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Query in depreciation as per it act

Pawan Verma (Assistant manager finance) (186 Points)

22 February 2012

Pls clarify in this regard..

One of my clients is engaged in software research and development. During the year it purchased software equipment which is in the nature of consumables and charged it off completely to profit and loss account. Hence it is not considered in fixed asset register

However while computing depreciation as per IT act, it is showing them as additions under "Computers".

My query is "whether additions as per IT act in the deprecaition schedule can be different from additions as per Fixed asset schedule as per companies act"?

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2 Replies

CA SUMANTH (LEARNER.....) (294 Points)
Replied 22 February 2012

In my openion, as far as accounting for Fixed assets is concerned AS-10 will apply, the difference is regarding rate of depreciation as per IT & Companies Act. So you cant have different aditions for IT & Accounts purpose.

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Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 22 February 2012

I don’t know if the software equipment is in the nature of consumables then why it is being shown as an addition for I-T purposes also. It should also be written-off to P&L while computing the taxable income

However there are some instances in which the asset purchased is fully written-off while computing the taxable Income, but as per normal accounting procedures the asset is being capitalised & depreciation charged to P&L each year. However such depreciation charged to P&L is added back while computing the taxable income each year. Example may be asset purchased for Scientific Research is fully charged while computing the taxable income.