Capital goods depriciation

[yateen vyas]

Sir,

Please define sub rule (4) of Rule 4 of  Cenvat Credit Rule, 2004. Explain it with an example.

[YAGAY andSUN]

It means that if you avail the CENVAT credit on the Capital Goods then on the amount so availed as CENVAT credit,  you will not charge the Depreciation.

Exihibit:

Cost of the Capital goods (Say Rs. 5000/-)

Excise duty is Rs. 600/-

and if you avail the CENVAT credit of Rs. 600/- then you can't capitalized goods at Rs. 5600/- Hence, you would have to avail the Depreciation on Rs. 5000/-

AI Summary

CENVAT credit on capital goods prevents depreciation on the credited portion of the asset value. Sub rule (4) of Rule 4 of the Cenvat Credit Rules, 2004 requires that CENVAT credit availed on capital goods be excluded from the capitalised cost for depreciation; when excise duty is claimed as CENVAT credit, depreciation must be computed on the purchase cost exclusive of the credited duty.