Lipsa Bhut

Dissolution Partnership Firm Settlement Accounts Dissolution: When the relationship between the partners has ended or terminated, then the partnership firm is said to be dissolved. Under such circumstances, the firm ceases to exist. The dissolution of a partnership firm is dissimilar to the dissolution of a partnership. The process of dissolution includes paying off liabilities and disposing of the assets. The firm stops all of its activities, and the partners have no relationship with each other.

• Reasons for the termination of the partnership agreement
• What is the dissolution of the firm as per section 39 of The Partnership Act of 1932?
• In the following ways, the dissolution of the partnership firm can take place
• Settlement of accounts on dissolution

Reasons for the Termination of Partnership Agreement

In the event of the dissolution of a partnership, the termination of the partnership agreement among the partners is due for the following reasons:

1. Admission of a new partner
2. Retirement or death or insolvency of an existing partner
3. Change in the current profit ratio
4. On the accomplishment of a certain venture for which the partnership was formed.
5. On the expiration of the period for which the partnership was formed.

By entering into a new agreement, the existing partners can continue the business. The dissolution of a partnership means a modification in the partnership. The dissolution of a partnership firm means the discontinuation of a firm’s business. Even without the dissolution of the firm, a partnership can be dissolved.

What is the Dissolution of the Firm as per Section 39 of The Partnership Act of 1932?

As per Section 39 of The Partnership Act of 1932, “dissolution of the firm” means dissolution of the partnership between all the partners within the firm.

Following this, a partnership firm is unable to do any kind of business activity. It can only discharge the partners’ claims, pay off the liabilities and do asset disposal for the firm to realize the amount.

In the Following Ways, the Dissolution of Partnership Firm Can Take Place

1. Dissolution by Agreement: If all the partners agree to the dissolution, the firm may be dissolved.
2. Dissolution by notice: When at will a partnership is designed, if any one of the partners provides written notice to the other partners stating their intention of dissolving the firm, then the firm dissolution may occur.
3. Contingent Dissolution: Under this way, the dissolution of a partnership firm may happen based on any one of the following contingencies:
4. If the partnership is established for a fixed term, then at the expiry of the period.
5. On the accomplishment of a certain venture for which the partnership was established.
6. On a partner’s death.
7. On a partner’s insolvency
8. Compulsory Dissolution: The firm’s compulsory dissolution will take place if:
9. One partner or all the partners becomes insolvent.
10. The firm’s business became illegal for some reason.
11. The firm’s business becomes unlawful due to the occurrence of an event.
12. Dissolution by Court: The partnership firm’s dissolution is ordered by the court on the following grounds:
13. When a partner becomes insane,
14. When a partner becomes unable to perform their duties as a partner,
15. When a partner is guilty of misconduct, it is more likely to affect the reputation and business of the firm.
16. When a partner breaches the partnership agreement,
17. When a partner transfers their entire interest or shares in the firm to a third party,
18. When the firm’s business cannot carry on except at a loss,
19. When the court’s opinion about the dissolution of the firm is fair and unbiased on any ground.

Settlement of Accounts on Dissolution

As stated by Section 48 of the Indian Partnership Act of 1932, the following procedure is to be followed to settle accounts between partners after the dissolution of the firm:

1. Losses, including inefficiencies of capital, will be first paid out from the profits, then from the capital, and, if essential, by the individual contribution of the partners in the ratio of their profit-share.
2. The assets of the firm, comprising of any sum contributed by the partners to make up for the insufficiency of capital, will apply in the following manner:

Payment of:

1. The firm’s debts to third parties
2. Advances and loans given by the partners
3. Capital contributed by the partners

If any remains, it is going to be divided among the partners in their profit-sharing ratio.

Procedure Change Companies Act 2013: Under the Parliament of India initiative, the Companies Act was put into effect on August 29th of 2013, after reforming the Companies Act of 1956. It deals with incorporating companies, their responsibilities, and renewed features as a functional.

• Alteration of Company name under Companies Act, 2013
• The ways to Alter names under Companies Act, 2013
• Section 4 under Companies Act, 2013
• Section 16 under Companies Act, 2013
• Rule 29 under Companies Act, 2013
• Which Companies cannot alter names, according to the Companies Act of 2013?
• Steps to Alter Company names
• FAQs

Alteration of Company Name under Companies Act, 2013

The topic of modifying the name of a company is also included in the Companies Act, 2013. Through this process, any limited company can alter its names with the due consent of all members and directors. A solid reason has to be provided along with the necessary documents to complete the process of the name change.

Different sections of the Companies Act of 2013 are dedicated to aiding other purposes. For example, section 13 of the Act deals with an amendment in the Memorandum of Association, whereas Section 14 regulates Articles of Association.

The Ways to Alter names under Companies Act, 2013

Under the Companies Act of 2013, section 13 deals with the change of company names with the approval of the Central Government via a special resolution. After completing the process of incorporation, the company may change their names according to the ways listed below:

• Converting its name from Private to Public
• Converting its name from Public to Private
• Converting its name from XYZ limited to ABC limited

Note: The company with ‘Private’ attached to its name does not need the approval of the Central Government.

Section 4 under Companies Act, 2013

Topics to Consider under Subsection 2

• The name mentioned in the memorandum must match the name of any other existing company that is registered under the Company’s Act.
• The name mentioned in the memorandum must not create any offense under any effective laws.
• The name mentioned in the memorandum must not be unsuitable in the Central Government’s opinion.

Topics to Consider Under Subsection 3

• The company must not be registered with any name that indicates its connection to the patronage of the state government or central government, the local authority, or the corporation.

Section 16 under Companies Act, 2013

Subsection 1

• A company needs to verify its new name that has been registered or re-registered.
• The new name must be unique and different from the name of any other company that exists already.
• The central government must rectify the company’s name.

Subsection 2

• After changing its name, the company must notify the registrar (because he is responsible for changes in the incorporation certificate and the memorandum) and the central government order within 15 days from the verification date.

Subsection 3

• Levying penalty up to Rs.1000 per day and Late Fine on defaulted companies as per the directions issued by the central government.

Rule 29 under Companies Act, 2013

• Change of name should be prohibited to any company that has defaulted in filing the Annual Returns or Financial Statements or any other significant document with the Registrar.
• Any company that has defaulted in repaying the matured deposits or debentures or the interest on deposits cannot complete the name change procedure.
• Sub-section 3 under section 13 requires the process of filing an application in Form INC-24 additional to the fee for change in the company name.
• A fresh certificate of incorporation in Form INC-25 must be issued to the company right after the change of name.

Which Companies Cannot Alter Names, According to the Companies Act of 2013?

Rule 29 under the Companies Rules of 2014 perfectly summarizes the rules applying to the prohibition of the process of the name change for companies that fall under the categories as mentioned below:

1. Companies that have defaulted in filing an annual return in time.
2. Companies that have failed to riposte matured deposits
3. Companies that have defaulted in repayment of matured debentures.
4. Companies that have not paid or have defaulted in paying the additional interest on debentures or deposits.

Steps to Alter Company Names

Step 1: Coordinating a Board Meeting

• The company must pass a board resolution to hold EGM for changing the company’s name (in the same board meeting or a new board meeting) and authorize the Director of the company or the Company Secretary to issue an application confirming the availability of the name proposed.

Step 2: Verifying the availability of the selected name

• Authorized persons such as the Director of the Company or Company Secretary shall confirm the availability of the proposed name by applying to the MCA along with the copy of the Board resolution passed in the meeting.
• Naming Guidelines under the Companies Act 2013 supervise this activity, and simultaneously the incorporation of any new company needs to be noted.
• The company can reserve the proposed name through the Reserve Unique Name web service available on the MCA portal.

Step 3: Congregating a General Meeting

• After receiving the approval of a new name from the MCA, the company should arrange a General Meeting to furnish a special resolution and reflect it on the Memorandum of Association and Articles of Association.

Step 4: Filing a Special Resolution and an Application to the Registrar

• The company should file the documents as stated below with the Registrar of companies:
• The special resolution legislated by the company u/s 13 part (1) in Form MGT-14.
• The application made for the name change in Form No. INC-24 and the additional fee.

The following documents are required to be attached to INC-24.

• A certified copy of the postulates of the General Meetings and name change approval order previously issued by the concerned department or authorities such as RBI, IRDA, SEBI, etc.
• Any such details may be furnished as optional attachments.

Step 5: Securing a fresh Certificate of Incorporation

• As per subsection 3b under Section 12, the company needs an engraving of the company name in readable characters on the company’s seal (if there is any).
• The company must notify the bank where their current account is in operation and the concerned government officials or any authorities such as stock exchanges, Excise Authorities, Tax, or any such parties with whom the company has struck a deal or made investments or secured insurance policies; about the change in the company’s name and intimate them to in the records as well.
• The company must apply for a new PAN and TAN.

FAQ’s on Procedure Change Companies Act 2013

Question 1.
Is Stamp Duty a must for change in MOA?

Answer:
This Act does not consider a new memorandum of association. Where it implies to be so, it is nothing else but a special resolution and, as such, does not need to be stamped.

Question 2.
After the verification of the company name, up to what time is the name available for use by the company?

Answer:
According to the Companies Amendment Act of 2017, in the case of alteration of the name of the company, the name shall be reserved for a duration of 60 days from the date of approval.

Section 8 Companies under Companies act of 2013: The primary purpose of Section 8 under the Companies Act of 2013 is to promote the subjects of commerce, science, art, education, social welfare, research, religion, protection of the environment, charity, and such other issues among companies.

Section 8 of the Companies Act of 2013 proposes the successful application of their profits or other incomes to promote its primary aims and forbids any such dividends among their members.

Table of Contents

• Terms and Conditions for Companies
• Significant Features of companies under Section 8
• Advantages of companies under Section 8
• The Steps to incorporate companies under Section 8
• The documents required for incorporation

Terms and Conditions for Companies

1. The Central Government should issue a license following the prescribed method.
2. According to this notice, the Government should approve the Company or partnership or association to register themselves under Section 8 without the attachment of the ‘Private Limited’ title to its name or the addition of only ‘limited’ as per the terms prescribed.
3. After modifying the Company or association or partnership name, the Registrar can register the association, Company, or partnership under Section 8.
4. The Companies registered under Section 8 can register themselves as a non-profit or charitable trust. But even though this Company will fall under the category of a Society or Trust, the only exception is that they will get registered under the Ministry of Corporate Affairs or MCA under the Central Government, unlike ordinary Trusts, which the State Government governs.
5. The companies under Section 8 have various advantages compared to general Societies or Trusts. They possess strong trust between donors, multiple departments of the Government, and other stakeholders.
6. The most crucial feature of this type of Company is the choice of registering themselves without including the titles’ Private Limited’ and ‘Limited’ as per the case.

Significant Features of Companies under Section 8

• Unique License: The companies that register under Section 8 of the Companies Act of 2013 are uniquely licensed by the Government. Their focus is to work with the public and their welfare; hence, sometimes, they receive funds from the general public.
• No Dividend: The companies under Section 8 do not issue bonuses to their partners or members due to restrictions. Hence, they are unable to distribute profits to members legally as a business objective.
• Charitable Aims: The primary objective of Section 8 under the Companies Act of 2013 is to promote commerce, science, art, education, social welfare, research, religion, protection of the environment, charity, and other issues among companies.
• Regulated Liability: The members or partners of a Private Limited or Limited company limited liability as they are registered under Section 8.
• No restrictions on minimum Capital: Unlike any other company, the companies under Section 8 do not need a minimum paid-up share capital to register legally.
• Firms as the sole members: Apart from individual members of the Company, firms are allowed to the members of the Company, as per Section 8 of the Companies Act of 2013.

Advantages of Companies under Section 8

Original Identity

Companies that fall under Section 8 of the Companies Act of 2013 possess an original identity and exist as an entity with a real presence in society.

The Company holds a legal position and has unique potentials to sustain debts in its name. The Company members do not have liability in the case of debts since they are seen as a separate section. Therefore, the Company functions as an individual with its original Identity.

Regulated Liability

Liabilities in the case of companies registered under Section 8 are regulated. The responsibility of members in the subject of the Company’s duties for company debts or partnerships are limited according to law. In simple words, the duties of company members are restricted to the amount of face value of the total shares.

No Additional suffix

Companies under Section 8 of the Act choose to omit suffixes such as Limited and Private Limited, once legalized by the Government.

Benefits on Tax

A company or association under Section 8 may choose to enjoy benefits on taxes if they are registered 12AA and under Section 80G of the IT Act.

No Restrictions on minimum Capital

Under Section 8, there is no minimum value of Capital required for the incorporation of any Private Limited company. According to the law of 2013, Private Limited company starters can build the foundation without any worries about minimum Capital requirements.

Fewer Stamp Duty

During the incorporation of companies under Section 8 of the Companies Act of 2013, the Government provides an array of benefits that reduces the stamp duty of the Company by a great deal.

The Steps to Incorporate Companies under Section 8

Step 1: Producing an application for the desired company name

The foremost step in the process of incorporation of a company is selecting the desired company name and reserving the unique name in section A of the SPICe Plus form. If the Central Registration Centre rejects the name proposed, then the Company needs to re-file the two names as presented within the time limit of 15 days starting from the day of rejection from CRC.

Step 2: Applying for a DSC or Digital Signature Certificate

Since the incorporation process of a company is entirely online from start to finish, a DSC or Digital Signature Certificate is crucial for the signing of forms by the directors as proposed or the company members via electronic means. The use of DSC is obligatory for all companies, their members, shareholders, and directors.

Step 3: Two-Stage filling method the application Form for the process of incorporation

The incorporation process starts once the company name gets verified. Within the time span of twenty days, application filling should be completed.

Stage A: All relevant documents needed for the process must be uploaded online on the SPICe plus site (combining eight records in one). Through this, the company can propose the following:

• Incorporation
• Name reservation
• PAN application
• TAN application
• DIN application
• GSTIN registration
• ESIC registration
• EPFO registration

Stage B: Filling of this Section of the Form needs details like paid-up capital, the total number of members and directors, number of whole shares by members, legalized share capital, registered company address and addresses of members and directors.

MOA and AOA of the company as proposed should be drafted next, followed by the filling of EPFO, and registering ESIC in detail. Filling AGILE and securing GSTIN are the next steps. Lastly, uploading the signature onto the MCA website is an essential step in this process.

The documents that are needed to be attached are:

• A Physical replica of the MOA draft (including the signature of witnesses and members)
• A Physical replica of the AOA draft (including the signature of witnesses and members)
• The Declaration in Form INC-14 by any such practicing professional

Step 4: Issuing the Certificate of Commencement of the Business

As soon as the application of incorporating the said Company has been approved and the Registrar of Companies has produced the Certificate of Incorporation, the Company must file another seeking for the approval of the commencement of business under 180 days from the Company’s incorporation.

Documents Required for Icorporation

As a Private Limited Company

• Aadhaar Card
• PAN Card
• A Photograph of the proposed Director

Identity Proofs (of the members and proposed Director)

• Voter’s Identity Card
• Driving License
• Passport

Address Proofs (of the members and proposed Director)

• Bank Statement
• Electricity bill
• Telephone/ Mobile Bill

Address Proofs for the prime business location (of the proposed company)

• The Rent Agreement, including Rent Slip
• Utility Bills like Telephone bill, Water bill, Gas Bill and Electricity Bill
• Proof of Ownership

Provisions of Loan from Directors under Companies Act, 2013: The Companies Act of 2013 discusses the various provisions for companies and the conditions, references, important dates, and other such subjects prescribed by the Ministry of Corporate Affairs.

• Definition of essential terms related to the Companies Act, 2013
• Discussing the most relevant sections of the Act
• Difference between Loan and Deposit
• The ways of lending money to the company by Directors
• Additional Points to Remember

Definition of Essential Terms Related to Companies Act 2013

Loans

When a fixed sum of money is given to another party in exchange for repayment of the aggregate with additional interest, it is known as a Loan. In other words, in general terms, any transaction where a sum of money is issued with the purpose of being reimbursed, inclusive, or exclusive of interest, is known as a Loan.

Deposits

Money receipts or Loan slips placed into banks or any such institutions for the safeguarding of a particular sum of money are called Deposits. The depositor can put these amounts into savings, marketing, or checking accounts and hold the authority to manipulate the placed sum of money after consulting with the bank.

Qualified Companies

Any Public Company that has a Turnover of not lower than Rs. 500 crores and a Net Worth not lower than Rs. 100 crores. The company has to have prior approved consent of the Registrar of Companies in a general meeting through a unique filed resolution before making any requests of acceptance of deposits to the public.

The Two Main Types of Accounts

1. Savings Account: These types of accounts are interest-bearing accounts. The rate of interest of these accounts depends on the bank at which it is deposited. Additionally, there are some restrictions in case of the number of times the user can withdraw an amount from this type of bank account.
2. Current Account: These types of accounts are generally operated by established companies and firms and provide overdraft functions to their users. They are most commonly known as the non-interest-bearing deposits and aid in providing more efficiency to such firms or companies in the banking sphere.

Discussing Most Relevant Sections of Act

• Under Section 179 of the Companies Act of 2013, the subject of taking consent of the Board before borrowing money.
• Under Section 180 of the Companies Act of 2013, the subject of focus is taking consent of company members through a unique resolution in the case of borrowing money or money that is borrowed already by the company that might exceed a sum-total of its owed share of funds and inclusive of security premiums except for temporary loans that are gained from the bankers in the general course of business.

Section 180 does not apply to any Private Company; hence, Private Companies can borrow capital by passing a Board Resolution even when the limit of the borrowed amount has been reached.

Example: Suppose XYZ (Public) and ABC Private Limited both have Rs. 100 crores for Paid-up Share Capital, Rs. 50 crores for Free Reserves, Rs. 20 crores for Security Premiums, and Rs. 5 crores for Present Borrowed Amount:

By way of passing a Board Resolution, the amount to be borrowed will tally up to Rs. 175 crores for both Public and Private Companies.

Yet, if ABC Public Company wishes to borrow above Rs. 175 crores, they need to pass the Special Resolution, but for XYZ Private Limited, they can borrow above Rs. 175 crores without passing any resolutions.

Difference Between Loan and Deposit

Even though in the case of both loans and deposits, the money is lent by one party and received by the other, there is a difference.

• Loan: A Loan is primarily associated with borrowing money for the benefit of the mortgager and according to the mutual agreement between both parties.
• Deposit: A Deposit is associated with benefitting from additional interests, and the repayment is made on demand by following particular instructions.

Note: It is crucial to understand when a receipt is considered as a deposit and a loan and also have knowledge about who is eligible to receive it and from whom.

The Ways of Lending Money to Company by Directors

The ways through which Directors can issue Loans either from their funds or from borrowed funds to the company are listed below:

Lending from Borrowed Funds

1. If the Director is Shareholder: The sum of money received from the director will be handled as deposits from the members and must follow the provisions under Section 73 and the laws of Section 180 of the Companies Act of 2013.
2. If the director is not a Shareholder: The sum of money received from the director will be handled as deposits from the public and must follow provisions under Section 76 read besides the Companies Rules of 2014 (Acceptance of Deposits) and Section 180 of the Companies Act of 2013.

The deposits, in this case, can only be accepted by Eligible companies and attain a credit rating each year. For secured deposits, the company does not need to charge any favorable assets of deposit holders for amounts under the Deposit amount limit.

Lending from Own Funds

When a company accepts a said amount from the director of the company or the relative director of the company out of their private fund, it is handled as a Loan. This said amount does not require to follow any provision under the Sections 73 and Section 78 of the companies Act of 2013.

Although, to be at an advantage from this method, the director of the company or the relative director as per the case, must furnish an original declaration in written form to make this amount obtainable and to clarify that the amount is being issued out of the directors own fund through accepting or borrowing loans or any deposits from other companies.

Note: The company should disclose the details of the amount received from the director or a Board’s Report to apply the conditions of Section 180 of the Companies Act, 2013.

Additional Points to Remember

• All Private Companies and Public Companies should reveal their financial statements in detail through notes and provide the necessary information about the amount accepted from the director or the relative directors in the case of a Private Company.
• All companies except Government companies should file a one-time return of the outstanding receipt of the specific loan amount by the company, which does not fall under the category of deposits according to the Companies Rules of 2014 (Acceptance of Deposit). The receipt, as mentioned before, should be filed within ninety days as specified in the DPT-3 Form (mentioned as April 1st, 2014 to March 31st, 2019 in the Rules) with the additional applicable fees.
• The Loans received from the director may be secured or unsecured.
• The Unsecured Loans by the director do not have interests.
• At the time of acceptance of the deposit, the board must consider the position of the director.

Example: Suppose Mr. X becomes a Director on August 25th, 2019, and is issued a loan of Rs. 100 crores to XYZ Limited on August 03rd, 2019; this will be considered a deposit.

Depreciation Rate Chart as per Companies Act 2013 with Related Law: The depreciation rates under Companies Act, 2013 under Written Down Value (WDV) Method and Straight Lime method (SLM) along with compiled Changes to Schedule II: Useful Lives to Compute Depreciation as per section 123 of Companies Act,2013 are discussed in this article.

• Depreciation Calculator for the Companies Act 2013
• Schedule II: Useful Lives to Compute Depreciation
• Rate Chart for Depreciation as per Schedule II of The Companies Act 2013
• Some Significant Points

Depreciation Calculator for the Companies Act 2013

Straight Line Method (SLM)

One of the simplest methods for calculating depreciation as per the Companies Act is the Straight Line Method or SLM. In this method, the total depreciable amount is allocated evenly every year over the asset’s useful life.

Written Down Value Method (WDV)

It is also popularly regarded as the reducing balance method or declining balance method of calculating depreciation as per the Companies Act. In this method, we charge the depreciation rate on the reducing balance of the asset.

For assets that existed on April 1, 2014, the date of acquisition is taken into account, and the balance sheet worth is depreciated over the remaining usable economic life of the asset.

Suppose the remaining useful life of an asset is zero or nil. In that case, the amount over and above residual value may be recognised in the opening balance of retained earnings or maybe accounted off to the Profit and Loss account.

If a firm implements the Written Down Value (WDV) method of accounting, it must approximate a new percentage of depreciation to depreciate the valuable asset throughout its expected useful life, which is expressed as –

R= 100 x {1 – (s/c) ^1/n}

In which –

1. R is the Depreciation Rate in %;
2. n is the Remaining useful life of the asset in years;
3. s is the Scrap value at the end of the useful life of the asset;
4. c is the cost of the asset/Written down value of the asset.

Note: Upon transition to Schedule II, in the case of existing assets, there will be a different remaining useful life for each asset as the company may have different depreciation rates for individual assets (even within the same class).

Schedule II Useful Lives to Compute Depreciation

Part ‘A’

1. The depreciation system is the systematic allocation of an asset for its useful life for the depreciable amount. The useful life of any asset is the time period over or in which an asset is expected to be available for its use by an entity, or else some number of productions of the similar units are expected to be obtained from the mentioned asset by the entity. The depreciable amount or cost of an asset is actually the cost of an asset or other amount substituted for cost, reduced by its residual value.
2. For this Schedule, the term depreciation includes amortisation.
3. Without preconception to the preceding provisions of paragraph 1, —
   1. The useful life of a financial asset will not typically fluctuate from the useful life indicated in Part C, and the residual value of an asset will not surpass 5% of the individual item’s original or actual cost:

If a firm utilises a useful life that differs significantly from what has indicated in Part C or a residual value that deviates from the limit formulated above, the financial statements will mention such difference and justify this behalf duly supported by technical advice.

In the case of intangible assets, the relevant Indian Accounting Standards (Ind AS) will be applied. Where a company is not needed to comply with the Ind AS (Indian Accounting Standards), it will be complied with the relevant Accounting Standards under Companies (Accounting Standards) Rules of 2006, except for the case of intangible assets (Toll Roads) as created under ‘Build, Own, Operate and Transfer’, ‘Build, Operate and Transfer’, or any other type of public-private partnership route for road-related projects. The amortisation for such cases may be done as discussed below —

Mode of Amortisation

Amortisation Rate = Amortisation Amount / Cost of the Intangible Assets (A) x 100

Amortisation Amount = Cost of the Intangible Assets (A) x Actual Revenue for the Year (B) / Projected Revenue from the Intangible Asset (till the end of the concession period) (C)

Where –

1. Cost of the Intangible Assets (A) is the cost incurred by the company following the accounting standards;
2. Actual Revenue for the year (B) is the Actual revenue (Toll Charges) received during the relevant accounting year;
3. Projected Revenue from the Intangible Asset (C) is the total revenue (projected) from the Intangible Assets as subject to the project lender at the moment of financial closure or agreement.

Note: The amortisation amount or rate should ensure that the entire cost of the intangible asset is amortised over and in the concession period.

Revenue will be verified at the end of each budget year, and estimated revenue shall be efficiently adjusted to reflect such changes, if any, in the estimates leading to the collection at the end of the concession period.

Example

If we assume that the Total revenue to be generated out of the Intangible Assets over the period would be Rs. 600 Crores, in the following way –

Where ‘*’ will be actual at the end of the relevant financial year.

Based on this, the charge for the first year or Year 1 would be Rs. 4.16 Crores (approximately) (i.e., Rs. 5 Crores/Rs. 600 Crores × Rs. 500 Crores), which would be applicable to the profit and loss account and 0.83% (i.e., Rs. 4.16 Crores/Rs. 500 Crores × 100) is the amortisation rate for the first year or Year 1.

When an organization estimates the amortisation value for the aforementioned Intangible Assets via any means legally permitted by the applicable Accounting Standards, it must immediately report the amount.

Part ‘B’

In this particular circumstance, regardless of the prerequisites in Schedule II, the useful life or residual value of any specific asset, as made aware for accounting purposes by a Regulatory Authority implemented under an Act of Parliament or by the Central Government, will be used to determine the depreciation to be granted for such entity.

Part ‘C’

In this, subject to Parts A and B above, the following are the useful lives of various tangible assets.

Rate Chart for Depreciation as per Schedule II of The Companies Act 2013

Some Significant Points

1. “Factory buildings” does not include the offices, godowns and staff quarters.
2. Where, during any financial year, an addition has been made to any asset, or if where any asset has been sold, demolished, destroyed, or discarded, the depreciation on such assets will be calculated on a pro-rata basis from the date of such type of addition or, as the scenario may be, up to the date on which such kind of asset has been sold, demolished, destroyed, or discarded.
3. The following information will also be disclosed in the accounts, that include –
   1. Depreciation methods used; and
   2. The useful lives of the assets for calculating depreciation if they do not match with the useful life specified in Schedule II.
4. Useful life as specified in Part C of Schedule II is for the entire asset. Where the cost of a part of the asset is significant to the total cost of the asset and the useful life of that part is different from the actual useful life of the remaining asset, the useful life of that significant part will be determined separately. The requirement is under subparagraph 4.1. shall be voluntary regarding the financial year commencing on or after April 1, 2014, and mandatory for financial statements regarding financial years beginning on or after April 1, 2015.
5. The useful lives of assets that work on a shift basis are specified in Schedule II based on their single shift working. Leaving for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C above), if an asset is used for any time during the year for a double shift, the depreciation will increase by 50% for that time period. In the case of the triple shift, the depreciation shall be calculated based on 100% for that period.
6. On the date at which this Schedule comes into effect, the carrying amount of the asset as on that particular date –
   1. after retaining the residual value (that can be recognised) in the opening balance of the retained earnings where the remaining useful life of an asset is zero or nil; and
   2. will be depreciated over the remaining useful life of the asset as per Schedule II.
   3. “Continuous process plant” is a plant that is needed and designed to operate for 24 hours a day.