Fixed Assets Re - Classified

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Ishan Bedi (Querist)
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16 July 2011 During the previous year, in the Balance Sheet of a Private Limited Company, UPS was recorded and depreciation was claimed under the computer block, whereas in the current year it is found that the UPS should be charged to depreciation under the Block Plant & Machinery. What is the treatment for the excess depreciation claimed in the previous year as per the Income Tax Act and how the UPS will be shown in the current year?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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16 July 2011 If the depreciation claimed and already allowed do not touch the depreciation calculation assuming that the UPS was an integral computer peripheral without which the computer was likely to be damaged due to power fluctuations.

You need not to disturb UPS, as such, to run your computers without interruption.

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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16 July 2011 First of all, UPS if purchased along with the Computer comes under the classification of Computer.

Even if you want to claim it as Plant and Machinery eligible for Depreciation @ 13.91% in Companies Act and 15% in Income Tax Act, you can do it so by prospective effect only. There is no need to worry about it.

You have to change the rate of depreciation in final accounts as per Schedule VI and it has to be disclosed in the notes to accounts as change in accounting estimates.

In case of income tax, you have the option to revise the return of the earlier year by changing the rate of depreciation and if any difference in tax arises, then you need to pay the same.

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