Conversion from it depreciation to companies act 2013 deprec

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Ramanan Krishnamoorthy (Querist)
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25 August 2015 Dear Members

I need a guidance wrt to how to handle if a company follows IT Depreciation upto 31/03/2014, and want to convert to companies act 2013 sch II DEPRN. MY QUERIES
1) HOW TO HANDLE THE ABOVE SITUATON
2) CAN COMPANY CAN CHARGE DEPRN AS PER IT RULES, IF COMPANY FOLLOWS IT DEPRN, THEY ARE ELIGIBLE TO PAY DIVIDEND
3) HOW TO DISCLOSE IN AUDIT REPORT

FOR THE KIND INFO. THE COMPANY IS PVT LTD AND TURNOVER LESS THAN 30 CRORES

Vivek Hebbar

Vivek Hebbar (Expert)
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28 August 2015 Dear Ramanan

A company registered under the Companies Act cannot charge depreciation as per IT Act. IT has to follow Schedule XIV (now Schedule II) of the Companies Act.

1. In the present situation, you have to make separate calculations as under:
(a) First calculate depreciation as per Companies Act, 1956 (Sch XIV) upto March 31, 2014 and find out the differential depreciation charged till March 31, 2014 and adjust it in April 01, 2014 against reserves.
(b) Calculate depreciation as per Sch II of the Companies Act, 2013 in accordance with the guidance note issued by ICAI and give treatment accordingly.

2. As the Companies Act, a company can declare dividend only if it has provided depreciation as per the Companies Act. Hence in this case, the company cannot pay dividend for earlier years. For the current year, after making the above adjustments, the company can declare dividend.

3. The above facts have to be detailed out in the Notes to Accounts and a reference be made in the Auditors Report making it a point of qualification for the current year.