32. Depreciation.- (1) In respect of depreciation
of—
(i) buildings , machinery , plant or furniture, being tangible
assets;
(ii) know-how, patents, copyrights, trade marks, licences,
franchises or any other business or commercial rights of similar
nature, being intangible assets acquired on or after the 1st
day of April, 1998,
owned , wholly or partly, by the assessee and used for the
purposes of the business or profession, the following deductions
shall be allowed—
(i) in the case of assets of an undertaking engaged in generation
or generation and distribution of power, such percentage on
the actual cost thereof to the assessee as may be prescribed
;
(ii) in the case of any block of assets, such percentage
on the written down value thereof as may be prescribed :
Provided that no deduction shall be allowed under this clause
in respect of—
(a) any motor car manufactured outside India, where such
motor car is acquired by the assessee after the 28th day of
February, 1975 but before the 1st day of April, 2001, unless
it is used—
(i) in a business of running it on hire for tourists ; or
(ii) outside India in his business or profession in another
country ; and
(b) any machinery or plant if the actual cost thereof is allowed
as a deduction in one or more years under an agreement entered
into by the Central Government under section 42 :
Provided further that where an asset referred to in clause
(i) or clause (ii) or clause (iia), as the case may be, is
acquired by the assessee during the previous year and is put
to use for the purposes of business or profession for a period
of less than one hundred and eighty days in that previous
year, the deduction under this sub-section in respect of such
asset shall be restricted to fifty per cent of the amount
calculated at the percentage prescribed for an asset under
clause (i) or clause (ii) or clause (iia), as the case may
be :
Provided also 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 and is put to use
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.
Explanation.—For the purposes of this proviso,—
(a) the expression “commercial vehicle” means
“heavy goods 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”;
(b) the expressions “heavy goods vehicle” ,
“heavy passenger motor vehicle” , “light
motor vehicle” , “medium goods vehicle”
, “medium passenger motor vehicle” , “maxi-cab”
, “motor-cab” , “tractor” and “road
roller” shall have the meanings respectively as assigned
to them in section 2 of the Motor Vehicles Act, 1988 (59 of
1988):
Provided also that, in respect of the previous year relevant
to the assessment year commencing on the 1st day of April,
1991, the deduction in relation to any block of assets under
this clause shall, in the case of a company, be restricted
to seventy-five per cent of the amount calculated at the percentage,
on the written down value of such assets, prescribed under
this Act immediately before the commencement of the Taxation
Laws (Amendment) Act, 1991:
Provided also that the aggregate deduction, in respect of
depreciation of buildings, machinery, plant or furniture,
being tangible assets or know-how, patents, copyrights, trademarks,
licences, franchises or any other business or commercial rights
of similar nature, being intangible assets allowable to the
predecessor and the successor in the case of succession referred
to in clause (xiii), clause (xiiib) and clause (xiv) of section
47 or section 170 or to the amalgamating company and the amalgamated
company in the case of amalgamation, or to the demerged company
and the resulting company in the case of demerger, as the
case may be, shall not exceed in any previous year the deduction
calculated at the prescribed rates as if the succession or
the amalgamation or the demerger, as the case may be, had
not taken place, and such deduction shall be apportioned between
the predecessor and the successor, or the amalgamating company
and the amalgamated company, or the demerged company and the
resulting company, as the case may be, in the ratio of the
number of days for which the assets were used by them.
Explanation 1.—Where the business or profession of the
assessee is carried on in a building not owned by him but
in respect of which the assessee holds a lease or other right
of occupancy and any capital expenditure is incurred by the
assessee for the purposes of the business or profession on
the construction of any structure or doing of any work in
or in relation to, and by way of renovation or extension of,
or improvement to, the building, then, the provisions of this
clause shall apply as if the said structure or work is a building
owned by the assessee.
Explanation 2.—For the purposes of this sub-section
“written down value of the block of assets” shall
have the same meaning as in clause (c) of sub-section (6)
of section 43.
Explanation 3.—For the purposes of this sub-section,
the expression “assets” shall mean—
(a) tangible assets, being buildings, machinery, plant or
furniture;
(b) intangible assets, being know-how, patents, copyrights,
trade marks, licences, franchises or any other business or
commercial rights of similar nature.
Explanation 4.—For the purposes of this sub-section,
the expression “know-how” means any industrial
information or technique likely to assist in the manufacture
or processing of goods or in the working of a mine, oil-well
or other sources of mineral deposits (including searching
for discovery or testing of deposits for the winning of access
thereto).
Explanation 5.—For the removal of doubts, it is hereby
declared that the provisions of this sub-section shall apply
whether or not the assessee has claimed the deduction in respect
of depreciation in computing his total income;
(iia) in the case of any new machinery or plant (other than
ships and aircraft), which has been acquired and installed
after the 31st day of March, 2005, by an assessee engaged
in the business of manufacture or production of any article
or thing, a further sum equal to twenty per cent of the actual
cost of such machinery or plant shall be allowed as deduction
under clause (ii) :
Provided that no deduction shall be allowed in respect of—
(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;
(iii) in the case of any building, machinery, plant or furniture
in respect of which depreciation is claimed and allowed under
clause (i) and which is sold, discarded, demolished or destroyed
in the previous year (other than the previous year in which
it is first brought into use), the amount by which the moneys
payable in respect of such building, machinery, plant or furniture,
together with the amount of scrap value, if any, fall short
of the written down value thereof :
Provided that such deficiency is actually written off in
the books of the assessee.
Explanation.—For the purposes of this clause,—
(1) “moneys payable” in respect of any building,
machinery, plant or furniture includes—
(a) any insurance, salvage or compensation moneys payable
in respect thereof;
(b) where the building, machinery, plant or furniture is
sold, the price for which it is sold,
so, however, that where the actual cost of a motor car is,
in accordance with the proviso to clause (1) of section 43,
taken to be twenty-five thousand rupees, the moneys payable
in respect of such motor car shall be taken to be a sum which
bears to the amount for which the motor car is sold or, as
the case may be, the amount of any insurance, salvage or compensation
moneys payable in respect thereof (including the amount of
scrap value, if any) the same proportion as the amount of
twenty-five thousand rupees bears to the actual cost of the
motor car to the assessee as it would have been computed before
applying the said proviso;
(2) “sold” includes a transfer by way of exchange
or a compulsory acquisition under any law for the time being
in force but does not include a transfer, in a scheme of amalgamation,
of any asset by the amalgamating company to the amalgamated
company where the amalgamated company is an Indian company
or in a scheme of amalgamation of a banking company, as referred
to in clause (c) of section 5 of the Banking Regulation Act,
1949 (10 of 1949) with a banking institution as referred to
in sub-section (15) of section 45 of the said Act, sanctioned
and brought into force by the Central Government under sub-section
(7) of section 45 of that Act , of any asset by the banking
company to the banking institution.
(iv) Omitted
(v) Omitted
(vi) Omitted
(1A) Omitted
(2) Where, in the assessment of the assessee, full effect
cannot be given to any allowance under sub-section (1) in
any previous year, owing to there being no profits or gains
chargeable for that previous year , or owing to the profits
or gains chargeable being less than the allowance, then, subject
to the provisions of sub-section (2) of section 72 and sub-section
(3) of section 73, the allowance or the part of the allowance
to which effect has not been given, as the case may be, shall
be added to the amount of the allowance for depreciation for
the following previous year and deemed to be part of that
allowance, or if there is no such allowance for that previous
year, be deemed to be the allowance for that previous year,
and so on for the succeeding previous years.
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