Depreciation on fixed assets
This query is : Resolved
Deepika Bhardwaj
(Querist)
27 June 2009
Dear Frnds
Preparation of Balance sheet pursuant to Schedule VI of the Companies Act, 1956 requires depreciation on the Fixed Assets of the Companies.
Can a Company decide not to charge any depreciation on the assets of the Company becaues the Assets are not put to use.
The assets are more than 10 years old & the Company has chagred depreciation on those assets for the past 10 years but the company don't want to charge any depreciation from this year.
Pls advice whether it is permissible under law to do the same.
pls take it as urgent
Best Regards
CS. Deepika Bhardwaj
Preparation of Balance sheet pursuant to Schedule VI of the Companies Act, 1956 requires depreciation on the Fixed Assets of the Companies.
Can a Company decide not to charge any depreciation on the assets of the Company becaues the Assets are not put to use.
The assets are more than 10 years old & the Company has chagred depreciation on those assets for the past 10 years but the company don't want to charge any depreciation from this year.
Pls advice whether it is permissible under law to do the same.
pls take it as urgent
Best Regards
CS. Deepika Bhardwaj
Sanjeev Jain
(Expert)
27 June 2009
Hie Deepika,
Dep. on fixed assets is governed by sec.350 which is read with schedule XIV of the companies act ,1956 which define the method to be followed and the rates that has to applied.
But there is one more thing which wont let you do which the management of the co. wanna do i.e. AS-6 which clearly defines that claiming of Dep. is mandatory.
To follow AS is must for the co. as per Sec.211 of companies act. In nutshell dep has to be provided in all the cases and there is no concept like inocme tax act that assets has to be depreciated only when it is put to use. Under com. Act dep. charge on the basis of efflux of time.
Bye Take Care
Dep. on fixed assets is governed by sec.350 which is read with schedule XIV of the companies act ,1956 which define the method to be followed and the rates that has to applied.
But there is one more thing which wont let you do which the management of the co. wanna do i.e. AS-6 which clearly defines that claiming of Dep. is mandatory.
To follow AS is must for the co. as per Sec.211 of companies act. In nutshell dep has to be provided in all the cases and there is no concept like inocme tax act that assets has to be depreciated only when it is put to use. Under com. Act dep. charge on the basis of efflux of time.
Bye Take Care
Message likes :
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28 June 2009
In case the Fixed Assets have been dismantled and not ready for use, then the depreciation is not to be charged otherwise the same is chargeable. In case the depreciation is not charged then the Auditors have to qualify the report as the Assets do not reflect a true state of affairs.
CA Nitin Wadhwani
(Expert)
28 June 2009
First of all, as per AS-6, depreciation is to be charged on fixed assets from the date they are "ready to use".
So, even if don't use the assets for commercial production and use, depreciation is to be charged.
If you don't charge depreciation and if you pay any dividend, then it will deemed that dividend has been paid out of capital.
So, even if don't use the assets for commercial production and use, depreciation is to be charged.
If you don't charge depreciation and if you pay any dividend, then it will deemed that dividend has been paid out of capital.
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