Hi Anand,
Here is what Note 8 to Schedule XIV says (capitalization mine):[8. Notwithstanding anything mentioned in this Schedule,depreciation on ASSETS, whose actual cost does not exceed fivethousand rupees, shall be provided depreciation at the rate ofhundred per cent:][Provided that where the aggregate actual cost of INDIVIDUAL ITEMSOF PLANT AND MACHINERY costing Rs. 5,000 or less constitutes morethan 10 per cent of the total actual cost of plant and machinery,rates of depreciation applicable to such items shall be the rates asspecified in Item II of the Schedule.]The main point 8 does not speak of Plant and Machinery. This meansthat each item of asset, no matter which kind, the cost of whichfalls below Rs 5001 can be provided for 100 % in the year ofpurchase itself.But the proviso underneath exclusively deals with assets fallingunder the head P & M. Plant & Machinery is a class of fixed assetsthat is directly involved in the manufacture of the company'sproducts. Naturally, a substantial percentage of money invested infixed assets is in the P & M category. Nature of industry may besuch that it requires installation of numerous small machines,individual cost of none of which exceeds Rs 5000. So in that event,the company might end up charging the entire cost of P & M to the P& L a/c right in the year of purchase.I guess it is for this reason an exception has been created, viaproviso to Note 8 to Schedule XIV, that if cost of individual itemsof machinery up to Rs 5000 taken together exceeds 10 % of totalfigure of the entire investment in P & M, depreciation even onmachinery items up to Rs 5000 will be provided at the normal rates.As is clear from the proviso, you have to aggregate the individualITEMS (and not bills) of machinery costing up to Rs 5000 and thencompare the total with the gross block of P & M to see if it makesup for more than 10 per cent of the total investment in P & M.I hope the air is clear now.
Thanks,
CA Sanjeev Bedi
--- In http://finance.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA/post?postID=HGHWw4WS5XpUDnDzUqO2rIcJzp1yAZQh4GBVEo18-YGPlbEn6ESv93621ICHJJNTv8nvO3yGJolkRPYUWYITGBKARh7-OCbBkxtM, pranav anand wrote:>> Dear members>> My query is related to the Depreciation which is> chargeable @100% for items below Rs.5000 individually.>> I have a doubt, it is mentioned in the proviso to the> Note No. 8 to the Schedule XIV of the companies act> that where the aggregate actual cost of individual> items of plant and machinery costing Rs. 5,000 or less> constitutes more than 10 per cent of the total actual> cost of plant and machinery, rates of depreciation> applicable to such items shall be the rates as> specified in Item II of the Schedule.>> Is it applicable to P & M only or to any other block> of asset. And if yes, then how to segregate the> individual items below Rs.5000, bill wise? or item> wise like chair/table etc.?>>
Thanks in anticipation.>>
Best Rgrds>>
C.A. Pranav Anand>
Chandigarh Distillers & Bottlers Ltd.> Sector 34A>
Chandigarh
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