Depreciation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2015 One of our clients has provided less depreciation in the profit & Loss account and calculated depreciation as per Income Tax Act for payment of Tax. He has taken a stand that depreciation is not compulsory as per partnership Act and he has provided depreciation as per accounting principals. As a result of his method the Firm is showing profit in the books and pays no Tax. The financial statements are submitted to the banker for loan/OD. It is a Tax Audit case.What is the duty of auditor in this situation. Whether he has to mention this fact in the audit report or not. Party is arguing that no comment is required as he has provided depreciation correctly in the Income Tax Return.

Ankur Singhal

Ankur Singhal (Expert)
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31 December 2015 Dear
A firm can follow the different depreciation methods for the purpose of books and for income tax.
But the depreciation rate provided in books should not be more than the rate provided by the income tax act.

Querist : Anonymous

Querist : Anonymous (Querist)

02 January 2016 Please clarify whether the auditor has to qualify his Tax Audit report. If not how he has to make it clear in his report. Please clarify whether silence or clean report is correct in this situation?

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Ankur Singhal

Ankur Singhal (Expert)
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02 January 2016 No need to qualify the report.
the reason being pls read above answer again.