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Hi All,

Suppose the company has write off entire block of asset say Plant from its books.

What will be impact of write off on calculation of depreciation as per IT Act, as the same was written off from the books.

will there be any effect of write off on Depreciation as per IT or can we write off  Block of Asset for Income Tax purpose.

 

Replies (4)

Dear Pavan,

 

No impact of write off on the IT Act depreciation.

Compute depreciation as if no such write off or revaluation was done.

 

Just make adjustment to Deferred Tax assets/liabilities if any on account of timing difference from deprecation

Agree With GK.........................................

Hi Pavan,

IT Act provides for terminal depreciation for electricity generating cos only. All others must follow block of assets.

However where the asset is scrapped, the company can sell the whole of the block and claim STCL.

Realisation of negligent amount can be shown as a book entry (Dummy).

Regards,

Sahana Murthy.

Dear Pawan,

The purpose of writing off will determine the impact on IT Depreciation, there can be 2 cases-

1) Entire Block is ceased to exist (due to say fire, etc)  & the bock has not been reinstated in the same FY by adding new asset falling in same block -

Depreciation under IT Act will not be allowed..

Further, whether Capital gains will be computed or not will depend upon the fact that u were having insurance cover or not, If u were having insurance then in the year of receipt of claim  the wdv less insurance claim will be a short term capital loss&

If u were not having insurance then no deduction or loss will beallowed under Income Tax neither under PGBP nor Capital gains.

2) Entire Block is not ceased to exist or the Block was reinstated by purchasing another asset in the same FY falling in the Block

Follow what brother G.K. has told above...


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