117th Report to the 4th Lok sabha the PAC. - Income Tax - 237/CBDT

INSTRUCTION NO. 237/CBDT Dated: November 7, 1970 In para 1.196 of their 117th Report to the 4th Lok sabha the PAC have made the following recommendation: 1.196: Another aspect to which the committee would like to draw attention in that internal audit had not been going into questions relating to depreciation and development rebate while checking assessments. Till recently the scope of internal audit was limited to scrutiny of arithmetical calculations. Although Internal Audit parties are now required to check whether the total depreciation allowed exceeds the original cost, there are still no specific instructions authorising them to check the admissibility of depreciation on intangible assets. The committee feel that this should be specifically brought within the purview of Internal Audit. The committee would in this connection draw attention to their observations in para 1.41 of their 100th report. 2. The IAPs have already been asked to scrutinise the admissibility of depreciation and development rebate vide boards Instruction No.52. Besides, detailed procedure for checking development rebate has been laid down in chapter II-E of the Internal Audit Manual. 3. Regarding admissibility of depreciation on intangible assets hardly any of the records scrutinised by the IAPs indicate a breaking of the assets into intangible ones. As the Audit parties are not expected to collect any materials which are not already on record, it will be quite futile to ask them to scrutinise whether the assets include intangible ones also. The better course would therefore be for the ITOs to obtain a break-up of the assets include intangible ones. The IAPs should thereafter be asked to check up whether they have done so and whether any depreciation has been incorrectly allowed on intangible assets as well. 4. The board desire that the above instructions may please be brought to the notice of the assessing officers and the IAPs under your charge immediately for compliance.