Query about calculation of wdv as per sec. 43(6)

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Harshad (Querist)
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24 September 2011 Query about calculation of WDV as per sec. 43(6) and providing depreciation there on. My query is as follows -

WDV of block(15%) as on 01/04 : Rs. 150000/-
Add: Cost of asset acquired during year : Rs. 100000/-
Less: Asset sold from block during year : Rs. (200000)/-
WDV at the end of year : Rs. 50000/-
Less:Depreciation @ 15% on year end WDV Rs. 7500/-

(a) Will there be any difference in calculation of WDV & depreciation there on if the asset is sold in 1st half/ 2nd half ?
(b) Will there be any difference in calculation of WDV & depreciation there on if the whole of asset acquired in 1st half/ 2nd half ? and
(c) if the asset acquired in partly 1st half and partly in 2nd half as no distinction is made in this section as to when asset acquired & is put to use?

Please justify with suitable example.

Dhruv Sharma

Dhruv Sharma (Expert)
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24 September 2011 Ans (a): Date of sale of asset is not relevant. So in the above example, there won't be any difference in calculating the WDV and Depreciation thereon.

Ans (b): Date of purchase is very much relevant. As you have not mentioned the date of purchase, it is explained as under:
(i) if the asset is purchased in the 1st half, the above calculation is right.
(ii) if the asset is purchased in the 2nd half, the calculation would be as under:
WDV as on 01/04 150000
(+) acquired during the 2nd half 100000
Total 250000
(-) sold during the year 200000
Balance 50000
(-) depreciation 50000*.075 = 3750
WDV at the end of the year Rs. 46250

Explanation to (b): In the above case the sale of asset would be first considered from the assets held for 180 days more than 180 days and then from the assets put to use for less than 180 days. So, in the above case, the balance left would represent the balance left from the asset acquired in the 2nd half and thus the depreciation would be charged for the half year.

Ans (c) If the asset is purchased partly in 1st half and partly in 2nd half, the calculation would be as follows:
Assuming that half of the value of asset is purchased in 1st half and the half of the value of assets are purchased in 2nd half..
WDV as on 01/04 = Rs. 150000
(+) acquired during 1st half = Rs. 50000
(+) acquired during 2nd half = Rs. 50000
Total = Rs. 250000
(-) sold during the year = Rs. 200000
Balance = Rs. 50000
(-) Dep. 50000*.075 = Rs. 3750
WDV at the end of the year = Rs. 46250

Explanation to (c): same as explanation to (b) above.

Harshad

Harshad (Querist)
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24 September 2011 Thank u sir for answering my query. The assumption 'the sale of asset would be first considered from the assets held for 180 days more than 180 days and then from the assets put to use for less than 180 days.' is not provided in sec 43(6) so far i have understood this section. (The query i am asking is purely for calculation of eligible depreciation as per Income Tax Act and not as per AS 6) Please rectify me if i am wrong.If in above example for purpose of calculation in (c) above if asset is sold for RS. 25000/-, then what will be the calculation?

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ACMA Obulirajan R

ACMA Obulirajan R (Expert)
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24 September 2011 Hi,

If the asset purchased during the previous year and put to use for more than 180 days then we can avail 100% of the block of asset depreciation %. in your case 15%.

If the asset purchased preceding the relevent previous year and put to use during the previous year, then we can avail 100% i.e. 15% irrespective of the days used in bussines.

Regards,
Obulirajan R