Depreciation charged at lower rate

Dear CA. Neha

Schedule XIV of the companies Act provided that the following information should also be disclosed in the accounts :

1) Depreciation method used (SLM or WDV)

2) Depreciation rates or the useful lives of the assets, if they are different from the principal rates specified in the schedule.

Hence we can conclude that charging depreciation at the rates different from the schedule is allowed.But the following points should be kept in mind in this regard.

1) A board resolution should be obtained mentioning therein the reasons for charging depreciation at different rates.

2) This point should also be mentioned in the audit report.

If the different rate of depreciation is charged only for the purpose of profit modification then it  will not reflect a true and fair view of the financial statement of the company.

In my opinion if u are charging a lower rate of depreciation it means u are increasing the useful life of the asset than the standard one and this can be a debatable question.

Dear CA. Neha

Schedule XIV of the companies Act provided that the following information should also be disclosed in the accounts :

1) Depreciation method used (SLM or WDV)

2) Depreciation rates or the useful lives of the assets, if they are different from the principal rates specified in the schedule.

Hence we can conclude that charging depreciation at the rates different from the schedule is allowed.But the following points should be kept in mind in this regard.

1) A board resolution should be obtained mentioning therein the reasons for charging depreciation at different rates.

2) This point should also be mentioned in the audit report.

If the different rate of depreciation is charged only for the purpose of profit modification then it  will not reflect a true and fair view of the financial statement of the company.

In my opinion if u are charging a lower rate of depreciation it means u are increasing the useful life of the asset than the standard one and this can be a debatable question.

In my opinion..the rates prescribed in the companies act are the minimum ones and the co. can not charge depreciation @ below then that...however on the reasonable grounds the co. can opt for higher rate of depreciation.....please correct me if i m wrong......

Thanks Subhash for the reply. in the case the auditor has mentioned that depreciation is charged depending on the useful life of the asset. also if depreciation is charged @ rate as per IT Act company would be incurring LOSS. its giving the impression only to show profit in books lower depreciation has been charged

Thats why i mentioned take a board resolution from the compny. Dont take responsibility on ur shoulders. You have to mention in ur audit report about the lower rate of dep and further u have to state that board resolution has been passed in this regard, Charging dep at different rates is permissible in companies act but not in the income tax act and hence when u will make P&L as per companies act it will show profit but while making statement of income as per income tax act there will be loss. 

The rates Prescribed under the companies Act are the minimum Act and Company can not Provide depriciation below that rete.

In Statutory Audit report the depreciation rate should be as per companies Act

In Tax Audit report the depreciation rate should be as per Income tax Act

and the difference arise due to depreciation should be differed tax Asset/ Liability.

if we provide depreciation as per Income tax and there is loss than it is said that it is loss due to depreciation which can be c/f for infinite time

 

Dear All,

 

I would like to know, in which method of depreciation will charge As per IT rules and Companies Act rules.

If the above rules charges different methods of depreciation. Please explain the reason?

Thanks & Regards

Pradeep T V