LIVE GST Audit Course by CA Sachin Jain. Register Now!!

Can the depreciation on an asset be more than its purchase price?

vinayak (-article assistant) (93 Points)

12 July 2017

Say a company is a power generation and distribution company set up in andhra pradesh (notified backward area) it purchases an windmill whose deprecition rate is 80%, being a manufacurer it will get an additional depreciation on 35%.So total depreciation would come upto 105%.Is it possible or is there any provision restricting the deprecition upto the cost of the asset?

Also the assessee can further claim a deduction of 15% u/s32 (1AC) and 15% u/s 32 AD. So which sums up to 135%

Reply
Follow
Share

1 Replies

Ankit Taprania (CA FINAL ) (542 Points)
Replied 12 July 2017

NO . company cannot claim depreciation more than its Actual cost . few point are to be noteable in your case :

First of all Electric gnerating company does not qualify to claim additional depreciation @ 35 % , it can claim add dep @ 20 % . only assesse if is engaged in production or manufacturer of any article or thing in the backward areas notified by the Central Govt. can claim 35 % ADD DEP . electric generating company fall in different category than production or manufacturer of any article or thing.

second of all it will claim 80 % NORMAL DEP & 20 % ADD DEP = 100 % actual cost . that's it . nothing more

THIRDLY , again 32AC & 32AD again is available to assesse if is engaged in production or manufacturer of any article or thing , which is not the case of electric gnerating company .