Section 32 depreciation doubt ?

Tax queries 928 views 3 replies

Rohan

article

44 Points Joined August 2012

I have some queries in section 32 - Depreciation as per income tax act

1) suppose we have WDV ( Machine A) as on 1st april 2011 as Rs 100,000. Now we have purchased one machine B of Rs 50,000 on 10th april (put to use same day). we have sold Machine A on 30th March 2012.

Now what will be the allowable depreciation

WDV: 100,000

Add:Additions 50,000

Less:Deletions 100,000

WDV at the year end 50,000

So we will be claiming depreciation on 50,000 (Full year ) as it is more than 180 days.

My question is that won't we take any depreciation on the machinery that has been sold off during the year ie. in this case on 100,000 that has been sold off during the year.We used for nearly an year????

is there any rule that only assets on closing date will be entitled to deduction of depreciation ?? pls help

2) Is addition of assets in the case of companies act and income tax same ???

According to me they might me different.Because if for example we get a machine on 20th March 2012 and is put to use on 1st april 2012 then as per companies act we will depreciate it but as per income tax this asset will

not be included in the additions...

Am I correct???

Please answer my above questions as soon as possible ...

Replies (3)

CA Manish

Job

5264 Points Joined December 2010

Your both the ans are correct.

Varshit Shah

Self Employed

676 Points Joined November 2008

Dear Rohan ,

Depreciation under Income tax Act follows BLOCK OF ASSETS concept , that means if you buy any assets which belongs to Same % of depreciation , that will be added in a single BLOCK , and amount existed on the 31st march of year is subject to Depreciation. There is no assets wise bifurcation required.

Format of Block of Assets :
Opening Balance as on 1st day of April    ****
Add : Assets Purchased inApril - Sept      ****
                                                                 -------
Add : Assets Purchased in Oct - Mar        ****
                                                                 --------
Less : Assets sold during year                  ###
          (Amt = Actual Recd against that
asset & not the original amount )             --------
   WDV as on 31/03                                  $$$$

If the WDV is more than amount of assets purchased after 30th sept. then depreciation amount formula is = [(WDV amt as on 31/03 - Assets Purchased after Sept.)*respective % ] + (Assets Purchased after Sept * Respective % / 2)

In short concept of Less than 180 days.

As far as Companies act is concern you have to calculate depreciation on Number of Days basis. Even % of depreciation under companies act is also different.

Shivashish

Chartered Accountant

2796 Points Joined November 2011

yes depreciation will be claimed only on Rs50000 as the amount(sale price) has been realised for the other asset and there is no relevance that u wil take dep. also as your unclaimed expense has now became nil as all amount incurredhas been realised .

Yes for the second quary also.