Deprecation in case of idle assets and Assets not put to
use for any reason whatsoever like strike, natural clamity, shut down etc
Opinion December 28, 1984
The Committee notes the following opinion of the Company Law Board on the matter which has also been referred to by the querist
“Since according to accepted accounting principles, depreciation also arises out of efflux of time, it would be necessary for the purpose of section 205 to provide for depreciation even in respect of assets which are not in use during any financial year”
The Committee also notes that it has been decided by courts
in certain cases that as soon as an item
of asset is installed and is ready for use, depreciation can be provided even
though the said asset is not actually used for the whole or part of the
relevant financial year.
Depreciation can be avoided on assets not yet installed.
However in Income Tax if If there is a discontinuance of business
or stoppage of business, depreciation is not allowable (Oriental
Coal co. Ltd. reported in 206 ITR 682 (Cal) ) But nothing prevent s from the
company in charging the depreciation in books.
Other Issues
Explanation 5 to section 32(1) of the ITA where it is said
that the provisions of this section shall apply whether or not the depreciation
is claimed by the assessee.
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