Depreciation if assets not used.
This query is : Resolved
27 June 2010
if a block of assets not used at all during the P.Y.
whether depreciation shall be allowed or not?
whether depreciation shall be allowed or not?
27 June 2010
section 32(1) states:-
...and used for the purposes of the business21 or profession...
in this regard, if asset not used during the year, no depreciation to be allowed.
...and used for the purposes of the business21 or profession...
in this regard, if asset not used during the year, no depreciation to be allowed.
27 June 2010
It says date of put to use.. As you mentioned that it is not used than no depreciation...
27 June 2010
please re-consider the this part of section 32
In respect of depreciation of—
i) buildings, machinery, plant or furniture, being tangible assets;
ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998,
owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed—....
In respect of depreciation of—
i) buildings, machinery, plant or furniture, being tangible assets;
ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998,
owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed—....
27 June 2010
Yes but still depreciation wont be there if its not used....
27 June 2010
AGREE WITH CA Shivang ,THE MAIN POINTIS WHEATHER THE ASSET IS PUT TO USE OR NOT.
28 June 2010
i want to ask, that a block of asset was used during preceding P.Y.s but not used at all during current P.Y..
Will the block of asset shall qualify for depreciation as per section 32?
Will the block of asset shall qualify for depreciation as per section 32?
28 June 2010
this point is raised in Bangar's Students' Guide to Direct taxes: this point is given as below:
NO DEPRECIATION IN SUBSEQUENT YEARS IF BLOCK OF ASSET NOT USED AT ALL DURING THE PREVIOUS YEAR: since, in the year subsequent to the year of acquisition, an asset loses individual identity and becomes part of block, therefore, in subsequent years, 'actual user test' will apply to block as a whole and no depreciation can be allowed if the 'block of assets' as a whole wasn't actually used even for a single moment in that previous year. Thus, even if a single asset forming part of the block is actually used for a single moment during the previous year, the block will qualify for depreciation.
NO DEPRECIATION IN SUBSEQUENT YEARS IF BLOCK OF ASSET NOT USED AT ALL DURING THE PREVIOUS YEAR: since, in the year subsequent to the year of acquisition, an asset loses individual identity and becomes part of block, therefore, in subsequent years, 'actual user test' will apply to block as a whole and no depreciation can be allowed if the 'block of assets' as a whole wasn't actually used even for a single moment in that previous year. Thus, even if a single asset forming part of the block is actually used for a single moment during the previous year, the block will qualify for depreciation.
28 June 2010
Pls. read section 32 with reference to AS -6
The following terms are used in this Statement with the meanings
specified:
3.1 Depreciation is a measure of the wearing out, consumption or other
loss of value of a depreciable asset arising from use, effluxion of time or
obsolescence through technology and market changes. Depreciation is
allocated so as to charge a fair proportion of the depreciable amount in each
accounting period during the expected useful life of the asset. Depreciation
includes amortisation of assets whose useful life is predetermined.
Further rate which is fixed under income tax as well as companies act are depending on predetermined use full life. again deprection is allowed to assesee either he claim as expenses or not.
Further in a Case "Vishwanath Bhaskar Sathe v. CIT - if an assets is kept ready for use for more than 180 days before the end of previous year but used less than 180 days during the year full depreciation will allowed."
From my view point - depreciation, in case of block of assets in next year even if not used, will be allowed because effluxion of time or obsolescence through technology and market changes.
The following terms are used in this Statement with the meanings
specified:
3.1 Depreciation is a measure of the wearing out, consumption or other
loss of value of a depreciable asset arising from use, effluxion of time or
obsolescence through technology and market changes. Depreciation is
allocated so as to charge a fair proportion of the depreciable amount in each
accounting period during the expected useful life of the asset. Depreciation
includes amortisation of assets whose useful life is predetermined.
Further rate which is fixed under income tax as well as companies act are depending on predetermined use full life. again deprection is allowed to assesee either he claim as expenses or not.
Further in a Case "Vishwanath Bhaskar Sathe v. CIT - if an assets is kept ready for use for more than 180 days before the end of previous year but used less than 180 days during the year full depreciation will allowed."
From my view point - depreciation, in case of block of assets in next year even if not used, will be allowed because effluxion of time or obsolescence through technology and market changes.
28 June 2010
thanks to all:
IN MY OPINION IT SHOULD BE ALLOWED IN SUBSEQUENT YEARS EVEN IF NOT USED IN THE SUBSEQUENT YEAR, but my confusion is due to note given in Bangar's Book on Direct Tax as referred to above.
IN MY OPINION IT SHOULD BE ALLOWED IN SUBSEQUENT YEARS EVEN IF NOT USED IN THE SUBSEQUENT YEAR, but my confusion is due to note given in Bangar's Book on Direct Tax as referred to above.
28 June 2010
Anshu... Your question was not cleared before... Anyways short answer is once you start providing depreciation, you have charge and claim depreciation from the next years even if the asset or block is not used.... I thought its a newly purchased asset...
So in current previous year also you need to charge and claim depreciation......
So in current previous year also you need to charge and claim depreciation......
28 June 2010
As per Section 32 there are 2 basic conditions for claiming depreciation in any previous year.
1- Assessee should be the owner of the asset.
2- Asset is used for business or profession during the previous year.
If any of the above conditions are not satisfied in that case depreciaton under Income Tax will not be allowed.
Here i want to say one more thing. Please do not mix depreciation of accounts with Income tax. They both are totally different. In Income Tax depreciation is allowed on assets because they are used to produce the income and hence they will be depreciated.
1- Assessee should be the owner of the asset.
2- Asset is used for business or profession during the previous year.
If any of the above conditions are not satisfied in that case depreciaton under Income Tax will not be allowed.
Here i want to say one more thing. Please do not mix depreciation of accounts with Income tax. They both are totally different. In Income Tax depreciation is allowed on assets because they are used to produce the income and hence they will be depreciated.
28 June 2010
Great mind on great discussions....carry on dear....
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