Deprecitaion when assets not used

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Satish Makam (Querist)

06 September 2010 there is a company. and it has some assets. during the year assets were not at all used in the production as there is no business. Now my doubt is- can the company claim depreciation under either of the Acts ( companies and IT act)

SANJAY TALATI

SANJAY TALATI (Expert)

06 September 2010 Sec. 32(1) provides for certain conditions to be satisfied for allowability of Depreciation under the IT Act,1961. One of such condition is the use of the asset during the previous yer.
However, this condition is only in respect of the first year of acquisition of asset. In case of CITV. Nahar Exports (2008) 296 ITR 419(P & H) has held that assesse is entitled to depreciation on the assets which could not be used during the relevant year on account of non receipt of orders.

The depreciation to be charged under the Companies Act,1956 is governed by sec. 205 read with Schedule XIV. It is based on the no. of days the asset used. It is stated i that schedule tht a company should disclose depreciation rates if they are different from the principal rates specfied in that schedule.
The Department has clarified that the rates contained in Schedule XIV should be viewed as the minimum rates and therefore, a company shall not be permitted to charge depreciation at rates lower than those specified in the schedule. Thus, even if because of the non business during the year, the depreciation is to be charged as per the Schedule of the Companies Act

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