10 September 2014
Mobile Phone is a capital item and should be capitalized under the head "Office Equipment".
If mobile phone is purchased before FY 2014-15 then it may be completely written of under the provisions of Companies Act 1956 as the cost is below Rs 5000. There is no such provision now under the Companies Act 2013.
Company use it for more than one year? Will company enjoy benifit of it for more than 1 year?
Yes...
It is mandatory to Capitalise Mobile phone and also required to be updated in fixed asset register.
Depreciation can be charged @100% as it costs less than 5000
Company collect this mobile back from employee if he left the organisation? . . . Definetely yes!! . . . Note:As per new companies act depreciation to be charged over useful life of asset.In this context company may prepare for accounting policy in this regard. I am not Very good at new company act
10 September 2014
But the Rs 5000 criteria is not there under new Companies Act 2013 so if the Mobile Phone is purchased in the FY 2014-15 it should be capitalized.
Would love to hear from Tushar about the definition as mentioned/referred by him in his reply.
11 September 2014
Yes, if mobile phone given free of cost it should form part of salary . . But generally companies do capitalise and depreciate. . . They will have control on this via fixed asset register..(Like how many mobiles and who is having that mobile)
11 September 2014
AS 26 link has nothing to do with in our case . . yes it is correct.
Mobile is asset.
1)Mobile is controlled by enterprise. (If employee left company will give that mobile to other employee, or they may change mobile to another employee ,employee has nothing to do with management to stop this)
2)Future economic benift flow to entreprise.
It is also correct in case of mobile.Employees use the mobile and communication with employee becomes easy which saves time and in this time company can definitely effort for additional revenue.
It is a Big truth in my opinion to say
MOBILE IS ASSET.
Note:if in your opinion it is not an asset just give it as your opinion,and welcome other experts to give more light on this issue
11 September 2014
So finally what should be treatment. ..the cell phone worth 1350 is first in first fixed assets register and depreciate fully in the same year ..or I take it as revenue exp by taking in P & L A/c
a) Controlled by an Enterprize.: Mobile phone purchased in the name of company but used by employee. Control lies with company. If employee resigns few days later he/she hand it over to employer. So control is always with employer.
2) Economic benefit to enterprise: Mobile phone is similar to other communication equipment like land line phones. Its given to employee mainly for benefit of the company. Economic benefit is flowing to enterprise and will flow till the existence of mobile phone. So future economic benefit is also accruing.
So Treatment of mobile phone purchased by the company:
1) Should be capitalized under Companies Act 2013 irrespective of value if its purchased on or after 01.04.2014.
2) Should be capitalized if value is more than Rs 5000/- under Companies Act 1956 provided purchased on or before 31.03.2014
If the Mobile phone is purchased by employee and the expenses are reimbursed by employer then the same will be treated as perquisites in the hands of employee and there will be no need for capitalization.
Hope it clears the issue. And Tushar if you disagree even after this, i am afraid, but i cant explain more than this. You can check it with any company or any practicing professional, I am sure you will find that your reply/view was not correct.
3 years ago you were of the view that Mobile is a Fixed Assets. 3 years down the line your view has changed so much that you do not want to treat Mobile Phone as an Asset? Why? Please accept that the Mobile Phone is an asset.
Tushar everyone makes mistake. I also make mistake, may be even more than you. But we should not be stubborn and should learn from it by accepting our mistake.
Please do not take it personally. Just treat this as an advice from your elder brother.
12 September 2014
Mobile phone is a capital asset and can be depreciated at normal rates for Income tax purposes. Inference is from Kerala High Court decision in Federal Bank Ltd Vs. ACIT reported in 332 ITR 319.
17 September 2014
Mobile phone is a Capital Asset. Tushar has in Possible haste checked AS 26 pertaining to Intangible Assets. The Clause which he has made a Mention is a defination & clarification in Continuation to the Immd above sub clause of the Clause 6 given therein which is for Intangible Assets.
Mobile Phones can be capitalised & depreciated
Tushar Pls check Sec 2(14) of IT Act for defiantions of Fixed Assets.
05 April 2015
All replies and baseless arguments by Tushar has been modified. Clear from the no of times he is agreeing to all experts.
He can modify reply but can not delete post. After the modification of his replies without accepting his mistake replies of all experts (Specially my replies) look silly.
Tushar you should not have modified your reply and should have accepted your mistake. Highly unprofessional. Everyone makes mistake but you should be brave enough to accept it. You should have acknowledged the correction made by your fellow experts.
CAclubindia
