02-07-2009, 05:41 PM
Dear Aftab,
Are we debating for something? I don't see anything biased on this whole sub-forum. If you see, please let me know for my correction.
You mentioned in your previous question the words "income statement" which is never used in terms of ITO 2001. Anyway.
Please note, even if you are using same depreciation rates as have been given in third schedule of ITO 2001, you cannot charge initial allowance (allowed under section 23 of ITO 2001) in your books of account.
Initial allowance is not a normal depreciation charge in fact. Even ITO 2001 differentiates it from normal depreciation charge. You can see the governing sections are different in ITO 2001.
Please remember that depreciation in accounts has to be charged based upon useful life of the assets. If some one is using tax depreciation rates even for accounting purpose, he is assuming that useful lives are in acordance with such rates.
As for as initial allowance is concerned for tax purpose, the eligible assets have also been stipulated in section 23. This allowance is not available on every asset. You have mentioned the building. Yes, in first year after construction (a new building) initial allowance is available at 50% of cost. The normal depreciation would thus be calculated after adjusting the cost with initial allowance i.e. using diminishing balance method.
If you need to know how these are calulated please study section 23 (also section 22) of ITO 2001.
Having remained untocuh with practice (handling) is not an issue. I am not the tax partner in my firm. You only have to study the tax law and keep the things in memory. I also recommend you to update the knowledge with every year's finance act and other significant amendments.
Let me know if you need to know something else on this topic.
Regards,
KAMRAN.
Are we debating for something? I don't see anything biased on this whole sub-forum. If you see, please let me know for my correction.
You mentioned in your previous question the words "income statement" which is never used in terms of ITO 2001. Anyway.
Please note, even if you are using same depreciation rates as have been given in third schedule of ITO 2001, you cannot charge initial allowance (allowed under section 23 of ITO 2001) in your books of account.
Initial allowance is not a normal depreciation charge in fact. Even ITO 2001 differentiates it from normal depreciation charge. You can see the governing sections are different in ITO 2001.
Please remember that depreciation in accounts has to be charged based upon useful life of the assets. If some one is using tax depreciation rates even for accounting purpose, he is assuming that useful lives are in acordance with such rates.
As for as initial allowance is concerned for tax purpose, the eligible assets have also been stipulated in section 23. This allowance is not available on every asset. You have mentioned the building. Yes, in first year after construction (a new building) initial allowance is available at 50% of cost. The normal depreciation would thus be calculated after adjusting the cost with initial allowance i.e. using diminishing balance method.
If you need to know how these are calulated please study section 23 (also section 22) of ITO 2001.
Having remained untocuh with practice (handling) is not an issue. I am not the tax partner in my firm. You only have to study the tax law and keep the things in memory. I also recommend you to update the knowledge with every year's finance act and other significant amendments.
Let me know if you need to know something else on this topic.
Regards,
KAMRAN.
