Guys needed your help

For the year 2009-10 you cant claim depreciation as the asset was not used.For the subsequent year ie 2010-11 you can claim depreciation at full rate.

There is a controversy regarding the fact whether use includes ready to use.But it is mentioned in the act that asset must be 'used' so you cant claim depreciation in the year of purchase if it is not  actually used.Generally the term ready to use is considered for stand by asset.

I agree with Richa, use means actually put to use.

agree with richa

ok let me be clear.... i have a confiusion regarding this ....while we maintains accounts then we will comply with all the requirements of Accounting Standerds, Standerd On auditing and other laws. 

is this true or not ???

Originally posted by : CA RICHA BOTHRA
	For the year 2009-10 you cant claim depreciation as the asset was not used.For the subsequent year ie 2010-11 you can claim depreciation at full rate. There is a controversy regarding the fact whether use includes ready to use.But it is mentioned in the act that asset must be 'used' so you cant claim depreciation in the year of purchase if it is not  actually used.Generally the term ready to use is considered for stand by asset.

AGREED                                   

yes 

Friends,

Considering that the asset was ready to be used in 2009-10 itself, depreciaiton can be very much claimed. Its been clarified that once the asset is ready to use, depreciaiton can be allowed.

Orelse just consider assets like a 'Gun' or a 'Fire extinguisher'. I think its illogical to argue that only if Assessee uses the Gun he can claim depreciation.

Hence in my view ready to use is very much sufficient to claim depreciation and actual use has less relevance.

@ Richa.... then tell me in audit it is shown that  if assets is ready to use thn dep. can be charged . am i true????

ya i agree with arihant

@ Arihant  .Fire extinguisher is stand by asset so i think for this ready to use can be considered but for other assets actual use is to be considered .

Well during the course of the audit its more like a decision Auditor has to make and decide whether the asset was actually ready to be used or not. Its again driven by materiality, knowledge, procedures etc.,

If your satisified then surely you can continue allowing the dep.

Ms Richa, thanx for your consideration but what about assets like a 'Gun'.
I beilieve Gun is normally a ready to use asset. Can one argue that since its not actually used depreciation cant be claimed?

I think this discussion will surely be helpful to many people. Please put more light if possible with examples.

Yes gun can be considered as ready to use asset and like fire extinguisher passive use concept of standby asset can be applied .Basically i guess 'used' concept will apply to all asset  except in some cases like ready to use or standby asset.

To add on the fore discussions...

Actual use was never envisaged in the Act. Its "put to use" and not “use”.  The phrase "put to use" implies that asset should be installed and available for immediate use. This means if asset is of such nature that it requires wiring and fittings then these should be done to make it eligible for "put to use". However, if the asset was "put to use" for less than 180 days in the year of purchase then only 50% of total depreciation for that year is allowed. But if the asset was not "put to use" in the year of purchase instead "put to use" in year(s) following the year of purchase then it will be eligible for full depreciation at the applicable rate. This is because the restriction of 50% is applicable to the year of purchase only and not after that.

In your case:

Regarding Point A- No depreciation allowed as per the Act for 2009-10, but full depreciation as per applicable rate for 2010-11.

Regarding Point B- Full depreciation as per the applicable rate in the year of purchase provided it is "Put to use" for 180 or more than 180 days. Actual usage is irrelevant for determining the eligibility of depreciation as per the Act

Correct me if I am wrong.

Thanks.