Page 279 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes Balancing Charge Section 41(2)
If any asset, on which depreciation is claimed on basis of SLM, asset is sold and the
amount, by which moneys payable together with scrap value, exceeds WDV of such asset,
then the least of the following shall be taxable under the head PGBP.
difference between the actual cost and WDV

difference between aggregate of moneys payable and WDV
3. Additional Depreciation [Section 32(1)(iia)]: With effect from Assessment year 2006–07
existing clause (iia) has been substituted by new Clause (iia) to provide additional
depreciation in certain circumstances. The additional depreciation shall be allowed @20%
of the actual cost. The conditions and restrictions imposed by this provision are as under.
Under this clause the additional depreciation is available to assessee engaged in the business
of manufacture or production of any article or thing or engaged in the business of generation
or generation and distribution of power at the rate of 20% of actual cost of eligible new
machinery or plant (other than ships and aircrafts acquired and installed in a previous
year). Additional depreciation shall not be allowed if (a) any machinery or plant which,
before its installation by the assessee, was used either within or outside India by any other
person; or (b) any machinery or plant installed in any office premises or any residential
accommodation, including accommodation in the nature of a guest house; or (c) any office
appliances or road transport vehicles; or (d) any machinery or plant, the whole of the
actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise)
in computing the income chargeable under the head “Profits and gains of business or
profession” of any one previous year.

9.7.4 Calculation of Written Down Value (WDV) of a Block of Asset

The WDV of an asset block can be computed in the following manner:
1. Find out the written down value on the first day of the previous year (WDV) relevant to
the assessment year, of all those depreciable assets on which the depreciation is allowed at
the same rate. All such assets are known as “block assets”;
2. The increase in the WDV by the actual cost of any asset falling within that block, acquired
during the previous year;
3. Reduce from the above, the moneys payable in respect of any asset falling within that
block, which is sold or discarded or demolished or destroyed during that previous year
together with the amount of the scrap value, if any, so that the amount of such reduction
does not exceed the written down value as so increased; and
4. In the case of a slump sale, decrease by the actual cost of the asset falling within the block
as reduced by the amount of depreciation that would have been allowable to the assessee
for any assessment year, so that the amount of such decrease does not exceed the written
down value.
It means if the net consideration of an asset out of the block is less than the balance under (ii),
there would be no capital gain. If the net consideration of an asset is more than the balance under
(ii) (the value of all assets in the block) the excess shall be deemed to be short term capital gain.
If all the assets of the block are sold in the previous year and the net consideration is less than the
balance under (ii), the loss shall be deemed to be short-term capital loss.
Where any capital asset is acquired by the assessee under a scheme for corporatisation of a
recognised stock exchange in India, approved by the Securities and Exchange Board of India

274 LOVELY PROFESSIONAL UNIVERSITY