Pavan (Manager) (80 Points)
10 February 2010Hi 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.
Max Payne
(employed)
(2569 Points)
Replied 10 February 2010
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
CA Ayush Agarwal
(Kolkata-Pune-Mumbai)
(27186 Points)
Replied 10 February 2010
sahana Murthy
(Student)
(123 Points)
Replied 10 February 2010
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.
Amir
(Learner)
(4016 Points)
Replied 10 February 2010
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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