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Cbdt notification on depreciation - urgent

CA Bijay Shrestha (Never Give up....No matter what....) (858 Points)

01 June 2017

Dear Experts and friends,

CBDT issued Notification on 07th Nov, 2016 regarding depreciation rate reduced to 40%.

In that Notification it is mentioned that:

(a) for company incorporated u/s 115BA, Reduced Depreciation rate is applicable wef 1st April 2016,

(b) for other taxpayers, Reduced Depreciation rate is applicable wef 1st April 2017.

Now my doubt is : wef 1st April, 2016 and 1st April 2017 mean Assessment years 2016-17 and 2017-18 respectively

OR, Previous year 2016-17 and 2017-18 respectively ?

Please suggest.

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16 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (176815 Points)
Replied 01 June 2017

Previous year 2016-17 and AY 2017-18 respectively !!

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CA Bijay Shrestha (Never Give up....No matter what....) (858 Points)
Replied 02 June 2017

so it means in both (a) and (b) it is FY 2016-17???

Sanjay S (Chartered Accountant) (1375 Points)
Replied 02 June 2017

With reference to your question,

(a) applies for AY 2017-18 and onwards. (in line with the AY of introduction of section 115BA)

(b) There is a lot of ambiguity regarding applicability of such notification. But I would say the reduced rate of depreciation for ALL taxpayers applies only from AY 2018-19.

Refer:

https://www.taxsutra.com/content/has-govt-notification-unintentionally-restricted-depreciation-rate-40-all-taxpayers

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (176815 Points)
Replied 02 June 2017

Yes, its same i.e. effective from AY 2017-18; but the intention of the notification seems to restrict depreciation only in respect of companies covered by Sec 115BA. CBDT's clarification for other assessees awaited.

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Sanjay S (Chartered Accountant) (1375 Points)
Replied 02 June 2017

@ Dhirajlal sir..

The notification has directly amended the Appendix I of the Income Tax Rules.. and replaced & restricted 'all rates exceeding 40%' to 40%. Once the Appendix has been amended, the new depreciation rates shall apply to ALL ASSESSEES.

Now the only ambiguity is with regard to the AY in which the amendment applies for ALL assessees. Here the CBDT may have to clarify.

Also the link to the amended 'NEW APPENDIX I' as hosted on the incometaxindia website is given below:

https://www.incometaxindia.gov.in/Rules/Income-Tax%20Rules/2008/103120000000007563.htm

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CA Bijay Shrestha (Never Give up....No matter what....) (858 Points)
Replied 02 June 2017

Of course I agree that there is ambiguity with regard to the AY from which it is applicable. CBDT has to come out with some clarification.

But it is well settled law in the Income tax law that wef 1st April 2016 and 1st April 2017 mean AY 2016-17 and AY 2017-18 respectively.

Please share your views.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (176815 Points)
Replied 02 June 2017


	@ Dhirajlal sir.. The notification has directly amended the Appendix I of the Income Tax Rules.. and replaced & restricted 'all rates exceeding 40%' to 40%. Once the Appendix has been amended, the new depreciation rates shall apply to ALL ASSESSEES. Now the only ambiguity is with regard to the AY in which the amendment applies for ALL assessees. Here the CBDT may have to clarify. Also the link to the amended 'NEW APPENDIX I' as hosted on the incometaxindia website is given below: https://www.incometaxindia.gov.in/Rules/Income-Tax%20Rules/2008/103120000000007563.htm

The depreciation chart as mentioned above is for the companies covered u/s. 115BA

For others the effective depreciation u/s.32(1)(ii), the chart is as below:

https://www.incometaxindia.gov.in/charts%20%20tables/depreciation%20rates.htm

There is no restriction of 40% for other companies. (refer for clarification::

https://www.taxsutra.com/news/16698/CBDT-Restricts-depreciation-to-40-for-manufacturing-companies-opting-for-concessional-taxation-u-s-115BA

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (176815 Points)
Replied 02 June 2017

Quoting some text from the refrence provided by you i.e.

https://www.taxsutra.com/content/has-govt-notification-unintentionally-restricted-depreciation-rate-40-all-taxpayers

"The Rule 5 has been amended w.e.f. April 1, 2016 and inserts a new proviso restricting depreciation allowance to 40% in case of domestic companies opting concessional taxation under newly inserted Sec 115BA. Finance Act, 2016 introduced Sec. 115BA............."

"Based on the overall 'spirit' of the notification, the intention seems to restrict depreciation only in respect of companies covered by Sec 115BA. However, a strict reading suggests otherwise. Hence, a clarification on this aspect from the CBDT would be immensely helpful."

"To amend the new Appendix IA read with rule 5 of Income-tax Rules, 1962 to provide that highest rate of depreciation under the Income-tax Act shall be restricted to 40% w.e.f 01.4.2017. (i.e. from previous year 2017-18 and subsequent years). The new rate is proposed to be made applicable to all the assets (whether old or new) falling in the relevant block of assets."

Sanjay S (Chartered Accountant) (1375 Points)
Replied 02 June 2017

My reply to the above post is not getting uploaded. Some technical glitch in the CAClubindia System.

I have instead attached a file containing my views. Please refer the same.

Attached File : 886703 20170602123330 depreciation amendment.pdf downloaded: 187 times

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Sanjay S (Chartered Accountant) (1375 Points)
Replied 02 June 2017

Also attaching another article which supports this interpretation.

In this article, it is stated that Depreciation rate is restricted to 40% for ALL assessees and that this amendment applies only from AY 2018-19.

Attached File : 886703 20170602123544 amendment in depreciation rates new appendix i.pdf downloaded: 176 times

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (176815 Points)
Replied 02 June 2017

Well, There was proposal for the restriction of depreciation to 40 % for all the assessee in the finance bill, but I had been waiting for CBDT notification in its regards.

As per the articles, even the authors are not sure about its implementation and awaiting CDBT clarification may be for date of implementation for all assessees.

Thanks for enlighting.

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CA Bijay Shrestha (Never Give up....No matter what....) (858 Points)
Replied 03 June 2017

In the Notification, it is NOT specifically mentioned that reduced rate of Depreciation (40%) is applicable to all Assessees but since the Appendix I is amended with 40% wherever required and that Appendix is appplicable to all the Assessees, it is to be interpreted that reduced rate of Depreciation is applicable to all the Assessees.

Regarding applicability of the Notification, the CBDT has to issue some clarification.

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