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depreciation against fixed assets

Shafiq Ahmed (Senior Accountant) (54 Points)

23 August 2010

Sir,

I am An Accountant in the firm. at present the firm has purchased plant & machine appx. 1.5 crore

if firm takes depreciation on fixed assets then balance sheet shown loss

can u tell me taking depreciation is compulsory as per income tax rules or not

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7 Replies

Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8311 Points)
Replied 23 August 2010

As pe the Companies Act, 1956 Dep. is compulsory and any company should provide for the Dep. an amount equal to or more than the rate prescribed in the SCHEDULE XIV.

Click on below link

SCHEDULE XIV

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CA SHUBHAM Mittal (CA ) (441 Points)
Replied 23 August 2010

you can carry Dep which can not be absorbed during the current year as unabsorbed depreciation and set off in the year which has sufficient profits

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 23 August 2010

HI DEAR,

AS FAR AS INCOME TAX IS CONCERNED, U HAVE TO CHARGE DEPRECIATION IRRESPECTIVE OF WHETHER THE DIVIDEND DECLARED OR NOT. SEC 32 PROVIDES FOR THAT.

HOWEVER, AS PER COMPANIES ACT, THERE IS NO SPECIFIC PROVISION THAT PROVIDES FOR COMPLUSORY CHARGING OF DEPRECIATION. HOWEVER, IMPLIED MEANING OF THE COMPANIES ACT, 1956 WOULD PROVIDE THAT FINANCIAL STATEMENTS WOULD NOT REFLECT THE TRUES AND FAIR VIEW OF STATE OF AFFAIRS AND OPERATING RESULTS OF THE COMAPNY, IF THE CHARGE FOR DEPRECIATION HAS NOT BEEN GIVEN. COMPANIES ACT MAKES IT MANDATORY TO PROVIDE FOR DEPRECIATION BEFORE DECLARING DIVIDEND. THUS, IF COMPANIES DOESN'T DECLARE DIVIDEND, COMPANIES ACT DOESN'T PROVIDE FOR CHARGING OR NON CHARGING OF DEPRECIATION.

REGARDS,

MANOJ