Is it possible ?

Quoting Sec 123(1) of Companies Act,2013

123 . (1) No dividend shall be declared or paid by a company for any financial year except—

Inference :

So dividend can be declared only after providing depreciation.

Only after providing depreciation the profit is eligible to be disposed off.

Put simply, not providing depreciation in respect of a FY is as good as keeping the profits locked up inside the company without giving room for appropriation.

What if the company doesn't want to pay dividends??

Can,    not providing dividends be an excuse for not providing depreciation in P&L Account ??

If ur clients pounces that way, I think, u can take the recourse of Sec 129(1), Proviso 1.

Quoting the same :

129 . (1) The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III:

Provided that the items contained in such financial statements shall be in accordance with the accounting standards:

By virtue of this provision, u need to mandatorily follow AS - 6 that speaks about depreciation.

If depreciation has not been provided in books it means co. financial statements are not according to relevant laws & accounting standards therefore, not reflecting True & Fair views. 

Hence, auditor qualifications are correct in this regards and there is nothing on the mood of your client as he wants to debit the dep. amount in 16-17.

Let's wait for others view.

@ gowtham:  i tried bringing into picture sec 129 as you specified... but you should note that the auditor is qualifying on this aspect... hence  you cant say that financials do not show true & fair... the auditors qualification suggests that... other than depreciation, rest of the financials show true & fair view... so, even 129 cant be strong argued strongly... 

@ agam: yes bro, its  a company.

@ kumar... yes bro... lets seee, how the experts or other person who has experience on this repiles... 

In that case, ask them to make a disclosure stating the nature of deviation from accounting standard, reason for deviation and it's financial effect.

Sec 129(5) Without prejudice to sub-section (1), where the financial statements of a company do not comply with the accounting standards referred to in sub-section (1), the company shall disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation.

@ goutham:   are you trying to tell me, that just by making disclosures in the financials, the company can escape from the clutches of penal clause, as specified in sec 129(7)??

@ anup: by that i meant that, the company has shown figures of value of asset as it is in the B/S, and the depreciation amount is mentioned in the notes to accounts, but charging the same in the P&L account did not happen..... 

Why do u use the word 'escape' ?

First of all, the company will not contravene Sec 129 on making proper disclosures to the said effect. 

Sec 129(5) is an alternate way of compliance. 

U r not stating the diminished profit in notes to account.

Not that u r sheathing up the decline in profit.

it obviously implies like an "escape"..... i dont do the proper accounting treatment, i take shelter of 129(5).... make proper disclosure... nd then escape penal provision?? 

then the whole spirit of law, and accounting is lost...

tmrw even another company wont follow a particular AS... since i dont follow AS, i will make a disclosure... nd then i can escape...

??? see, the essence of accounting would be lost if that is the case.

I again invite ur attention to the wordings of Sec 129(5)

Note 1  : Without prejudice to sub-section (1)

Note 2  : where the financial statements of a company do not comply with the accounting standards

Sub-section 1 calls for  true and fair view.

As long as the FS enshrine true and fair view, u can set right the non-compliance of AS thru Sub-section 5 way.

What is true and fair view is, again, to a good degree, subjective

i got your point gowtham..

so reading (5) with (1), in this case, it implies that the company is in violation of provisions of sec 129, and hence penalty can be attracted vide 129(7) rite????