Consider the following situation:
An asset has been constructed, and is substantially ready for use and certification has been obtained from the engineer about completion on 28.02.09, the company contends that the asset will not be used upto 31.03.2009 and so wants to transfer the same to Fixed assets on 01.04.2009 and claim depreciation for it from 2009-10. Is the treatment correct?
NO....as per Companies Act & AS we depreciate an asset from the date when it is READY FOR USE...hence depreciation for the march month should be claimed in Books of Account.
However as per IT Act, 1961...Depreciation is available from the date asset is actually PUT to USe. Thus, no dep will be available for the period ending on 31.03.09.
>> Vipul Garg
| Originally posted by :Vipul Garg | ||
| " | NO....as per Companies Act & AS we depreciate an asset from the date when it is READY FOR USE...hence depreciation for the march month should be claimed in Books of Account. However as per IT Act, 1961...Depreciation is available from the date asset is actually PUT to USe. Thus, no dep will be available for the period ending on 31.03.09. >> Vipul Garg |
" |
Thanks that answers my question.
I require advices on the below scenario:
Can a company choose to calculate the depreciation as per Income Tax Rules only and not follow the Companies Act, or is it mandatory to follow the Schedule XIV? Please help.
Thanks.
I have seen some balance sheets of private limited companies where depreciation as per Income Tax Rules is provided. But providing of Depreciation as per companies act is compulsory. In that case generally a note is put with the accounts where such deviation is reported and also the amount affecting the profit & Loss account.
as per companies act it is compulsary for every company to follow sch VI
No its mandatory to provide for Depreciation as per Companies Act....
a note will not suffice in case of departure and auditor will need to Qualify his report suitably.
Following rates prescribed in Schedule XIV to the Companies Act, 1956 is not mandatory per se. However for purposes like calculation of managerial remuneration availability of profits for distribution as dividend, the rates prescribed in said schedule shall have to be applied.
| Originally posted by :Shubhankar Limaye | ||
| " |
It is to be noted that every company has to comply with Schedule XIV of the Companies Act. However, it must be kept in mind that depreciation rates as provided in Companies Act are minimum rates of depreciation. In case the assets has suffered more wear and tear a higher rate of depreciation is fully permissible under the Act. Hence if the above condition is satisfied there will be no departure from the Act. Thanks |
" |
| Originally posted by :Shubhankar Limaye | ||
| " |
It is to be noted that every company has to comply with Schedule XIV of the Companies Act. However, it must be kept in mind that depreciation rates as provided in Companies Act are minimum rates of depreciation. In case the assets has suffered more wear and tear a higher rate of depreciation is fully permissible under the Act. Hence if the above condition is satisfied there will be no departure from the Act. Thanks |
" |
| Originally posted by :deepak K Gujrati | ||
| " | " | |
Dear Raj,
As per companies Act, Claim the depreciation from the date of put to use.
As per Income tax Act, Claim Dep based on the commencement of Commercial Production.
In this case,
Claim Dep under Comp Act from 28.02.09.
Claim Dep under Income Tax Act, as and when the Commercial Production is Commenced.
Please note that, Date put to use is different from commencement of Commercial Production.
KK & Company Chartered Accountant
Pune
CA Inter
View Details
CCI
Pro
CAclubindia
