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Depreciation to be provided in the books

Eswar Reddy S (CFO- at NHTF) (58213 Points)

06 January 2014

Hi All, What is the basis of providing depreciation in the books of proprietorship and partnership ? As per Income Tax ACT or Companies Act

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CA. SURYAKANT SHARMA (CA) (229 Points)
Replied 06 January 2014

Hello Iswar,

With respect to Depreciation in the books of accounts of Proprietor and partnership will be governed by the provision of Section 32 of Income tax act for the income from business and profession , so go through Section 32 Iswar, well your question abt Companies Act , so in this regards Iswar Companies act are applicable for companies registered under companies act 1956, so proprietorship and partnership firm do not come under the purview of Companies act.

Regards

CA Suryakant Sharma.

Sindhuja (Final Student) (113 Points)
Replied 06 January 2014

Iswar

A proprietor or firm is not required to follow any act(IT or Companies act) for depreciation.It can even follow any rates as it deems fit. Point to be noted is should follow the rates consistently.

If the firm or proprietor is not following the deprecitation as per IT, while calculating the Income under PGBP dep as per books needs to be reversed and dep as per IT should be considered.

Normally for ease of computation and to avoid confusion rates as per IT are followed by most of the people

Ramanuj (Accountant.) (834 Points)
Replied 06 January 2014

Above Ans is right

Anuj jain (CA Final Student) (163 Points)
Replied 06 January 2014

companies act have not any provision regarding partnership firms and properterships...therefore u should go with the rates provided in income tax act...however, u can charge depreciation at rates other than those provided by income tax act but in that case u have to apply AS-22 "Accounting for taxes on income".....

Sonia M Ketkar (B.com CA DISA(ICA) Pursuing CS) (625 Points)
Replied 06 January 2014

For Proprietors and Partnerships it is not mandatory to follow depreciation rates specified in schedule XIV of Companies Act 1956. They can charge any rate. But while computation of tax, the depreciation charged in books need to be added back and claim depreciation on WDV as per IT ACT and claim it. Have to prepare separate depreciation schedules as per books and as per IT ACT.

Incase the rates charged in books are as per IT ACT. Prepare single schedule As per Books/IT Act