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Depreciation

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This query is : Resolved

Vijay Kr. Mishra (Querist)

17 December 2009 Mr. X Purchased a Shop in the Multi- Stored Marketing Complex for Rs.10 lakhs, after that he constructed a Show Room in that shop and started a Proprietorship Business. The construction cost of the show room is Rs. 12 lakhs. Please determine the amount of depreciation (rate of depreciation : 10%).

I have a doubt on one point that is - the cost of Shop Rs.10 lakhs should not consider for depreciation. Because day by day the value of shop (value of property) will increase, how can it's value depreciate ? Only cost of construction of Show Room consider for depreciation i.e. 10% of 12 lakhs = 1.2 lakhs. (i am not sure but someone told to me so I asked). Thanks.

Pankaj Gupta

Pankaj Gupta (Expert)

17 December 2009 Cost of shop include cost of building and cost of land. if valuation of building can be determined separately then you are entitled to get the depreciation on the old building also alternatively the old building can be valued from certified valuers.

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