ICDS V- Tangible Fixed Assets - SBSandCo€¦ · notify Income Computation Disclosure Standards. 10...
Transcript of ICDS V- Tangible Fixed Assets - SBSandCo€¦ · notify Income Computation Disclosure Standards. 10...
ICDS V- Tangible Fixed Assets
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
040-4018 3366 (119)
By
SBS Hyderabad 17th November 2018
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 2
Introduction of ICDS
Applicability of ICDS
Scope
Identification of tangible assets
Components of Actual cost
Special cases
Inclusions and Exclusions
Self-constructed tangible fixed asset
Non-monetary consideration
Improvements and Repairs
Joint ownership and Joint cost
Transitional provisions
Differences between ICDS V AS-10 and Ind-AS-16
Topics to be covered
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 3
Section 145(2) of the Income Tax Act1961(ldquothe Actrdquo) grants power to Central Government to notify Income Computation Disclosure Standards
10 ICDS were notified by Central Government on 31stMarch2015 However they are made applicable from the Assessment Year 2017 -18
ICDS are not for maintenance of books of accounts they are only for purpose of income
Computation amp
Disclosure (Notification SO892(E) dated 31032015)
Note In the case of conflict between the provisions of the Act and the ICDS the provisions of the Act shall prevail to that extent
Introduction of ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 4
Assessee having income from PGBP
or other sources
Mercantile system of accounting amp
Individuals or HUF
Tax audit not applicable
Not Applicable
Tax audit applicable
Applicable
Any other assessee
Applicable
Cash system of accounting
Not applicable
Applicability of ICDS
following
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 5
The main object of this ICDS is that an expenditure incurred in connection with a Tangible Fixed Asset is to be capitalised or is to be treated as a revenue expenditure
ICDS V covers assets being land building machinery plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and not held for sale in the normal course of business
Since this ICDS deals with tangible fixed assets intangible assets are not covered under this ICDS for determination of actual cost of asset
Scope
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 6
Asset for the purpose of administrative purposes is covered under the ICDS
Asset for the rental purposes
Scope
such rental income is taxable
under
Income from Business or other
sources
Covered under this ICDS
Income from House property
Not covered under this ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 2
Introduction of ICDS
Applicability of ICDS
Scope
Identification of tangible assets
Components of Actual cost
Special cases
Inclusions and Exclusions
Self-constructed tangible fixed asset
Non-monetary consideration
Improvements and Repairs
Joint ownership and Joint cost
Transitional provisions
Differences between ICDS V AS-10 and Ind-AS-16
Topics to be covered
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 3
Section 145(2) of the Income Tax Act1961(ldquothe Actrdquo) grants power to Central Government to notify Income Computation Disclosure Standards
10 ICDS were notified by Central Government on 31stMarch2015 However they are made applicable from the Assessment Year 2017 -18
ICDS are not for maintenance of books of accounts they are only for purpose of income
Computation amp
Disclosure (Notification SO892(E) dated 31032015)
Note In the case of conflict between the provisions of the Act and the ICDS the provisions of the Act shall prevail to that extent
Introduction of ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 4
Assessee having income from PGBP
or other sources
Mercantile system of accounting amp
Individuals or HUF
Tax audit not applicable
Not Applicable
Tax audit applicable
Applicable
Any other assessee
Applicable
Cash system of accounting
Not applicable
Applicability of ICDS
following
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 5
The main object of this ICDS is that an expenditure incurred in connection with a Tangible Fixed Asset is to be capitalised or is to be treated as a revenue expenditure
ICDS V covers assets being land building machinery plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and not held for sale in the normal course of business
Since this ICDS deals with tangible fixed assets intangible assets are not covered under this ICDS for determination of actual cost of asset
Scope
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 6
Asset for the purpose of administrative purposes is covered under the ICDS
Asset for the rental purposes
Scope
such rental income is taxable
under
Income from Business or other
sources
Covered under this ICDS
Income from House property
Not covered under this ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 3
Section 145(2) of the Income Tax Act1961(ldquothe Actrdquo) grants power to Central Government to notify Income Computation Disclosure Standards
10 ICDS were notified by Central Government on 31stMarch2015 However they are made applicable from the Assessment Year 2017 -18
ICDS are not for maintenance of books of accounts they are only for purpose of income
Computation amp
Disclosure (Notification SO892(E) dated 31032015)
Note In the case of conflict between the provisions of the Act and the ICDS the provisions of the Act shall prevail to that extent
Introduction of ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 4
Assessee having income from PGBP
or other sources
Mercantile system of accounting amp
Individuals or HUF
Tax audit not applicable
Not Applicable
Tax audit applicable
Applicable
Any other assessee
Applicable
Cash system of accounting
Not applicable
Applicability of ICDS
following
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 5
The main object of this ICDS is that an expenditure incurred in connection with a Tangible Fixed Asset is to be capitalised or is to be treated as a revenue expenditure
ICDS V covers assets being land building machinery plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and not held for sale in the normal course of business
Since this ICDS deals with tangible fixed assets intangible assets are not covered under this ICDS for determination of actual cost of asset
Scope
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 6
Asset for the purpose of administrative purposes is covered under the ICDS
Asset for the rental purposes
Scope
such rental income is taxable
under
Income from Business or other
sources
Covered under this ICDS
Income from House property
Not covered under this ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 4
Assessee having income from PGBP
or other sources
Mercantile system of accounting amp
Individuals or HUF
Tax audit not applicable
Not Applicable
Tax audit applicable
Applicable
Any other assessee
Applicable
Cash system of accounting
Not applicable
Applicability of ICDS
following
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 5
The main object of this ICDS is that an expenditure incurred in connection with a Tangible Fixed Asset is to be capitalised or is to be treated as a revenue expenditure
ICDS V covers assets being land building machinery plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and not held for sale in the normal course of business
Since this ICDS deals with tangible fixed assets intangible assets are not covered under this ICDS for determination of actual cost of asset
Scope
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 6
Asset for the purpose of administrative purposes is covered under the ICDS
Asset for the rental purposes
Scope
such rental income is taxable
under
Income from Business or other
sources
Covered under this ICDS
Income from House property
Not covered under this ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 5
The main object of this ICDS is that an expenditure incurred in connection with a Tangible Fixed Asset is to be capitalised or is to be treated as a revenue expenditure
ICDS V covers assets being land building machinery plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and not held for sale in the normal course of business
Since this ICDS deals with tangible fixed assets intangible assets are not covered under this ICDS for determination of actual cost of asset
Scope
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 6
Asset for the purpose of administrative purposes is covered under the ICDS
Asset for the rental purposes
Scope
such rental income is taxable
under
Income from Business or other
sources
Covered under this ICDS
Income from House property
Not covered under this ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 6
Asset for the purpose of administrative purposes is covered under the ICDS
Asset for the rental purposes
Scope
such rental income is taxable
under
Income from Business or other
sources
Covered under this ICDS
Income from House property
Not covered under this ICDS
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 7
No monetary threshold is prescribed for an asset to be recognised as tangible fixed asset It is
recognised if asset is beneficial for an entity which lasts over period of time
Stand-by equipment and servicing equipment are to be capitalised and spares are to be
capitalised if they are expected to be used for a long period
Identification of tangible assets
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 8
The actual cost of an acquired tangible fixed asset shall comprise of
Purchase price
Import duties and other taxes (which are not subsequently recovered)
Any other expense which is directly attributable for making asset ready to use
Borrowing cost which is recognised as per ICDS- IX
Note Any trade discounts need to reduced from actual cost
Components of Actual cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 9
Actual cost in case of certain circumstances like merger amalgamation re-acquisition gift etc need to recognised as per section 43(1) of the Act
In case of demerger or amalgamation ndash cost carrying by amalgamating company
In case of gift ndash cost to previous owner less depreciation
In case purchased through cash ndash not considered for actual cost
In case earlier used for scientific research ndash cost less availed deduction us 35 of the Act
Stock converted to asset- FMV on date of conversion
Previously owned such asset and re-acquired ndash actual cost when previously purchased less depreciation
Grant or reimbursement from government ndash reduced from actual cost
For reference
Special cases
Section 43
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 10
Actual cost doesnrsquot include initial estimate of dismantling cost and cost for removing the item and restoring the site
In case payment done for the asset acquired beyond the normal credit terms then interest paid for such credit is added to asset
If a subsidy or grant receivable by an assessee from government which is related to acquisition of an asset then the grant shall be reduced from the written down value of block of assets to which such asset belongs to in accordance with ICDS-VII Government grants
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 11
If an asset is acquired from country outside India then exchange fluctuation araised while payment to concerned party is to be increased or decreased from actual cost of the asset in accordance with ICDS-VI Effects of changes in foreign exchange rates
Administrative and general overhead are need to be included in the cost of asset if such expenditure is directly attributable to asset or bringing it to its working condition
Expenditure on test runs experimental production and any other expenditure related to such asset till the asset has been ready for commercial production or captive consumption need to be capitalised
If asset used in business after it ceases to be used for scientific research the amount deduction claimed under section 35 (1)(iv) of the Act [ie 100 deduction in respect of capital expenditure for scientific research] need to be decreased from Actual cost ie Nil
Inclusions and Exclusions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 12
In case of self-constructed tangible fixed asset all the expenditure directly attributable for construction of such fixed asset need to be capitalised
Note Any inter department or inter branch profits need to be eliminated from cost of such asset
Self-constructed tangible fixed asset
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 13
If an asset is acquired in exchange of other asset then fair value of asset so acquired shall be actual cost of asset acquired
And same has to be followed if asset belonging to one block of asset is exchanged with an asset belonging to another block
Non-monetary consideration
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 14
An Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is added to the actual cost Current repairs are need to be allowed as revenue expenditure and not to added to the cost of asset
An addition or extension which becomes integral part of asset is added to its actual cost and if it capable of being used even after such asset is disposed off and has separate identity then such addition need be recognised as a separate asset
Improvements and Repairs
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 15
In case asset is owned by two or more persons then
its actual cost depreciation and written down value
need to be bifurcated to them based on proportion
of ownership
When several assets are acquired for a consolidated
price then cost need to be proportioned to all assets
on fair basis
Joint ownership and Joint cost
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 16
For an asset
which is purchased or constructed after 01-04-2016 and
the acquisition or construction of which commenced on or before the 31-03-2016 but not completed even after 01-04-2016 should be recognised as per this ICDS
Note In recognition of actual cost of an asset which is acquired before 01-04-2016 actual cost considered in the earlier years is to be taken into account
Transitional provisions
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 17
Sno Points of comparison ICDS-V Tangible Fixed Assets
AS- 10 Ind AS-16
1 Stand-by equipment and servicing equipment
Directly to be recognised as asset
They are recognised only if they meet recognition criteria
They are recognised only if they meet recognition criteria
2 initial estimate of the costs of dismantling and removing the item
Doesnrsquot contain any such requirement
Need to be recognised as the cost of asset
Need to be recognised as the cost of asset
3 Payment of interest due to payment beyond normal credit terms
Interest need to be recognised as cost
Interest shall be capitalised only if it satisfies AS-16
Interest shall be capitalised only if it satisfies Ind AS-23
4 Government grant Grant received shall be directly reduced from actual cost of asset in accordance with ICDS VII
Same as ICDS grant shall be reduced from cost of asset
Ind AS -16 doesnrsquot permits grant to be directly reduced from cost of asset
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 18
Sno Points of comparison ICDS-V Tangible Fixed Assets AS- 10 Ind AS-16
5 Revaluation of tangible fixed assets and change in method of depreciation
There is no such provision Deals with revaluation and change in method of depreciation in detail
Deals with revaluation and change in method of depreciation in detail
6 Non-monetary consideration
the fair value of the asset so acquired shall be its actual cost
FMV of the asset given or FMV of asset acquired which is clearly evident
the fair value of the asset so acquired and if fair value is not measurable then carrying amount of asset given up
7 Subsequent expenditure Recognised if increases future benefits beyond its previously assessed standard of performance
Recognised if meets recognition criteria
Recognised if meets recognition criteria
Differences
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 19
An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
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An assessee(company) Business income of Rs9000000 during the year assessee purchased a machinery worth Rs1500000 and its estimated cost of dismantling in future is Rs200000
Explanation
Cost of asset recognised as per Accounting standards is Rs1700000
And depreciation accounted is Rs113333(Life is 15 years)
And as per Income tax act depreciation 15 is Rs255000
As per ICDS cost of asset is Rs1500000 and accordingly depreciation is Rs225000
Dismantling cost is treated as expenditure when it actually expended
Example
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
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P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
saivarunpsbsandcocom wwwsbsandcocom +040-4018 3366 (119) 20
Increase in profit Rs30000
Example
Particulars Amount in Rs
Profits from Business 9000000
Gross Total Income 9000000
Tax on Total income 25 2250000
Particulars Amount in Rs
Profit 9000000
Increase in profit due to ICDS
30000
Gross Total Income 9030000
Tax on Total income 25 2257500
As per normal calculations As per ICDS
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wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer
wwwsbsandcocomwiki
wwwsbsandcocomdigest
Read our monthly SBS e-Journals
Our Presence Hyderabad Kurnool Nellore TADA Vizag amp Bengaluru infosbsandcocom 040-40183366
Thank you
P Sai Varun 2nd Year Intern
Ms SBS and Company LLP saivarunpsbsandcocom
+040-40183366(119)
SBS Hyderabad
At
Disclaimer Please logon to httpwwwsbsandcocomdisclaimer