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Praveeri (Querist)

10 April 2009 Hello Experts,

Pls guide me to the following:-

1. Can we provide depriciation to assets only for the number of days used (say put in to use in the middle of the year and put on hold after few month but before year end)is it legal according to Co., Law.

2. Is it possible to provide depreciation as mentioned above and also reduce on account of impairement of assets in the same financial year. (under Co. Law and IT)

3. if Possible Impairement on which value on WDV on Gross block.

Thanks in advance.

C.A.Javid Patel

C.A.Javid Patel (Expert)

10 April 2009 1. One put to use then you have to provide for the depreciation for whole of the period after put to use, even if put on hold after few month.
2. For impairment on value you have to refer to the formula of AS 28.

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Praveeri

Praveeri (Querist)

10 April 2009 any further comments or argues?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)

10 April 2009 Reply
1)It is legally allowed that you can charge depreciation only for the utilised period subject to fulfilment of certain conditions :
(a)We should be in a position to arrive at the exact number of days of life of the asset.
EG : Bundling machine it can bundle 100000 Bundles is the life of the machine.
Where the machine can be used whenver necessary and can be again repacked. Say tools for assembling. We use the tools and then again we will repack the same.

(b) If not used there should not be general wear and tear for the asset.
EG : Car, computer, Fridge, eventhough we are not utilsing it the wear and tear will be there.

It is absolutely legally allowed.A suitable note has to be given under companies act. With reference to income tax act we can claim the rates as per act if we have utilised the machinery even for 1 day or 365 days.

2) It is possible you provide depreciation as above and if you are a company where accounting standards are applicable you can apply impairment of assets and also depreciation under companies act. Under income tax act there is no concept called impairment of assets.

3) For calculating impairment of assets the Written down value has to be compared with replacement cost if the company wants to replace the asset at the end of the life of the asset. If the company do not want to replace it then you have to compare with realisable market value.

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