Depreciation - Section 115VK - Income Tax - Ready Reckoner - Income Tax

Depreciation - Section 115VK For the purposes of computing depreciation under clause ( iv ) of section 115VL , the depreciation for the first previous year of the tonnage tax scheme (hereafter in this section referred to as the first previous year) shall be computed on the written down value of the qualifying ships as specified under section 115VK(2). Separate blocks of assets of qualifying assets and non-qualifying assets (other assets) The written down value of the block of assets, being ships, as on the first day of the first previous year, shall be divided in the ratio of the book written down value of the qualifying ships (hereafter in this section referred to as the qualifying assets) and the book written down value of the non-qualifying ships (hereafter in this section referred to as the other assets). [ Section 115VK(2) ] The block of qualifying assets as determined under section 115VK(2) shall constitute a separate block of assets for the purposes of this Chapter. [ Section 115VK(3) ] Steps for computing book WDV of qualifying assets and block of other assets [ Section 115VK(4) ] The book written down value of the block of qualifying assets and the block of other assets shall be computed in the following manner:- Step 1: Determine the book written down value of each qualifying asset and each other asset as on the first day of the previous year and which form part of the block of assets to be divided by taking the book written down value of each asset appearing in the books of account as on the last day of the preceding previous year. Any change in the value of the assets consequent to their revaluation after the date on which the Finance (No. 2) Act, 2004 receives the assent of the President shall be ignored Step 2:- the book written down value of all the qualifying assets and other assets shall be aggregated Step 3: - Determine the ratio of the aggregate book written down value of the qualifying assets to the aggregate book written down value of the other assets The block of qualifying assets so determined shall constitute a separate block of assets for the purpose of this Chapter. Situations where part of the block of qualifying assets begins to be used for other purposes [ Section 115VK(5) ] Where an asset forming part of a block of qualifying assets begins to be used for purposes other than the tonnage tax business, an appropriate portion of the written down value allocable to such asset shall be reduced from the written down value of that block and shall be added to the block of other assets. Appropriate portion of the written down value allocable to the asset, which begins to be used for purposes other than the tonnage tax business, shall be an amount which bears the same proportion to the written down value of the block of qualifying assets as on the first day of the previous year as the book written down value of the asset beginning to be used for purposes other than tonnage tax business bears to the book written down value of all the assets forming the block of qualifying asset. For the purposes of computing depreciation in respect of an asset mentioned above i.e. assets bring into use for partly purpose or partly period, depreciation computed for the previous year shall be allocated in the ratio of the number of days for which the asset was used for the tonnage tax business and for purposes other than tonnage tax business. Situation which an asset forming part of block of other assets begins to be used for tonnage tax scheme [ Section 115VK(6) ] Where an asset forming part of a block of other assets begins to be used for tonnage tax business, an appropriate portion of the written down value allocable to such asset shall be reduced from the written down value of the block of other assets and shall be added to the block of qualifying asset. Appropriate portion of written down value allocable to the asset which begins to be used for the tonnage tax business shall be an amount which bears the same proportion to the written down value of the block of other assets as on the first day of the previous year as the book written down value of the asset beginning to be used for tonnage tax business bears to the total book written down value of all the assets forming the block of other assets. For the purposes of computing depreciation in respect of an asset mentioned above i.e. assets bring into use for partly purpose or partly period, depreciation computed for the previous year shall be allocated in the ratio of the number of days for which the asset was used for the tonnage tax business and for purposes other than tonnage tax business. Explanation 1 . For the removal of doubts, it is hereby declared that for the purposes of this Act, depreciation on the block of qualifying assets and block of other assets so created shall be allowed as if such written down value had been brought forward from the preceding previous year. Explanation 2 . For the purposes of this section, book written down value means the written down value as appearing in the books of account.