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Computation of Depreciation Allowance

Computation of Depreciation Allowance

Computation of Depreciation Allowance  on the following basis:

(i) Computation of Depreciation Allowance  In the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost to the assessee as prescribed by Rule 5(1A).

(ii) Computation of Depreciation Allowance  In the case of any block of assets, at such percentage of the written down value of the block, as may be prescribed by Rule 5(1)

(iii) Computation of Additional depreciation on Plant & Machinery acquired by an Industrial

 

(i) Computation of Depreciation Allowance  In the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost to the assessee as prescribed by Rule 5(1A):

Rule 5(1A) – As per this rule, the depreciation on the above mentioned assets shall be  calculated at the percentage of the actual cost at rates specified in Appendix IA of these  rules.

However, the aggregate depreciation allowed in respect of any asset for different  assessment years shall not exceed the actual cost of the asset. It is further provided that such an undertaking as mentioned above has the option of being allowed depreciation on the written down value of such block of assets as are used for its business at rates specified in Appendix I to these rules.

However, such option must be exercised before the due date for furnishing return under section 139(1) for the assessment year relevant to the previous year in which it begins to generate power. It is further provided that any such option once exercised shall be final and shall apply to all subsequent assessment years. block, as may be prescribed by Rule 5(1).

(ii) Computation of Depreciation Allowance  In the case of any block of assets, at such percentage of the written down value of the block, as may be prescribed by Rule 5(1):

Block of Assets – 1. A “block of assets” is defined in clause (11) of section 2, as a group of assets falling within a class of assets comprising—

(a) tangible assets, being buildings, machinery, plant or furniture;

(b) intangible assets, being know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed.

(iii) Computation of Additional depreciation on Plant & Machinery acquired by an Industrial Undertaking:

Additional depreciation is allowed on any new machinery or plant (other than ships and aircraft) acquired and installed after 31.3.2005 by an assessee engaged in the  business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power at the rate of 20% of the actual cost of such machinery or plant.

Such additional depreciation will not be available in respect of:

(i) any machinery or plant which, before its installation by the assessee, was used within or outside India by any other person; or

(ii) any machinery or plant installed in office premises, residential accommodation, or in any guest house; or

(iii) office appliances or road transport vehicles; or

(iv) any machinery or plant, the whole or part of the actual cost of which is allowed as a deduction  (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and Gains of Business or Profession” of any one previous year.

(iv) Terminal depreciation: In case of a power concern as covered under clause (i) above, if any asset is sold, discarded, demolished or otherwise destroyed in the previous year, the depreciation amount will be the amount by which the monies payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, falls short of the written down value thereof. The depreciation will be available only if the deficiency is actually written off in the books of the assessee.

With regards,

Thank you.

Computation of Depreciation Allowance

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Computation of Depreciation Allowance

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