CA Finalist (Management Apprentice) 05 July 2015

Depreciation requirement as per ca,2013

Hello Friends,

We know that by virtue of Explanation provided in Sec 32 of Income tax act, Depreciation is mandatory whether or not the same is considered in arriving at the Total income.

However my question is, is it mandatory on the part of the company, to charge depreciation in the books of accounts as per Companies act 2013. Inference to provisions 123 of CA,2013 tells that, depreciation shall be deducted as provided in Sch II, when the company intends to declare dividend. What if my company doesnot want to declare dividend. Should I still charge depreciation in my books of accounts?? (i mean debit to P&L a/c)?

1) i haven't charged depreciation from 2010-2014. 2) i dont want to charge dep even for 14-15 and even from 15-16. 3) i want to charge dep only from 16-17 when my profits break even. so in the above context, is it compulsory for me to charge dep.?? or attleast from FY 14-15 onwards shall i charge dep?

please tell me in the context of companies act..

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2 Replies

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 ) 05 July 2015

Depreciation is the systematic reduction in the recorded cost of a fixed asset. Examples of fixed assets that can be depreciated are buildings, furniture, leasehold improvements, and office equipment. The only exception is land, which is not depreciated (since land is not depleted over time, with the exception of natural resources). The reason for using depreciation is to match a portion of the cost of a fixed asset to the revenue that it generates; this is mandated under the matching principle, where you record revenues with their associated expenses in the same reporting period in order to give a complete picture of the results of a revenue-generating transaction. The net effect of depreciation is a gradual decline in the reported carrying amount of fixed assets on the balance sheet.

CA Finalist (Management Apprentice) 05 July 2015

@ramachary... sir, i am not asking what is depreciation. I am asking is charging of Depreciation in the books of accounts of a company Mandatory as per Companies Act, 2013/1956....

What are the legal consequences if I dont charge the same.