Depreciation

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2013 A society has purchased an asset worth Rs 50 Lacs to be used by 4 different companies. The society is looking after the maintenance part. The companies had advanced money to the society for purchasing the asset. The society is purchasing the asset by a single bill and in turn gives debit note to the 4 companies. Who is eligible to take the advantage of depreciation? Whether it is the society or the four companies?

Pankaj Gupta

Pankaj Gupta (Expert)

20 May 2013 As the machine is purchased on the directions of the companies, with their money, and is also used by them. Hence the depreciation will be allowed to the companies in proportions of their rights in the asset.

Beneficial ownership should be seen in this case.
Society is just acting as an intermediary.

Querist : Anonymous

Querist : Anonymous (Querist)

21 May 2013 Thanks Pankaj ji for your valuable opinion. I still have a doubt. The bill is in the name of the society and the society is issuing debit notes by dividing the single bill in proportion. Would the photocopy of the bill(which is in the name of society) allow the companies to claim depreciation? Please guide.

Pankaj Gupta

Pankaj Gupta (Expert)

29 May 2013 Your query is a bit complicated. I even did not found any relevant case study to support my opinion. But what I feel is that, the department should not have any objection with the above mentioned treatment. My opinion is based on the general concept derived from the IT rules which says that person eligible to claim deprecation is one who holds the ownership of the asset and who uses it for/in his business and profession. And if everything mentioned above are satisfied then it is immaterial that the asset is in name of some other person.

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Pankaj Gupta

Pankaj Gupta (Expert)

29 May 2013 Yes the debit note issued by the society will serve the purpose. It would be more relevant if the society issues an acknowledgement ( in addition to debit note ) specifying the facts to all the 4 companies.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2013 Thanks a lot Sir.

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