Dep on agri. land?

While I understand depreciation on Land isn't charged, because there isn't any value in land which depreciates, per se.

 

However, what about agricultural land? I've now been long intrigued as to why agricultural land isn't depreciated? An agricultural land naturally becomes less fertile with time, and it's ability to grow vegetative plantations is also reduced drastically with time. If farmers don't use fertilizers, their agricultural output would reduce 1 year after another.

While I know that agricultural income is exempt from tax anyway. Logically speaking, shouldn't agricultural land be charged with depreciation?

Replies (3)

Depreciation is charged on a capital asset  for eflux of time and its capacity to produce value without major  additional expenditure.

That being the case we have to examine whether land meets these characteristics.

Lands capacity to produce does not change with the eflux of time and to produce the same produce it does not need additional expenditure other than application of fertilizers and pesticides as a routine.

Finally land value does not become zero valued  like scrap in case of other  assets.

So in my opinion land need not be depreciated.

kkm

Originally posted by : Kolluru Krishna Murty

Depreciation is charged on a capital asset  for eflux of time and its capacity to produce value without major  additional expenditure.

That being the case we have to examine whether land meets these characteristics.

Lands capacity to produce does not change with the eflux of time and to produce the same produce it does not need additional expenditure other than application of fertilizers and pesticides as a routine.

Finally land value does not become zero valued  like scrap in case of other  assets.

So in my opinion land need not be depreciated.

kkm


Krishna Sir,

Land's capacity to produce DOES decrease with time. Soil fertility, as has been explained by Science on various occassions, decreases in proportion to the amount of vegetative output it produces, over time. Hence, the need to add fertilizers to the soil. Fertilizers provide the soil with nutrients to increase land fertility.

However, like you mentioned, fertilizers could be treated as repairs to land, like general repairs are made to any other capital asset, such as a building. Nonetheless, even when repairs are made, we don't quit depreciating a building. Likewise, why don't we depreciate agricultural land?

I'm sorry to make this sound so confusing, but I'm having a hard time getting this around my head.

 

Best regards,
Sam

 


 

Dear Sir,

I have no argument with you.Your view also can be taken.

But the basic difference between land and other visible assets is that the land cannot die or by any addition,deletion etc of any material its capacity to produce is eternal and value does not decrease.

So I am of the firm view,being son of a farmer and CA ,there is no need to depreciate land.

kkm

 

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