Dividends ‑ Declaration of ‑ Whether “specified period” is to be determined with reference to original cost and yearly quantum of depreciation. - Companies Law - No. CLAS/24,

Circular: No. CLAS/24, dated 27 ‑ 6 ‑ 1961 issued by Indian Chamber of Commerce, Calcutta. Subject:- Dividends ‑ Declaration of ‑ Whether specified period is to be determined with reference to original cost and yearly quantum of depreciation. Query: It is not clear how the specified period as referred to in sub-section (5) is to be worked out in existing companies where a portion of depreciation has already been written off. It may be considered whether as a matter of practical convenience, the balance of the written down cost could be divided by the number of years (specified period) as provided in sub‑section (5)(a) for computing annual depreciation to be provided hereafter or otherwise how computation of net depreciation is contemplated, keeping into consideration the amount of depreciation already written off and the residual term of the specified period. Answer: The specified period will have to be determined with reference to the original cost and the yearly quantum of depreciation. Under the straight line method depreciation will have to be determined accordingly. However, reference to original cost is for the above limited purpose of determination of the specified period and quantum and once the instalment has been determined, it will be deducted from the written down value and not from original cost . It would, therefore, not be necessary to provide again the depreciation already provided in the books in respect of a particular asset in any financial year ending prior to 28th December, 1960.