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Depreciation on block of assets

Shaurabh Sahu (FINAL STUDENT) (46 Points)

18 June 2015

ASSESSE HAS TWO MACHINES AND THEIR OPENING BALANCES OPENING BAL: 1. RS.200000 AND 2. RS 150000. ASSESSE SOLD BOTH MACHINES FOR RS. 200000 ON 13.6.2014 AND TWO MACHINE ACQUIRED ON 12.5.2014 OF RS. 500000. I WANT TO KNOW DEPRECIATION ALLOWED AS PER INCOME TAX, GROSS BLOCK, AND CLOSING WDV AS ON 31.03.15 AND ACCOUNTING TREATMENT FOR THESE TRANSACTION.

THANK YOU...

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4 Replies

gagandeep (shahabad markanda) (38 Points)
Replied 18 June 2015

Only capital gain arise

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Hemanth Pullanikkat (Chartered Accountant) (89 Points)
Replied 19 June 2015

Here I am attaching the computation

Attached File : 1321815 20150619122330 closing wdv.xlsx downloaded: 387 times

Hemanth Pullanikkat (Chartered Accountant) (89 Points)
Replied 19 June 2015

Hello Shaurabh 1.Depreciation as per income tax rules. Depreciation cannot be claimed for the assets which are sold during the concerned previous year. Because as per section 43(6) Written Down Value, moneys payable should be deducted while computing WDV for the purpose of depreciation. Moneys payable means, if the machinery is sold the price for which it is sold is the moneys payable.so an assessee cannot avail depreciation on the value of the assets which is sold. So in this case depreciation cannot be claimed for the machines which is sold on 13-06-2014. But you can claim depreciation on the new machines acquired on 13/05/2014.As it is used for more than 180 days full rate of depreciation can be claimed as per section 32(1)(ii). You didn't specify the type of the machine so I cannot provide the rate of the depreciation as per section 32(1) Besides you can also claim enhanced depreciation as per section 32(1)(iia) upto 20% of the actual cost,as per section 43(1), of the machine. Provided conditions specified in section 32(1)(iia) should be complied with. In short you can claim depreciation as per section 32(1) on two machines acquired on 13/05/2014 and you can also claim enhanced depreciation as per section 32(1)(iia) on actual cost of the machines. 2. Gross Block:- Since the assets are machines it can be classified under machines. Then grouping should be done based on the rate of depreciation as per Income Tax Rules. If each such new machines have different rate of depreciation each machine will come under two group. As I stated early, you have not specified the details of the machine I cannot determine the rate of the depreciation. Assuming that both will depreciate at rate of 15% then both will come under one single group @ 15% rate. Then the value of the block before depreciation will be Rs.5,00,000/- , the value of the new machines. 3.Closing WDV:- Here I am attaching a spreadsheet for your reference, in which the computation of WDV included. 4. Accounting Treatment:- First of all I would like to bring to your notice that accounting treatment is based on the Accounting standards issued by ICAI and Computation of WDV and depreciation is according to Income Tax Act 1961. As per Accounting standard-10 "Accounting for Fixed Assets" Gains or loss of the disposal are generally recognized in profit and loss account. If the sold asset is revalued one a) Debit the loss on the revaluation reserve account arise out of the same asset if any.

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