Depreciation

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2013 Dear Sir,

Part - A.

My query is as below:

In a pvt. ltd. company we have block of vehicle. The book value of which is suppose Rs. 100. We sold the old vehicle of Rs. 100 for a sum of Rs. 80/-. And buy a new car of Rs. 120. So net book value in books comes to Rs. 140. (i.e. 100-80 + 120 = 140). Now question is :

1. Should we treat net block as Rs. 140/- and charge depreciation on it or book profit / loss on sale of Vehicle of rs. 20 and charge depreciation on Rs. 120.

2. If we book profit / loss of Rs. 20 as per books whether it is taxable or not because as as per income tax vehicle block is not fully disposed off.

Please also let us know accounting entries of the same.

Part - B.

Accounting entry of MAT Credit u/s 115JB.

In a company : As per business income company is in loss but as per book profit gained profit of Rs. 10000/- and tax charged as per MAT u/s 115JB. so what will be accounting entries of :

1. Income tax paid as per MAT u/s 115JB
2. Entry of MAT Credit C/o to be adjusted in future tax liabilities.

Please advised along with section reference.

Kindly reply.

Subhash Chander
85120 67120

subsagar1982@gmail.com

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

20 May 2013 Part A:
1. Treatment will be different under Companies Act & Income Tax Act.

(a) Companies Act:
(i) Depreciation on old asset shall be charged for the number of days for which the asset was used.
(ii) Sale price - WDV - Dep = Loss.

(b) Income Tax
Closing balance of block of asset shall be Rs. 140 on which depreciation shall be allowed.

Timing difference shall arise and DTA/DTL will arise as per AS 22.

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