Depriciation for the calculation of mat
This query is : Resolved
19 May 2012
sir ,
i have a question that if a company charged depreciation as per income tax act but the assessing officer disallow the same and charged depriciation as per companies act for the calculation of net book profit for 115jb mat calculation , is the assesing officer is right ? or is it correct to charge depriciation as per income tax act?
i have a question that if a company charged depreciation as per income tax act but the assessing officer disallow the same and charged depriciation as per companies act for the calculation of net book profit for 115jb mat calculation , is the assesing officer is right ? or is it correct to charge depriciation as per income tax act?
19 May 2012
Yes, The officer is right in disallowing depreciation calculated using Income tax rates.
Under section 115 JB, tax is calculated on book profit as calculated under section 349 of the Companies Act, 1956.
Clause 4(k) of section 349 requires entities to charge depreciation as prescribed under section 350 of the Act.
Section 350 requires an entity to charge depreciation as per the rates laid down in Schedule XIV of the Act.
However follwoing points are to be noted:
1. Sch XIV rates are minimum rates.
2. Entities can use a higher rate of depreciation provided it is justified for the asset.
3. Suitable accounting policy and judgement is part of accounts disclosure.
4. Auditor has issued an Unqualifed opinion of financials.
In above scenerio, the entity can offer a reduced profit under section 115 JB.
Under section 115 JB, tax is calculated on book profit as calculated under section 349 of the Companies Act, 1956.
Clause 4(k) of section 349 requires entities to charge depreciation as prescribed under section 350 of the Act.
Section 350 requires an entity to charge depreciation as per the rates laid down in Schedule XIV of the Act.
However follwoing points are to be noted:
1. Sch XIV rates are minimum rates.
2. Entities can use a higher rate of depreciation provided it is justified for the asset.
3. Suitable accounting policy and judgement is part of accounts disclosure.
4. Auditor has issued an Unqualifed opinion of financials.
In above scenerio, the entity can offer a reduced profit under section 115 JB.
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