Page 278 - DCOM301_INCOME_TAX_LAWS_I

Unit 9: Income under the Head Business and Profession

ships). Further, where any new machinery or plant is installed during the previous year Notes
for the purposes of manufacture or production of any article or thing, and such article or
thing (a) is manufactured or produced by using any technology or know-how developed
in, or (b) is invented in, a laboratory owned or financed by the Government or owned by
a public sector company or university or a duly recognised institution, then such plant or
machinery shall be treated as part of block of assets qualifying for depreciation @ 50% of
written down value subject to the fulfilment of the following conditions:
(a) the right to use such technology or know-how or to manufacture such article or
thing has been acquired from the owner of the laboratory or from any person who
has derived the right from such owner;
(b) the return furnished by the assessee for his income or the income of any other
person for which he is assessable for any previous year in which the said machinery
or plant is acquired is accompanied by a certificate from the prescribed authority
(Secretary, Department of Scientific and Industrial Research, Government of India)
to the effect that such technology or know-how is developed in, or the article or
thing is invented in such laboratory; and
(c) the machinery or plant is not used for the purposes of business of manufacture or
production of any article listed in the Eleventh Schedule (i.e. low priority articles).

Notes For the purposes of above:
“Laboratory financed by the Government” means a laboratory owned by anybody
(including a society registered under the Societies Registration Act, 1860 (21 of 1860), and
financed wholly or mainly by the Government;
“Public sector company” means any corporation established by or under any Central,
State or Provincial Act or a Government company as defined in Section 617 of the
Companies Act, 1956;
“University” means a University established or incorporated by or under a Central, State
or Provincial Act and includes an institution declared under Section 3 of the University
Grant Commission Act, 1956, to be a University for the purposes of that Act.

2. Depreciation on Straight Line Basis: In the case of Power Units [Section 2(1)(i)] (optional
to power generating units) From the assessment year 1998–99, an undertaking engaged in
generation or generation and distribution of power can claim depreciation on straight
line basis on the actual cost of individual asset. But the aggregate depreciation cannot
exceed the actual cost. Alternatively, such undertaking can claim depreciation, at its option,
according to written down value method like any other assessee. The option for this
purpose shall be exercised before the due date of furnishing return of income. Once this
option is exercised, it shall be final and shall apply to all the subsequent years.

Did u know? Terminal depreciation
If any asset, on which depreciation is claimed on basis of SLM, is sold and the amount by
which money payable together with scrap value, fall short of WDV of such asset,
depreciation shall be allowed equal to such deficiency in the year of sale.

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