Search Results For: depreciation


QUERY: As per Schedule II of the Companies Act, 2013 the useful life of Plant and Machinery and in generation of power is 40 years, but as per the company, useful life is much less. What the company should do?
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Note no. 3(i) of Part ‘A’ of Schedule II of the Act, provides as under:

“The useful life of an asset shall not be longer than the useful life specified in Part ‘C’ and the residual value of an asset shall not be more than five per cent of the original cost of the asset.

QUERY: M/s. ABC Ltd. is engaged in the business of cement manufacturing and power generation.

Existing depreciation policy of M/s. ABC Ltd. is as follows:

“Depreciation is provided on written down value method at the rates specified in schedule XIV of the Companies Act, 1956 or the rates prescribed in the Income-tax Act, 1961 whichever is higher. However in case of those assets whose WDV as per Income-tax Act,1961 is lower than the WDV as per books, additional depreciation is provided to align the book WDV as per Income-tax Act, 1961.”

The Companies Act, 2013 provides that depreciation is required to be charged as per useful life prescribed in Schedule-II as per provision of section 123 of the Act.

Provision of Schedule-II of Companies Act, 2013

“Part ‘A’

1……..

3. Without prejudice to the foregoing provisions of paragraph 1,

(i) In case of such class of companies, as may be prescribed and whose financial statements comply with the accounting standards prescribed for such class of companies under section 133, the useful life of an asset shall not normally be different from the useful life and the residual value shall not be different from that as indicated in Part C, provided that if such a company uses a useful life or residual value which is different from the useful life or residual value indicated therein, it shall disclose the justification for the same.

(ii) In respect of other companies the useful life of an asset shall not be longer than the useful life and the residual value shall not be higher than that prescribed in Part C.”

Queries

(a) Whether company can continue its existing depreciation policy i.e., charging depreciation at higher rate from Companies Act (by deriving rates as per useful life as specified under Schedule-II and Income -tax Act, with WDV alignment, even after applicability of Companies Act, 2013. If yes, please specify justification/disclosure (if any) required to be given.

(b) Whether company can consider different useful life (higher or lower) from the useful life specified in Schedule-II. If yes, please specify justification/disclosure (if any) required to be given.

(c) Is there any retrospective impact if –

• Company shift from existing policy (WDV method with alignment) to SLM method under new Companies Act, 2013 and charge depreciation as per useful life prescribed under Schedule-II.

• Company shift from existing policy (WDV method with alignment) to WDV method (without alignment) under new Companies Act, 2013 and charge depreciation as per useful life prescribed under Schedule-II.

(d) How the rates of depreciation would be arrived for each asset under WDV method as per Schedule-II, where each asset is capitalised at different dates in a year
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(i) As per schedule II of Companies Act, 2013, in case of prescribed class of companies, whose financial statements comply with Accounting Standards prescribed for such class of companies under section 133 of the Act, can have different useful life and residual value other than indicated in Part C of Schedule II of the Act, on disclosure of justification for the same i.e.

QUERY: Assets being land and building acquired on 1-8-1978 for Rs. 2,00,000/- and being used in business on which year to year Depreciation allowed W. D. V. as on 1-4-2009 come to Rs. 20,000/-. The Assessee sold the entire depreciated property on 25-3-2010 for consideration of Rs. 10,00,000/-.

What will be taxable income as business income, long term capital gain, short term capital gain and tax liability.
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From the query, it is not clear whether the building forms a part of block of assets, as no depreciation is allowable on the land as per CIT vs. Alps Theatre 165 ITR 377 (SC). Followed by the Delhi Tribunal in Dy. CIT vs. Capital Caps (P) Ltd. 114 ITD 286.

QUERY: S. 40(a)(ia) lays down that the expenditure mentioned therein viz., interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or payment to a contractor/ sub-contractor on which tax is deductible at source under Chapter XVIIB, but has not been deducted or after deduction not been paid, would not be allowed as a deduction in computing the business income of the payer-assessee till such TDS is paid within specified time limit. Can Assessing Officer disallow the depreciation on the amount capitalized on which no TDS was deducted, for payments made to contractor who is resident?
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Section 40 starts with “notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”: –

(ia) any interest, commission or brokerage, [rent, royalty] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor,

QUERY: Please enlighten the rate of depreciation applicable to the following items of plant & machinery:–

(i) J.V.C. Machine

(ii) Road Roller

(iii) Crane

They are all movable like trucks run for the business, whether depreciation on block would be @30% or @ 15%?
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Item No. 3(ii) of Part III (Machinery and Plant) of New Appendix I prescribes higher rate @30% of motor buses, motor lorries and motor taxies used in a business of running them on hire.

QUERY: As per Schedule II of the Companies Act, 2013 the useful life of Plant and Machinery and in generation of power is 40 years, but as per the company, useful life is much less. What the company should do?
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QUERY: We have two factories, one at Bombay and the other at Delhi. The factory at Bombay is operational. However, the factory at Delhi has been shut for two years with no activity. Are we entitled to claim depreciation on the assets installed there?
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Yes! You are entitled to claim depreciation even on assets that are not used provided they are part of a “block of assets” and the block has been used during the year. The user of the “block” is important and not that of individual assets.