purchased the assets...

Saravanan

Saravanan (Querist)

23 June 2012 What will be the consequence for the items which bill were raised in the books of Pvt company

Soumitra Basu

Soumitra Basu (Expert)

24 June 2012 Company has done the correct thing. Company can only depreciate those figure upto the date of sale. Though it is 100% but it should be proportionate in relation to month. The SB should show the asset in its books on the basis of its purchase documents. There are two ways - If the company wants to charge all the assets then the Sale Proceeds shall be charged as Profit on sale of asset otherwise there will be neither any profit nor any loss.

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