calculation of depreciation

Page no : 2

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 25 January 2010

If the asset is purchased on 5th January 2009 but put to use on 12th Decemebr 2009,will there be no depreciation for the F.Y. 2008-09?

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CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 25 January 2010

no there wont be any depreciation for F.Y.2008-09. However if the asset is a genset, whose use depends upon the non-availability of Electricity, dep can be claimed from the date on which it is ready to use. Hence active use is not necessary

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 25 January 2010

Thanks Mukund.Want to know one more thing.Ammorrtisation of patent rights can be done over 14 years or the actual period of patent whichever is less.But if we are selling the patent before the expiry of the period of 14 years, can we get deduction in the year of sale or no?

CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 25 January 2010

no fatema, you cant claim dep on patent rights in the year of sale as per I.T. Act.

Amir (Learner) (4016 Points)
Replied 25 January 2010

Dear Fatema,

I disagree with Mukund,

Lets take an example Original cost of patent is 1.40 lacs rs., Depreciation claimed till last year is Rs. 20,000 and now

Sale price 1) 1,30,000

2) 1,00,000

Now in the first case No deduction will be allowed in the year of sale.

However in the second case where sale price is 1,00,000, Rs. 20,000 will be allowed as deduction in the year of sale.

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CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 25 January 2010

That 20k wont be charged as dep. instead it will shown as short term capital loss.

Amir (Learner) (4016 Points)
Replied 25 January 2010

Dear Mukund,

Read this - Sec 35 A(3)

Where the rights either come to an end without being subsequently revived or are sold in their entirety and the proceeds of the sale (so far as they consist of capital sums) are less than the cost of acquisition thereof remaining unallowed, a deduction equal to such cost remaining unallowed or, as the case may be, such cost remaining unallowed as reduced by the proceeds of the sale, shall be allowed in respect of the previous year in which the rights come to an end, or, as the case may be, are sold.