Depreciation

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CA.E.Deepan Chakravarthy

CA and CS Executive

336 Points Posted on 17 May 2008

Hello friends, One of my client has converted his proprietary concern into partnership firm. My question is “ How the depreciation should be calculated? “ 1. The depreciation should be apportioned between successor and predecessor as mentioned in Section 32(1) of Income Tax Act, 1961 Or 2. I should apply 180 days scheme i.e., for predecessor who had asset for more than 180 days so, full percentage of depreciation would be claimed and for successor had asset for less than 180 days 50% of depreciation would be claimed Please help in this regard. (According to me, there is no solution in the act. Important one is, in the act it discusses about conversion of Individual and firm into company.)

Replies (2)

Prasanna.Rm

Finance Pro

264 Points Posted on 17 May 2008

hi deepan,

the depreciation should be apportioned as recommended by the act and the that has to be done in the first 180 days and next 180 days break up.

though it is act based,logically also this holds good.

DIXIT VERMA

Professional

71 Points Posted on 18 May 2008

Hi Deepan...

In this case the first method is correct as the second method i.e. of 180 days will be chargable only in case of new addition (brand new not second hand) only.

Since the predecessor is buying the assets from a running concern hence no case of charging dep as per 180 days rule.

In this case the first calculate the whole depreciation for the year then divide it between the predecessor and successor in proportion of number of days of the year for which they used it i.e. if the predecessor got converted into partnership after 5 months of financial yr. then dep for 5 months will be charged into his accounts and for rest of the year in successors accounts.