Page 280 - DCOM301_INCOME_TAX_LAWS_I

Unit 9: Income under the Head Business and Profession

established under Section 3 of the Securities and Exchange Board of India, 1992 (15 of 1992), the Notes
actual cost of the asset shall be deemed to be the amount which would have been regarded as
actual cost had there been no such corporatisation.

Example:

This may be easily followed by the following example:
Depreciable assets on 1.4.2011 on which the depreciation is available at the same rate of 25%.
Asset A 3, 00,000

Asset B 5, 00,000
Asset C 7, 00,000
Total 15, 00,000
Less: [Depreciation @ 25% of 15, 00,000] (3, 75,000)
(i) Written down value on 1.4.2012 of block of assets 11, 25,000

Add: Cost of Asset purchased during 2012–13 6, 00,000
(ii) Balance 17, 25,000
Asset B sold during year 2012–13 (6, 75,000)

(iii) Balance 10, 50,000
Less: Depreciation for 2012–13 @ 25% of 10,50,000 (2, 62,500)
Written down value of all assets on 1.4.2013 7, 87,500
The third proviso to Section 32(1) provides that where an asset being commercial vehicle is,
acquired by the assessee on or after the 1st day of October 1998 but before the 1st day of April,
1999 for the purposes of business or profession, the deduction in respect of such asset shall be
allowed on such percentage on the written down value thereof as may be prescribed.
Commercial vehicles in this proviso means heavy good vehicle, heavy passenger motor vehicle,
light motor vehicle, medium goods vehicle and medium passenger motor vehicle but does not
include maxi-cab, motor-cab, tractor and road-roller (as per their meaning assigned in Section 2
of the Motor Vehicle Act, 1988).
The fifth proviso to Section 32(1) provides that in cases of succession in business or profession,
in the case of amalgamation of companies or in the case of demerger of companies depreciation
of plant and machinery, buildings and furniture in any previous year shall not exceed the
depreciation calculated at the prescribed rate as if the succession, amalgamation or demerger
had not taken place. It also seeks to allow the deduction to the predecessor and the successor or
the amalgamating company and the amalgamated company or the demerged company and the
resulting company in the same proportion as the number of days for which they used the asset
in the business or profession.
Section 38(2) provides that where any building, machinery, plant or furniture is not exclusively
used for the purposes of the business or profession, the deduction under Sections 30(a) & (c), 31(i)
& (ii) and 32(1)(ii) shall be restricted to a fair proportionate part thereof as may be determined
by the Assessing Officer. This section has not been amended to cover Section 32(1)(i) under
which depreciation to electricity undertaking is allowed. Hence, the depreciation for electricity,
undertakings claiming deduction under Section 32(1)(i) cannot be proportionately disallowed
under Section 38.

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