Ministry of Corporate Affairs
EXPLANATORY MEMORANDUM
REVIEW OF SCHEDULE XIV TO THE COMPANIES ACT,1956
1. Schedule XIV to the Companies Act, 1956 provides for the rates of
depreciation to be charged on the assets by the companies while preparing their
balance sheet and profit and loss account in accordance with Section 350 and
while providing the dividend under section 205, respectively, of the Companies
Act, 1956 (the “Act”).
2. The Government of India has in the meantime, notified Companies
(Accounting Standards) Rules, 2006 (the “Rules”) under the Act. For the present,
in pursuance of the requirements under the Act and to provide guidance for
ascertaining the amount of depreciation to be charged, it is proposed to retain
Schedule XIV with suitable modifications/amendments. The purpose of such
exercise is to provide comprehensive guidance for charging of depreciation by
companies in compliance of the Act, enable consistency between Schedule XIV
and the Rules, recognition of assets arising out of concession
agreements/contracts/agreements relating to relating to infrastructure projects etc,
and amortization of the same. The Ministry has constituted a Committee headed
by Shri R. Vasudevan, Director (Inspection & Investigation) with the
representatives from the Institute of Chartered Accountants of India, Institute of
Cost and Works Accountants of India and special invitees from some of the
Regulatory bodies to examine the above and related issues and to make
recommendations on the changes/modifications necessary to Schedule XIV.
3. On the basis of the issues arising in implementation of provisions relating
to depreciation under the Act noticed by the Ministry from time to time, changes
felt desirable in Schedule XIV to address the environment determined by the
Accounting Standards Rules have been prepared in concept form and a process of
consolations initiated. In pursuance of the exercise taken up to review in
Schedule XIV, the proposed changes in this Schedule are annexed to this
Memorandum for viewing by all stakeholders.
4. Suggestions/Comments on the proposed changes in Schedule XIV along
with justification for the same may be addressed/sent latest by 31
st
December
2008 to Shri. M. S. Pachouri, Assistant Director, Ministry of Corporate Affairs,
5
th
Floor, A wing , Shastri Bhavan, New Delhi so the same may also be
considered by the Committee while finalizing its recommendations on the subject.
The suggestions/comments may also be sent through email at
[email protected] or [email protected]. It will be
appreciated if the name and address of the sender is also indicated clearly at the
time of sending suggestions/comments.
* * * * * * *
SCHEDULE XIV TO THE COMPANIES ACT, 1956 (WITH PROPOSED CHANGES)
(See section 205 and 350)
(Rates of Depreciation)
PART I
1. Rates of Depreciation and notes contained in this schedule are subject to the provisions of the
Companies Act, 1956 and the Companies (Accounting Standards) Rules, 2006 as amended from time
to time.
PART II
2. Subject to the Companies (Accounting Standards) Rules, 2006, for the purpose of ascertainment
of depreciation as provided under section 350 of the Companies Act, 1956, the useful life of any
specific asset not listed in Part IV, as notified by a Regulatory Authority constituted under an Act of
Parliament shall be applied in calculating the depreciation amount to be provided for such asset.
PART III
3. In the case of a company engaged in infrastructure project executed on the basis of a concession
agreements, where expenses incurred on the maintenance of such asset are provided out of the revenue
of assets or concession agreement or contract derived from a tariff or a toll or otherwise charged to the
customer; the value of the said asset arising out the concession agreement shall be amortized over the
period of the contract or concession agreement in accordance with the Companies (Accounting
Standards) Rules, 2006.
PART IV
4. Subject to the Parts (1), (III) and (III) above, following rates of depreciation shall be applicable
to the assets:-
Single Shift Double Shift Triple Shift Nature of assets
W.D.V: S.L.M. W.D.V. S.L.M. W.D.V. S.L.M.
1 2 3 4 5 6 7
I. (a) Buildings (other than factory
buildings) (NESD)
5 1.63 .. .. .. ..
per
cent
per
cent
(b) Factory buildings 10 3.34 .. .. .. .
per
cent
per
cent
(c) Purely temporary erections such as
wooden structures
100 100 .. .. .. ..
per
cent
per
cent
II. Plant and Machinery
[(i) General rate applicable to,
(a) plant and machinery (not being a ship)
other than continuous process plant for
which no special rate has been prescribed
under (ii) below:
13.91 4.75 20.87 7.42 27.82 10.34
per
cent
per
cent
per
cent
per
cent
per
cent
per
cent
(b) continuous process plant, for which no
special rate has been prescribed under (ii)
below. (NESD)]
15.33 5.28 .. .. .. ..
per
cent
per
cent
(ii) Special rates
A. 1. Cinematograph films-Machinery used
in the production and exhibition of
cinematograph films (NESD)
20 7.07 .. .. .. ..
per
cent
per
cent
(a) Recording equipment, reproducing
equipment, developing machines, printing
machines, editing machines, synchronisers
and studio lights except bulbs
20 7.07 .. .. .. ..
per
cent
per
cent
(b) Projecting equipment of film exhibiting
concerns
-do- -do- .. .. .. ..
2. Cycles (NESD) 20 7.07 .. .. .. ..
per per
cent cent
3. Electrical Machinery, X-ray and
electrothepeutic, apparatus and acces-sories
thereto, medical, diagnostic equipments,
namely, Cat-scan, Ultrasound Machines,
ECG Monitors etc. (NESD)
20 7.07 .. .. .. ..
per
cent
per
cent
4. Juice boiling pairs (karhais) (NESD) 20 7.07 .. .. .. ..
per
cent
per
cent
5. Motor-cars, motor cycles, scooters and
other mopeds (NESD)
25.89 9.5 .. .. .. ..
per
cent
per
cent
6. Electrically operated vehicles including
battery powered or fuel call powered
vehicles (NESD)
20 7.07 .. .. .. ..
per
cent
per
cent
7. Sugarcane crushers (indigenous kolus
and belans) (N.E.S.D.)
20 7.07 .. .. .. ..
per
cent
per
cent
8. Glass manufacturing concerns expect
direct fire glass melting furnaces-
Recuperative and regenerative glass melting
furnaces
20 7.07 30 11.31 40 16.21
per
cent
per
cent
per
cent
per
cent
per
cent
per
cent
9. Machinery used in the manufacture of
electronic goods and components.
15.62 5.38 23.42 8.46 31.23 11.87
per
cent
per
cent
per
cent
per
cent
per
cent
per
cent
B. 1. Aeroplanes, Aero Engines, Simulators,
Visual System and Quick Engine Change
Equipment (NESD)
16.2 5.6
per
cent
per
cent]
2. Concrete pipes manufacture Moulds
(NESD)
30 11.31 .. .. .. ..
per
cent
per
cent
3. Drum container manufacture dies
(NESD)
-do- -do- .. .. .. ..
4. Earth-moving machinery employed in
heavy construction works, such as dams,
tunnels, canals, etc. (NESD)
-do- -do- .. .. .. ..
5. Glass manufacturing concerns expect
direct fire glass melting furnaces
Moulds(NESD)
-do- -do- .. .. .. ..
6. Moulds in iron foundaries (NESD) -do- -do- .. .. .. ..
7. Mineral oil concerns Field operations
(above ground) Portable boilers drilling
tools, well-head tanks, rigs, etc. (NESD)
-do- -do- .. .. .. ..
8. Mines and quarries-Portable underground
machinery and earth moving machinery
used in open cast mining (NESD)
-do- -do- .. .. .. ..
9. Motor buses and motor lorries other than
those used in a business of running them on
hire (NESD)
30 11.31 .. .. .. ..
per
cent
per
cent
9A. Motor tractors, harvesting combines
(NESD)
-do- -do- .. .. .. ..
10. Patterns, dies and templates (NESD) -do- -do- .. .. .. ..
11. Ropeway structures-Ropeways, ropes
and trestle sheaves and connected
parts(NESD)
-do- -do- .. .. .. ..
12. Shoe and other leather goods factories-
Wooden lasts used in the manufacture of
shoes.
30 11.31 45 18.96 60 29.05
per
cent
per
cent
per
cent
per
cent
per
cent
per
cent
C.
1. Motor buses, motor lorries and motor
taxies used in a business of running them on
hire (NESD)
40 16.21 .. .. .. ..
per
cent
per
cent
2. Rubber and plastic goods factories
Moulds (NESD)
-do- -do- .. .. .. ..
3. Data processing machines including
computers (NESD)
-do- -do- .. .. .. ..
4. Gas cylinders including values and
regulators (NESD)
-do- -do- .. .. .. ..
D. 1. Artificial silk manufacturing
machinery wooden parts
100 100 .. .. .. ..
per
cent
per
cent
2. Cinematograph films Bulbs of studio
lights
-do- -do- .. .. .. ..
3. Flour mills Rollers -do- -do- .. .. .. ..
4. Glass manufacturing concerns Direct fire
glass melting furnaces
100 100 .. .. .. ..
per
cent
per
cent
4A. Float Glass Melting Furnaces (NESD) 27 10 .. .. .. ..
per
cent
per
cent
5. Iron and Steel industries Rolling mill
rolls
100 100 .. .. .. ..
per
cent
per
cent
6. Match factories Wooden match frames -do- -do- .. .. .. ..
7. Mineral oil concerns (a)- Plant used in
field operations (below ground)-
Distribution - returnable packages (b) Plant
used in field operations (below ground) but
not including assets used in field operations
(distribution) - Kerbside pumps including
underground tanks and fittings
100 100 .. .. .. ..
per
cent
per
cent
8. Mines and quarries - (a) Tubs, winding
ropes, haulage ropes and sand stowing pipes
(b) Safety lamps
-do- -do- .. .. .. ..
9. Salt works - Salt pans, reservoirs and
condensers, etc., made of earthy, sandy or
clay material or any other similar material
-do- -do- .. .. .. ..
10. Sugar works Rollers -do- -do- .. .. .. ..
III. Furniture and fittings
1. General Rates (NESD) 18.1 6.33 .. .. .. ..
per
cent
per
cent
2. Rate for furniture and fittings used in
hotels, restaurants and boarding houses;
schools, colleges and other educational
institutions, libraries; welfare centres;
meeting halls, cinema houses; theatres and
circuses; and for furniture and fittings let
out on hire for use on the occasion of
marriages and similar functions. (NESD)]
25.88 9.5 .. .. .. ..
per
cent
per
cent
IV. Ships
1. Ocean-going ships-
(i) Fishing vessels with wooden hull
(NESD)
27.05 10 .. .. .. ..
per
cent
per
cent
(ii) Dredgers, tugs, barges, survey launches
and other similar ships used mainly for
dredging purposes (NESD)
19.8 7 .. .. .. ..
per
cent
per
cent
(iii) Other ships (NESD) 14.6 5 .. .. .. ..
per
cent
per
cent
2. Vessels ordinarily operating on inland
waters-
(i) Speed boats (NESD) 20 7.07 .. .. .. ..
per
cent
per
cent
(ii) Other vessels (NESD) 10 3.34 .. .. .. ..
per
cent
per
cent
W.D.V.: means Written Down Value.
S.L.M.: means Straight Line Method.
Notes.-
1. "buildings" include roads, bridges, culverts, wells and tube-wells.
2. "factory buildings" does not include offices, godowns, officers and employees' quarters, roads,
bridges, culverts, wells and tube-wells.
3. "speed boat" means a motor boat driven by a high speed internal combustion engine capable of
propelling the boat at a speed exceeding 24 Kilometers per hour in still water and so designed that
when running at a speed it will plane, i.e., its bow will rise from the water.
4. Where, during any financial year, any addition has been made to any asset, or where any asset has
been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a
pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset
has been sold, discarded, demolished or destroyed.
5. The following information should also be disclosed in the accounts:
(i) depreciation methods used; and
(ii) depreciation rates or the useful lives of the assets, if they are different from the principal
rates specified in the Schedule.
6. The calculations of the extra depreciation for double shift working and for triple shift working shall
be made separately in the proportion which the number of days for which the concern worked double
shift or triple shift, as the case may be, bears to the normal number of working days during the year. For
this purpose, the normal number of working days during the year shall be deemed to be-
(a) in the case of a seasonal factory or concern, the number of days on which the factory or
concern actually worked during the year or 180 days, whichever is greater; (b) in any other
case, the number of days on which the factory or concern actually worked during the year or
240 days, whichever is greater.
The extra shift depreciation shall not be charged in respect of any item of machinery or plant which has
been specifically, excepted by inscription of the letters "N.E.S.D." (meaning "No Extra Shift
Depreciation") against it in sub-items above and also in respect of the following items of machinery and
plant to which the general rate of depreciation of 13.91 per cent applies-
(1) Accounting machines
(2) Air-conditioning machinery including room air-conditioners
(3) Building contractor's machinery.
(4) Calculating machines.
(5) Electrical machinery - switchgear and instruments, transformers and other stationary plant
and wiring and fitting of electric light and fan installations.
(6) Hydraulic works, pipelines and sluices
(7) Locomotives, rolling stocks, tramways and railways used by concerns, excluding railway
concerns.
(8) Mineral oil concerns - field operations:
(a) Prime movers.
(b) Storage tanks (above ground).
(c) Pipelines (above ground).
(d) Jetties and dry docks.
(9) Mineral oil concerns - field operations (distribution) - Kerbside pumps, including
underground tanks and fittings.
(10) Mineral oil concerns - refineries:
(a) Prime movers.
(b) LPG Plant
(11) Mines and quarries:
(a) Surface and underground machinery (other than electrical machinery and portable
underground machinery).
(b) Head-gears.
(c) Rails.
(d) Shafts and inclines.
(e) Tramways on the surface.
(12) Neo-post franking machines.
(13) Office machinery
(14) Overhead cables and wires.
(15) Railway sidings.
(16) Refrigeration plant containers, etc. (other than racks).
(17) Ropeway structures:
(a) Trestle and station steel work.
(b) Driving and tension gearing.
(18) Salt works - Reservoirs, condensers, salt pans, delivery channels and piers if constructed of
masonry, concrete, cement, asphalt or similar materials; barges and floating plant; piers, quays and
jetties; and pipelines for conveying brine if constructed of masonry, concrete, cement, asphalt or similar
materials.
(19) Surgical instruments
(20) Tramways electric and tramways run by internal combustion engines- permanent way: cars- car
trucks, car bodies, electrical equipment and motors; tram cars including engines and gears.
(21) Typewriters.
(22) Weighing machines.
(23) Wireless apparatus and gear, wireless appliances and accessories.]
7. "Continuous process plant" means a plant which is required and designed to operate 24hours a day.
8. Notwithstanding anything mentioned in this Schedule depreciation on assets, whose actual cost does
not exceed five thousand rupees, shall be provided depreciation at the rate of hundred per cent:]
Provided that where the aggregate actual cost of individual items of plant and machinery costing Rs.
5,000 or less constitutes more than 10 per cent of the total actual cost of plant and machinery, rates of
depreciation applicable to such items shall be the rates as specified in Item II of the Schedule.]