Depreciation

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CA. Jyoti Baid (Querist)
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18 July 2011 Respected All,

Please refer to the following query:

A company was incorporated in the F.Y. 2007-08 and purchased an office premises for Rs. 20,00,000 as its registered office. The company has not charged depreciation on the same in accounts for 3 years.

Now in the F.Y. 2010-11,the company wants to provide for depreciation in the books of accounts.

My question is whether the company will charge depreciation on the cost of Rs. 20,00,000 in the current year or will charge on the WDV after deducting depn of previous 3 years? What will be the treatment of previous 3 years depreciation which was not provided in the books?

Regards
Jyoti

Ravikant

Ravikant (Expert)
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18 July 2011 Depreciation will be charged at reduced WDV after charging depreciation for past yrs, it is depreciation deemed to be claimed,,

In Books of account, the premises will be shown at its cost less current depreciation only.Account books will not be disturbed, though for tax purpose it will show a different picture,

CA. Jyoti Baid

CA. Jyoti Baid (Querist)
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19 July 2011 Thankyou for the reply.

For income tax, depn will be calculated for 4 years and for accounts, depn will be calculated in the current year.

So what will be the treatment of deferred tax assets in this case

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Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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21 July 2011 Calculate the depreciation for 3 earlier years and charge it off to prior period expenses. Charge the current years depreciation to profit and loss account.
Regarding Deferred Tax Treatment, you can calculate the deferred tax amount by considering the difference between the WDV of the assets. It will be the best method to compute DTA/DTL.