Determination of depreciation under section 205(2)(b) of the Companies Act, 1956, consequent upon changes in income-tax rates introduced by the Finance Act, 1983 - Income Tax - 001/1986

Determination of depreciation under section 205(2)(b) of the Companies Act, 1956, consequent upon changes in income-tax rates introduced by the Finance Act, 1983 Circular No.001 Dated 21/5/1986 To All Chambers of Commerce, etc., Sirs, Sub: Determination of depreciation under section 205(2)(b) of the Companies Act, 1956, consequent upon changes in income-tax rates introduced by the Finance Act, 1983. I am directed to refer to this Department's Circular of even number dated January 10, 1985* on the above subject and to say that the question of providing depreciation under straight line method and the calculation of specified period, as suggested in the Circular referred to above, has been re-examined. On reconsideration, the Department is of the view that once "Specified period" is determined at the time of purchase of an asset in accordance with the procedure laid down under section 205(5) read with section 350 of the Companies Act with reference to rates of depreciation under the Income-tax Act at that time and amount of depreciation fixed under section 205(2)(b) of the Companies Act, the same need not be changed subsequently consequent on changed in the rates of depreciation under the Income-tax Act. It is, therefore, open to the companies to provide for depreciation under clause (b) of section 205(2) of the Companies Act on the basis of rates of depreciation prescribed under the Income-tax Act and in force at the time of acquisition/purchase of the asset. Yours faithfully, (Sd.) B. Bhavani Sankar Joint Director (Accounts)