Provision for Depreciation

Concept of Depreciation Allowance

Depreciation means decrease in the value of assets due to their use in production process or
reduction in market value or obsolescence. The main purposes of depreciation are the
replacement of assets, exact pricing of the product, prevent from consuming capital, reduction of
tax liability. There are mainly two types of deprecations, namely, tax depreciation and economic
depreciation. The amount of depreciation which is permitted to write off as expenditure by tax
law is tax depreciation. It is tax depreciation because it reduces the amount of tax to be paid by
the firm. As opposed to tax depreciation, economic depreciation is the decline in asset value due
to aging and use in production process
According to sec. 2 (ka) of income tax Act 2058, depreciable assets means an asset for generation of income from any business or
investment and value decrease due to wear and tear, obsolescence, or passing of time, however the term does not include any
trading stock and business assets. Depreciation is the reduction in the original value of a depreciable asset due to use or
obsolescence over the expected life of the asset. According to the income tax Act, assets are classified into five categories i.e.,
Business asset, depreciable asset, trading stock, non-business chargeable assets and non-taxable assets.

Nepal exercised various rates of depreciation system prescribed by Income Tax related acts and
rules. The depreciation has different purposes. One among them is reducing the tax burden of a
taxpayer. Since depreciation is a deductible expense before deriving the taxable income, it can
save the tax. The amount of tax saving depends on the allowable depreciation expenses according
to rate of depreciation and the tax rate as per income tax act. The higher allowable depreciation
can reduce taxable income and also reduce tax liability. Income tax act 2058 provides the
provision of depreciation as an allowable or deductible expenses. The person is allowed to
deduct the depreciation of owned depreciable assets and it can use by the person during the
income year to generating income from the business or investment activities. Income Tax Act
2058 section 19and Appendix 2 made a provision regarding depreciation.
2 Ta xa ti o n i n Nep a l

Classification of Depreciable Assets as Per Income Tax Act

2058 (Section 19)
Classification of Assets and rate of depreciation for special industries operated by individuals
and for normal business.
Structural Depreciation Depreciation
Block Types of assets included
category of assets rate method
A Tangible Buildings, structures and similar works of a 5% Written down
permanent nature, Building, Bridge, Dam value
Structures, Other work of permanent nature etc.
B Tangible Computers, data handling equipment, 25% Written down
furniture and fixtures, office equipment, and value
other similar nature assets
C Tangible Automobiles, buses, minibuses, Car, jeep, van, 20% Written down
truck, Motor Bike and other vehicles. value
D Tangible Contraction and earth-moving equipment, plant 15% Written down
and machinery and other tangible asset not value
included in block A, B and C, excess (capitalized)
pollution control costs and excess (capitalized)
research & development costs, excavation of
natural resources, exploration and development
of mineral ,plane, helicopter, hotel kitchen
equipment, NTC switching machine even
computer, cement mill etc.
E Intangible Intangible assets like patent, copyrights, Cost ÷ Life Straight
trademarks, goodwill, software etc. which are Rounded down line
not included in block ‘D’ assets. to the nearest Method
half year

Some Special Provision Regarding Depreciation Allowance

The income tax Act 2058 has provided special depreciation facility to any person as depreciation
allowances for deduction while calculating assessable income from business and investment.
 Income tax Act 2058 has provided, to the person who generates energy power for its own
business purpose may claim to deduct 50% of the capitalized amount of the assets used to
generate such power as depreciation allowance in the same year.
 The income tax Act 2058, has provided to the person who uses fiscal printer and cash machine
to issue invoices may claim to deduct in a lump sum the whole amount incurred for such
machines as depreciation allowance in the same year.
 The income tax Act 2058, has provided special depreciation facility to some entities such as
special industry, entity engaged in building specific public infrastructures etc. (normally the
entities for which 20% tax rate is applicable ignoring the concessions). These entities are
entitled to an additional depreciation rate added by 1/3 in the normal depreciation rates
applicable to the concerned pool of tangible depreciable assets. However, the following
provision is applied in respect of the depreciation of the machines, equipment and other
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machinery installed in the electricity projects that are involving in building power station,
operating and transmitting electricity and in the projects conducted by any entity so as to
build public infrastructure, own, operate and transfer (BOOT) project to Nepal Government:

Rate of Depreciation for Special Industry Operated by Entity Only

This facility is not applicable for industry operated by individual or natural person.
Rate of Depreciation for special industries (including additional 1/3
Block Normal depreciation rate
depreciation facility)
A 5% 5% + 1/3 of 5%=6.67 %
B 25% 25% +1/3 of 25%= 33.33 %
C 20% 20% + 1/3 of 20% =26.67 %
D 15% 15% +1/3 of 15%=20 %
 In case the old machines, equipment and other assets that are already installed require
replacement in any income year as they are out of order due to being too old, the remaining
value of such old assets remained after deducting accumulated depreciation up to the income
year is allowed for deduction as allowable expense for the same income year.
 At the time of transfer of other assets to Nepal Government except of the replaced old assets,
the remaining value after deducting the accumulated depreciation up to the income year is
allowed for deduction as allowable expense.
 If the depreciated value after deducting depreciation as per rules of any block of tangible asset
at the end of an income year produces an amount less than Rs..2,000 at that time, whole
amount of depreciation base is treated as depreciation allowances for the income year.

The Special Entities/Industry Including the Following Entities

 Entity engaged in building public infrastructure to transfer to government of Nepal and any
other entity engaged in power generation, transmission or distribution of electricity.
 Entity wholly engaged in operating specially industry.
 Entity wholly engaged in operating road, bridge, tunnel, ropeway or flying bridge
constructed by the entity.
 Entity wholly engaged in operating trolley bus or trams.
 Entity that earned income from export in the income year.
 Only the entities as mentioned above will get additional one –third depreciation. Individuals
even though involved in similar activities cannot enjoy such facility. For example, an
individual operating special industry is not entitled to additional one-third depreciation.

Absorbed Value and Unabsorbed Value of Assets

Absorbed Unabsorbed
Time of purchase
portion portion
If the assets is to be added between 1st of Shrawan and the end of Poush 3/3 Nil
If the assets is to be added between 1st of Magh and the end of Chaitra 2/3 1/3
If the assets is to be added between 1st of Baisakh and the end of the Ashad 1/3 2/3
4 Ta xa ti o n i n Nep a l

Depreciation Base and Allowable Depreciation

The amount of depreciation per year is ascertained by applying the following formula based on
pool system:
Depreciation base (basis) for the year =Opening written down value of assets for the income year +
Addition purchase during the year - Disposal value of any assets of the concerned pool
Or
, Depreciation base of preceding income year + Purchase during the year (Absorbed value) – Sales
during the year
Opening depreciation basis .............................................................................................................................. xxx
Add: Addition during the year (absorbed addition only) ..................................................................................... xxx
Less: Disposal during the year ......................................................................................................................... (xxx)
Depreciation basis xxx

The allowable depreciation for the assets under blocks A, B, C & D is obtained by applying the
following formula;
Allowable depreciation amount = Depreciation basis of asset block for the year ×Applicable
depreciation rate of respective block
Calculation of depreciation base amount and allowable depreciation under different block of
assets:
Statement of Provision for Depreciation
Details A B C D
Opening written down value (WDV) Or opening depreciation base .................. ×××× ×××× ×××× ××××
Add: Additional during the year (period wise purchase) ..................................... ×××× ×××× ×××× ××××
Less: Disposal during the year (Cash value of assets disposed) ....................... (××××) (××××) (××××) (××××)
Depreciation base (basis) amount (A) ×××× ×××× ×××× ××××
Depreciation rate (B) ×× ×× ××× ××
Allowable depreciation (A×B) ............................................................................. ×× ×× ××× ×××
Closing value or Net value (Depreciation base–allowable depreciation) ........... ×× ×× ××× ×××
Calculation of opening depreciation base for the next year:
Details A B C D
Closing value or net value (Depreciation base – Allowable depreciation) .......... ××× ××× ××× ×××
Add: Unabsorbed portion of asset purchase ..................................................... ××× ××× ××× ×××
Capitalized value of repair cost ......................................................................... ××× ××× ××× ×××
Capitalized value of PCC and R & D cost ......................................................... - - - ×××
Opening depreciation base for the next year. ×××× ×××× ×××× ××××
Calculation of allowable depreciation for intangible assets (Block ‘E’)
Cost of intangible assets
Allowable depreciation = Life of intangible assets

Note.
If the useful life of the intangible asset is not given for the full years, the life should be ascertained as rounded down to the
nearest half year. That means, half year and full year only should be consider while calculating depreciation.
• If useful life of intangible assets is 10 years and 5 months, i.e. (1 – 5 months) then life is 10 years.
• If useful life of intangible assets is 10 years and 6 months i.e. (6-11 months) then life is 10.5 year.
 Error! No text of specified style in document.  5

Repair and Improvement Cost (Section 16)

However, the repairs and improvement cost incurred by airlines for overhauling of aircraft are
fully allowed for deduction as per the standard prescribed by the Civil Aviation Authority of
Nepal.
Provision of repair and improvement cost as per income tax Act 2058:
7% of depreciation base
Or actual repair expenses
Allowable repair and improvement cost =whichever is lower
Capitalized value of repair and improvement cost= Actual repair > 7% of depreciation base of respective block.
Note: Unabsorbed portion of repair due to limit for the year to be capitalized under the respective block of assets.

Pollution Control Cost (PCC) (Section 17)

Allowable limit:
Actual pollution control cost
Or 50% of adjusted taxable income
Allowable PCC=whichever is lower
Capitalized value of PCC=Actual PCC > 50% of adjusted taxable income
Note: Adjusted taxable income = Gross receipt from business – Allowable deduction before pollution control cost and
research and development cost - Adjustment of business losses.

Research and Development Cost (R&D Cost) (Section 18)

Allowable limit:
Actual research and development cost
Or 50% of adjusted taxable income
Allowable R& D=whichever is lower
Capitalized value of R &D=Actual R & D > 50% of adjusted taxable income
Note: Adjusted taxable income from business = Gross receipt from business – Allowable deduction before pollution control
cost and research and development cost - Adjustment of business losses.

Illustrative Problems
Illustration 1: Following is the details about the fixed assets of a company under group 'C'.
• Depreciation base of assets on 1st Shrawan, previous year Rs. 3,000,000.
• New addition of asset of same group:
Marga, previous year: Rs. 10,00,000
Chaitra, previous year: Rs. 15,00,000
Company disposed off one the asset having book value of Rs. 10,00,000 on opening date at par on Magh of
previous year. Company incurred repair expenses of Rs. 3,20,000 during the year.
Required: a. Amount of depreciation to be charged for the current year.
b. Depreciation base of asset at the year end.
c. Opening depreciation for the next year.
6 Ta xa ti o n i n Nep a l
SOLUTION
a. Calculation of allowable depreciation
Particulars Block ‘C’ (Rs.)
Opening depreciation basis................................................................................................................................... Rs. 30,00,000
Add: Absorbed additions
In Marga (Rs 10,00,000 × 3/3) .................................................................................................................... 10,00,000
In Chaitra (Rs 15,00,000 × 2/3) .................................................................................................................. 10,00,000
Total 50,00,000
Less: Disposable value ........................................................................................................................................ 10,00,000
Depreciation base (A) 40,00,000
Deprecation rate (B) 20%
Allowable depreciation (A x B) Rs 8,00,000
b. Calculation of depreciation base of assets at year end
Depreciation basis................................................................................................................................................. 40,00,000
Less: Allowable depreciation ................................................................................................................................. 8,00,000
Depreciation basis at year end (Closing WDV) Rs 32,00,000
c. Calculation of opening written down value for next year
Closing WDV ........................................................................................................................................................ Rs. 3200,000
Add: Unabsorbed additional (15,00,000×1/3)........................................................................................................ 500,000
Add: Capitalized repair expenses ......................................................................................................................... 40,000
Depreciation basis for the next year Rs 37,40,000
Where, Capitalized repair expenses = Actual repair expenses – Allowable repair expenses
= 3,20,000 – 7% of Depreciation basis
= 3,20,000 – 7% of 40,00,000
= 3,20,000 – 2,80,000
= Rs 40,000
Note: Here, the actual repair expenses is more than 7% of depreciation basis so the capitalized repair expenses = Actual
repair expenses - Allowable repair expenses.

Illustration 2: A Ltd. company provided the following details of its fixed assets under different pools (blocks).
Particulars Pool ‘B’ (Rs) Pool ‘D’ (Rs)
Depreciation base of asset at the beginning of the previous year .............................................. Rs. 1,50,000 Rs. 12,00,000
New addition of assets
On 1st Aswin ........................................................................................................................... 50,000
On 1st Falgun ......................................................................................................................... 6,00,000
Assets disposed off during the period:
Book value at beginning ............................................................................................................. 10,000 3,00,000
Disposed off value of assets ...................................................................................................... 197,500 2,00,000
Required: a. Amount of depreciation to be charged in current year.
b. Depreciation base of assets for next year.
SOLUTION
a. Calculation of allowable depreciation
Particulars Block 'B' (Rs.) Block 'D' (Rs.)
Opening WDV ............................................................................................................................ 1,50,000 12,00,000
Add: Absorbed additions
On 1st Aswin (50,000×3/3) ...................................................................................................... 50,000
On 1st Falgun (6,00,000×2/3) ................................................................................................. 4,00,000
Total 2,00,000 16,00,000
Less: Disposable during the year 197,500 2,00,000
Depreciation base (A) 2,500 14,00,000
Depreciation rate (B) ................................................................................................................. 25% 15%
Allowable depreciation (A x B) .................................................................................................. 625 =2,500 2,10,000
Closing WDV (Depreciation base – Allowable depreciation) Nil 11,90,000
Note:
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If the depreciated value after deducting depreciation as per rules of any block of tangible asset at the end of an income year
produces an amount less than Rs..2,000 at that time, whole amount of depreciation base is treated as depreciation allowances
for the income year.
b. Calculation of depreciation base of asset for next year.
Particulars Block “D’
Closing WDV ........................................................................................................................................................ Rs. 11,90,000
Add: Unabsorbed addition (Rs.600,000×1/3) ........................................................................................................ 2,00,000
Depreciation base for next year (opening WDV) 13,90,000

Illustration 3: A special industry provide d the following information regarding its depreciable assets for the
relevant income year as:
Beginning WDV .......................................... Rs. 16,00,000 Repair expenses ...................................... Rs. 2,50,000
Disposable value of an asset ....................... Rs.2,00,000 Cost of an assets purchase ....................... Rs.6,00,000
Capitalized PCC for the year ........................ Rs.1,00,000
Purchase of asset as well as repair expenses were made at the end of Chaitra. You are notified that all the
information is related to the assets under block – D.
Required:
a. Allowable depreciation assuming that the industry is running by an individual and entity.
b. Opening WDV for the next year assuming that the industry is running by an individual & entity.
SOLUTION:
a. Calculation of allowable depreciation of group ‘D’ assets
Detailed Industries run by individual Industries run by entity
Beginning WDV ........................................................................... 16,00,000 16,00,000
Add: Purchase (2/3 of 6,00,000) ................................................. 4,00,000 4,00,000
Less: Sales of assets .................................................................. (2,00,000) (2,00,000)
Depreciation base (A) 18,00,000 18,00,000
Depreciation rate ( special industrial company) (B) ..................... 15% 20%
Allowable depreciation (A×B) 2,70,000 3,60,000

b. Calculation of opening depreciation base for next year of group -D

Details Industries run by individual Industries run by entity
Closing WDV of assets (Deps base – Allowable dep) .................... 15,30,000 14,40,000
Add: Unabsorbed purchase (6,00,000×1/3) ................................... 2,00,000 2,00,000
Add: Capitalized repair cost (2,50,000-1,26,000) ........................... 1,24,000 1,24,000
Add: Capitalized PCC .................................................................... 1,00,000 1,00,000
Opening WDV for next year 19,54,000 18,64,000
Note: Special industries operated by natural person can apply general rate of depreciation but entity can apply the special
rate higher by 1/3rd in comparison to the rate applied to natural person.
W.N. Calculation of capitalized repair:
7% of depreciation base (1800,000 x 7%) = 126,000
Or Actual repair = 250,000
(Whichever is lower)
Capitalized repair = Actual repair – Allowable repair
= 250,000 – 126,000 = 124,000

Illustration 4: A tender provides the following information about building the assets which lies in block 'A'.
Beginning written down value (WDV) of the assets Rs.15,00,000.
Purchased during the year of the same balance is as follows:
On 1st Ashwin ........................................................................................................................................................ Rs.5,00,000
On 1stFalgun ......................................................................................................................................................... Rs.9,00,000
On 1stBaishakh...................................................................................................................................................... Rs.12,00,000
One assets of the same block having book value in the beginning Rs.6,00,000 was disposed off on Marga at
Rs.5,00,000. Actual repair expenses of the assets Rs.2,50,000.
8 Ta xa ti o n i n Nep a l
Required: a. Depreciation charge during the year as per IT Act 2058.
b. Opening WDV of the assets for the next year.
SOLUTION:
Calculation of allowable depreciation and closing WDV for the year
Particulars Block ‘A’
Opening WDV of Assets ....................................................................................................................................... 15,00,000
Add: Absorbed addition
On 1st Ashwin (5,00,000 × 3/3) ................................................................................................................... 5,00,000
On 1stFalgun (9,00,000 × 2/3) ..................................................................................................................... 6,00,000
On 1stBaishakh (12,00,000 × 1/3) ............................................................................................................... 4,00,000
Total 30,00,000
Less: Disposal during the year ............................................................................................................................. 5,00,000
Depreciation and repair base ................................................................................................................................ 25,00,000
Depreciation rate .................................................................................................................................................. @ 5%
Allowable depreciation .......................................................................................................................................... 1,25,000
Closing WDV 23,75,000
Closing WDV during the year
Calculation of opening depreciation base for next year
Details Block ‘A’
Closing WDV of assets (Deps base – Allowable dep) ........................................................................................... 23,75,000
Add: Unabsorbed addition:
On 1st Ashwin (5,00,000 × 0/3) ................................................................................................................... Nil
On 1stFalgun (9,00,000 × 1/3) ..................................................................................................................... 3,00,000
On 1stBaishakh (12,00,000 × 2/3) ............................................................................................................... 8,00,000
Add: Capitalized repair (Working note) ............................................................................................................... 75,000
Opening WDV for next year 35,50,000
Working Note:
Calculation of allowable repair expenses:
7% of Rs.25,00,000 = Rs.1, 75,000
Or, Actual repair = Rs.2,50,000
(Whichever is lower)
The actual repair expenses is greater than 7% of depreciation base.
Therefore, capitalized repair (2,50,000 – 1,75,000) = Rs.75,000

Illustration 5: A special manufacturing company provides the following information relating to the plant and
machinery block.
Beginning WDV of plant and machinery Rs.32,00,000
Purchased during the year:
On Ashwin 25 ........................................................................................................................................................ Rs.5,00,000
On Magh 15 .......................................................................................................................................................... Rs.27,00,000
On Ashadh 12 ....................................................................................................................................................... Rs.33,00,000
Unabsorbed PCC, R & D cost and repair and improvement cost Rs.1,40,000, Rs.2,30,000 and Rs.3,20,000
respectively on the opening date of previous year were not included in opening WDV of machine. A part of plant
and machinery having book value on the beginning of the year Rs.5,00,000 was sold at Rs.7,00,000. Actual
repair and improvement cost during the year amounting to Rs.7,00,000.
Required: Allowable depreciation during the previous year and opening WDV for next year.
SOLUTION:
Calculation of allowable depreciation for the year and opening WDV for the next year
Particulars Block ‘D’ (Rs.)
Opening WDV of Assets except capitalized expenses .......................................................................................... 32,00,000
Add: Unabsorbed pollution control cost (PCC) ...................................................................................................... 1,40,000
Research and development cost (R&D cost) ........................................................................................................ 2,30,000
Repair and improvement cost ............................................................................................................................... 3,20,000
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Total opening WDV 38,90,000

Add: Absorbed addition:
On Ashwin 25 (5,00,000 × 3/3) ............................................................................................................................. 5,00,000
On Magh 15 (27,00,000 × 2/3) .............................................................................................................................. 18,00,000
On Ashadh 12 (33,00,000 × 1/3) ........................................................................................................................... 11,00,000
Total 72,90,000
Less: Disposal during the year .............................................................................................................................. 7,00,000
Depreciation and repair base 65,90,000
Depreciation rate (15% + 1/3 of 15%=20%) @20%
Allowable depreciation @ 20% ............................................................................................................................. 13,18,000
Closing WDV 52,72,000
b. Calculation of opening depreciation base for next year
Details Block ‘D’
Closing WDV of assets (Deps base – Allowable dep) .............................................................................................. 52,72,000
Add: Unabsorbed addition
Add: Unabsorbed addition:
On Ashwin 25 (5,00,000 × 0/3) ...................................................................................................................... Nil
On Magh 15 (27,00,000× 1/3) ................................................................................................................... …… 9,00,000
On Ashadh 12 (33,00,000× 2/3)..................................................................................................................... 22,00,000
Add: Capitalized repair ........................................................................................................................................... 2,38,700
Opening WDV for the next year 86,10,700
Working Note:
Calculation of allowable repair expenses:
7% of Rs. 65,90,000 = Rs.4,61,300 or Actual Rs.7,00,000
The actual repair expenses is greater than 7% of depreciation base.
Therefore, there is capitalized repair (7,00,000 – 4,61,300) = Rs.2,38,700.

Illustration 6: An industrial company furnished the following details of its assets.

Assets type Plant Furniture
Beginning depreciation basis value 1,000,000 500,000
Purchase during the year 600,000 150,000
Date of purchase Magh Ashadh
Cash disposal value 200,000 Nil
Book value of assets disposed off 250,000 Nil
Repair cost incurred 90,000 48,500
The company incurred pollution control cost Rs.500,000. Adjusted taxable income before business loss
Rs.1,200,000. Unrelieved previous year business loss was Rs.300,000.
Required: a. Chargeable amount of depreciation for the year.
b. Opening depreciation basis value for the next year.
SOLUTION:
Calculation of allowable depreciation during the year and closing WDV for the year
Particulars Blocks Plant (Block-D) Furniture (Block-B)
WDV in the beginning ................................................................................................... 10,00,000 5,00,000
Add: Absorbed addition:
On Magh (6,00,000 × 2/3) ............................................................................................. 4,00,000 –
On Ashadh (1,50,000 × 1/3) ......................................................................................... – 50,000
Total 14,00,000 5,50,000
Less: Disposal during the year ..................................................................................... 2,00,000 Nil
Depreciation and repair base (A) 12,00,000 5,50,000
Depreciation Rate (Additional 1/3 of normal depreciation rate) (B) @20% 33.33%
Allowable depreciation ( A x B) ..................................................................................... 240,000 183,315
Closing WDV 960,000 366,685
Calculation of opening depreciation base for next year
Details Block ‘D’ Block ’B’
10 Ta xa ti o n i n Nep a l

Closing WDV of assets (Deps base – Allowable dep) .................................................. 960,000 366,685
Add: Unabsorbed addition:
On Magh (6,00,000 ×1/3) ................................................................................... 200,000 -
On Ashadh (150,000 × 2/3) ............................................................................... - 100,000
Add: Capitalized repair (W.N.1) ................................................................................... 6,000 10,000
Add: Capitalized PCC (W.N.2) 50,000 -
Opening WDV for the next year 12,16,000 476,685
Working notes:
i. Calculation of capitalized repairs
Particulars Blocks Plant (D) Furniture (B)
Allowable repairs @ 7% of depreciation base 84,000 38,500
Actual repairs 90,000 48,500
Capitalized repairs 6,000 10,000
ii. Calculation of capitalized pollution control cost
Particulars Amount Rs.
Adjusted taxable income before business loss ........................................................................................................ 1,200,000
Less: Previous year business loss ........................................................................................................................... 3,00,000
Adjusted taxable income 9,00,000
Pollution control cost (50% of 9,00,000 = Rs.4,50,000 Or, Actual PCC = Rs.5,00,000
Note: The actual PCC is greater than 50% of adjusted taxable income by Rs.50,000 (5,00,000 – 4,50,000). So, the excess
amount is capitalized and added in block (D) assets.

NUMERICAL EXERCISE
Problem 1. __ An individual running special industry furnished the following information regarding its
assets under block‘B’:
i. Beginning depreciation base Rs.10,00,000
ii. Purchase during the year:
Chitra 29 – Rs.6,00,000
Asad 15 – Rs.3,00,000
iii. Disposal during the year:
Book value at beginning Rs.1,50,000 sold at a loss of Rs. 50,000
Actual repair cost Rs.1,00,000
Required: a.Allowable depreciation for the year b. Closing WDV at the end of the year.

Problem 2. __ The balance sheet of a Ltd. Company showed the following details of its assets under
pool D and E.
Pool Pool – D Pool – E
Beginning WDV in the previous year ................................................................................... Rs.5,00,000 Rs.7,00,000
Disposal during the year:
Book value .......................................................................................................................... Rs.60,000 –
Sold at a profit ..................................................................................................................... Rs.40,000 –
New purchased:
On Shrawan 3 ..................................................................................................................... Rs.6,00,000 –
On Chaitra 17 ...................................................................................................................... – Rs.9,00,000
The company purchased the trademarks on Chaitra 17 for a period of 10 year 4 months. The
beginning written down value of intangible assets copyright which was purchased 3 year ago, at the
time of purchased the cost of copyright was Rs.10,50,000. Total estimated life of the assets was 10
year 7 months at the time of purchased
Required: a.Allowable depreciation during the year b. Opening WDV for the next year
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Problem 3. __ An industrial company furnished the following details of its assets.

Assets type Plant Furniture
Beginning depreciation basis value 1,000,000 500,000
Purchase during the year 600,000 150,000
Date of purchase Magh Ashadh
Cash disposal value 200,000 Nil
Book value of assets disposed off 250,000 Nil
Repair cost incurred 90,000 48,500
The company incurred pollution control cost Rs.500,000. Adjusted taxable income before
business loss Rs.1,200,000. Unrelieved previous year business loss was Rs.300,000.
Required: a.Chargeable amount of depreciation for the year.
b. Opening depreciation basis value for the next year.

Problem 4. __ A resident company established under company Act, 2063 has provided the following
information with respect to assets of group D.
The opening WDV of assets Rs.1,00,000
During the previous year the company purchased assets as:
On Marga Rs.5,00,000
On Chaitra Rs.6,00,000
On Baishakh Rs.3,00,000
Company disposed of f the part of asset during year at Rs.5,00,000 (book value Rs.4,00,000.
Repair expenses was incurred during the previous year 1,20,000.
Actual research and development cost Rs.300,000
Adjusted taxable income before previous business loss Rs.800,000
Previous business loss Rs.100,000
Required: a.Allowable depreciation for the year b. Closing WDV at the end of the year.

Problem 5.___ A special manufacturing company provides the following information relating to the plant
and machinery block.
Beginning WDV of plant and machinery Rs.32,00,000
Purchased during the year
On Ashwin 25................................................................................................ Rs.5,00,000
On Magh 15 .................................................................................................. Rs.27,00,000
On Ashadh 12 ............................................................................................... Rs.33,00,000
Unabsorbed PCC, R and D cost and repair and improvement cost Rs.1,40,000, Rs.2,30,000 and
Rs.3,20,000 respectively on the opening date of previous year were not included in opening WDV of
machine. A part of plant and machinery having book value on the beginning of the year Rs.5,00,000 was
sold at Rs.7,00,000. Actual repair and improvement cost during the year amounting to Rs.7,00,000.
Required: Allowable depreciation during the previous year and opening WDV for next year.

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