Depreciation

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012 Building space is taken on rent at Sahara Ganj mall for office purpose & its construction( furniture fixtures, sanitary work, glass work etc.) started there after.
Bills of carpainter, plumber, ply & other material are availble from july 2011 to march 2012, and according to client they started working from office around october but then also work was going on and many bills are of after that date, as no particular asset is purchased so that i can capitalise it from its put to use (i.e when actual working of office started). Problem is how should i divde(capitalise) whole expenses in to assets such as furniture fitting, building etc & how should i charge depreciation as per companies act(prorata basis) when construction work is still going on after office work started from the office, Office is fully constructed by the feb -march 2012, therefore i cant show it as Construction work in progress.

Amol S Joglekar

Amol S Joglekar (Expert)
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27 July 2012 Since premises is rented.. most of the items will constitute furniture. Within that you can make the distinction like bay1, bay 2 and so on OR shaow case 1.. show case 2 and so on. The civil construction if any may be claimed as revenue. There are many case laws available on this issue.

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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012 Sir how should i charge depreciation on them on pro rata basis as per companies act 1956 when bills are scattered over full year & bills are of carpainter , plumber etc.

i have classified them as
1.Premises (sanitary+civil+plumbering etc)@ 5%
2.Furniture&Fixtures(carpainter+ply+glass work etc)@18.1%
3.Electrical fittings @18.1%

problem is from which date i should capitalise them and charge depreciation.

Company says working from office started from october onwards but bills scattered till feb & march containing bills of carpainter, plumber ply etc, because work was in progress that time 7 completed by march 2012.

as per income tax there will be no problem for charging dep as i will show it as less than 180 days & will charge 50% of dep rate on them.

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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012
Author : Anonymous

( Author )
27 July 2012 Sir how should i charge depreciation on them on pro rata basis as per companies act 1956 when bills are scattered over full year & bills are of carpainter , plumber etc.

i have classified them as
1.Premises (sanitary+civil+plumbering etc)@ 5%
2.Furniture&Fixtures(carpainter+ply+glass work etc)@18.1%
3.Electrical fittings @18.1%

problem is from which date i should capitalise them and charge depreciation.

Company says working from office started from october onwards but bills scattered till feb & march containing bills of carpainter, plumber ply etc, because work was in progress that time 7 completed by march 2012.

as per income tax there will be no problem for charging dep as i will show it as
less than 180 days & will charge 50% of dep rate on them.

Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2012
Author : Anonymous

( Author )
27 July 2012 Sir how should i charge depreciation on them on pro rata basis as per companies act 1956 when bills are scattered over full year & bills are of carpainter , plumber etc.

i have classified them as
1.Premises (sanitary+civil+plumbering etc)@ 5%
2.Furniture&Fixtures(carpainter+ply+glass work etc)@18.1%
3.Electrical fittings @18.1%

problem is from which date i should capitalise them and charge depreciation.

Company says working from office started from october onwards but bills scattered till feb & march containing bills of carpainter, plumber ply etc, because work was in progress that time & completed by march 2012.

as per income tax there will be no problem for charging dep as i will show it as
less than 180 days & will charge 50% of dep rate on them.

Amol S Joglekar

Amol S Joglekar (Expert)
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27 July 2012 I disagree for Premises. That need not be taken as asset. Rest is OK. Why are you insisting on pro rata... any specific reason?

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Querist : Anonymous

Querist : Anonymous (Querist)

28 July 2012 Just because of companies act 1956, which says depreciation has to be charged on prorata basis, therefore for filing Balance sheet to R.O.C i am using prorata basis for charging depreciation, for income tax purpose there is no problem.