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Depreciation during closure of operations

Madhu.M.S (Service) (29 Points)

12 April 2012

Dear All,

I require clarification on accounting of Depreciation during closure of operations. My client has closed the operations and is in the process of winding down the unit. The Company closed the operations as on Jan 31 2012. Post Jan 31 2012 there are no operations and there is no intension to start the business. In this scenario what is the treatment for depreciation. Can we stop calculating the depreciation or is it correct to charge off the WDV as on Jan 31 2012.

Kindly clarify.

Thanks.

Madhu

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2 Replies

CA. Anshul Jain (Taxation) (141 Points)
Replied 12 April 2012

I think depreciation should be charge in Profit and Loss account, because the Assets has been introduced in the business, the business is not started due to some reasons is altogether a different matter.

And Charging depreciation is compulsory in Companies Act, 1956, but this is my personal thought, i would search some case laws to support my opinion and let you know for ur refrence.

Akhilesh Kapadia (Employee) (106 Points)
Replied 12 April 2012

According to me no depreciation has to b charged as the business is stopped. Only the winding up of business expenses statutory liabilities wud have a place in p/l account.