Depreciation

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Ramawatar Joshi (Querist)
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28 January 2008 A Partnership firm has been converted as pvt ltd company under chapter IX of the companies act, 1956 on 20th October 2007. How much depreciation will be allowed to partnership firm and company.

As per Income Tax Act Depreciation is not allowed in the year of disposal/transfer of assets. Since Partnership Firm has been converted during the financial year 2007 - 2008 weather depreciation will be allowed to firm or not.

As per Income Tax Act Depreciation to the Company should be allowed for half year as Company came into existiant only on 20.10.2007.

It appears that only half depreciation will be allowed for financial year 2007 - 2008. Is it not a disadvantage on conversion.

Plz reply catagorically stating each event with reasons.

R. A. Joshi

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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29 January 2008 Incme tax Act 1961:

Your case is covered by clause (xiii) of section 47 of the Income tax Act 1961, where a firm is succeeded by the company. In such a case fifth proviso to clause (ii) of subsection (1) of section 32 will be applicable for apportionment of depreciation between the firm and the company succeeding the firm.

Companies Act 1956.

Proportionate depreciation for the period from the date of incorporation, on the annual rates provided as per schedule XIV to Companies Act 1956 has to be charged.