DEPRECIATION U/S 32 OF IT ACT

Tax queries 708 views 2 replies

Ayan Sinha

Manager-Accounts

24 Points Posted on 02 September 2010

I request you all to please solve the following issue:

A Partenrship Firm converted into a Limited Company during the Fianancial Year 2009-10. Date of Incorporation of the Company was 28th July 2010 and Date of Certificate of Commencement of Business was 15th December 2009. My Queries are:

1. Partnership Accounts should continue upto which date and from which date Company Accounts should start?

2. All the addition of Fixed Assets upto 28th July'2009 will have to be depreciated at full rate as prescribed in the Income tax Act as the assets has been put to use for more than 180 days during the year 2009-10. If it is true, then how come the same assets will have to be depreciated in the Company Books? Will it be correct to allocate the depreciation (calculated at full rate as per IT Act as the assets have been put to use for more than 180 days during 2009-10) on assets acquired upto 28th July'20009 on the basis of period of holding during 2009-10 of the same by the Partnership Firm and the Company?

Please advise and oblige.

Ayan Sinha

Mobile: 9007477733

Replies (2)

ashokbabu

Article student

40 Points Posted on 02 September 2010

Partnership Accounts should continue upto 27.07.2010.

Depreciation is to be provided on the basis of period of holding. i.e., upto 27.07.2010 assets should be depreciated in the books of the Partnership firm and for the rest of the period it is to be depreciated in the books of the company.

Vicky

CA LCS MCOM

136 Points Posted on 03 September 2010

as per sec 47(xiii) a transaction will not be treated as transfer where firm is succeeded by a co.accordingly there will be no capital gains in such a case on assets transferred.if ur case is covered by sec47(xiii),,( firm is succeeded by a co).....then as per proviso to sec 32(1) dep shall be allowed to the firm and newly formed co in the ratio of no of days for which the assets were used by them......however to fall in sec 47(xiii) certain strict conditions are required to be fulfilled.if these conditions are not satisfied,then capital gains will be attracted to firm on transfer of assets.....in that case firm wont be able to claim dep on any of the assets as the firm does not exists at the end of the year.however the newly formed co can claim dep on the same.actual cost to such co for claimimg dep will be cost at which assets are acquired by the co from the firm.period of holding shall start from the actual acquisition date for the co for claiming dep