Depreciation disallowance in a scrutiny assessment

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Guest

Guest (Querist)

07 July 2011 Consider a Situation....

In a scrutiny assesstment, the AO has disallowed some part of the depriciation claimed by the assessee in his returns and the assessee has made the payment of the taxes on such disallowance, without appealing against the order of the AO

Now my question is what will be the impact of such disallowance on the WDV of the block of assets in the subsequent years.

Do we need to re-instate the figures of the block to give the impact of such disallowance

Also assume that the time allowed to revise the subsequent return(s) has expired

Wiating for the valuable suggestions of the experts

Thanks

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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07 July 2011 The reason and asset on which the depreciation has been disallowed, should also be clearly mentioned by you.

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If the disallowance is on the ground of personal use of the asset, you need not require to recompute the depreciation of the subsequent AYs.

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Guest

Guest (Querist)

07 July 2011 The Asset was building, used exclusively for the business purposes, but the fault of the assessee was that he had not bifurcated the cost of building purchased (along with land) into land and building separately, he has been continuously charging depreciation on land also (which is a non depreciable asset)

Thanks

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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08 July 2011 In spite of revising and re-stating the WDVs in the past AYs, it is better to show the WDV of land and building separately from now ( say, from FY 2010-11, if return is not yet filed) onwards.

If the assessee desires further safety, the depreciation claimed in earlier years in respect of land may be reversed by crediting the P&L a/c of the current year and debiting the land account.

Guest

Guest (Querist)

08 July 2011 What would be the treatment if the cost of land and building can't be bifurcated as in the assessee's case the registry doesn't state the actual amount paid towards the cost of land and building.....
it only states the lump sum amount paid towards the purchase of the building

Is there any case law of which we can take shelter???

Thanks

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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08 July 2011 The assessee should continue to claim the depreciation.
Plea can be taken by him that he has purchased building only and not the land.
If he would have gone in appeal, the addition may be deleted by the tribunal.

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