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Depreciation claim under Companies and Income tax

Mohd Pervez (Manager Accounts) (32 Points)

08 March 2023

Hi All,

If we purchased an asset but did not put it to use, can we claim depreciation under Income Tax act or Companies Act?

Can you please help me to clear this doubt?

Thanks,

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2 Replies

prasad Nilugal ( GST Practitioner & Accounts ) (14165 Points)
Replied 09 March 2023

Depreciation needs to be charged , even though Asset not to put in to use and kept ready to use and As per the income tax Act , you have to fulfil following conditions .
1) Assessee must be owner of the Asset
2) Asset must be used during previous year
3) Asset must be used for Business or profession purpose.
The use of asset may be active use or kept ready to use .

However there are certain Case laws , please go through

1) ACIT vs Victory Aqua Farm Ltd ( Honorable supreme court case)
2) CIT vs Express resort and Hotels ( H' ble HC)
3) CIT vs Sonic Biochem ( H' ble Bombay High court)
4) CIT vs Swastik Industries etc.

In Case you claim GST credit you Can not Claim depreciation as per section 16(3) of the CGST Act . please refer 16(3) of the CGST Act

Calculation of Deferred Tax if you are claiming Depreciation ( Depreciation as per Companies Act and Income Tax Act difference)

Refer AS 10 or Ind As 16 , whichever is applicable to you for more details.

Take others opinion as well.

Komal Barapatre (210 Points)
Replied 09 March 2023

Depreciation charge from date of put to use in IT act
depreciation charge from date of ready to use as per AS and IND AS
but if Financial statement is prepared for IT purpose only the charge depreciation from date of put to use