Section 43(1) defines actual cost of an asset as the amount incurred to acquire and install the asset, less any amount reimbursed by other parties. Written down value is actual cost minus depreciation. Unabsorbed depreciation is depreciation that could not be set off due to insufficient profits and can be carried forward indefinitely. Additional depreciation of 20-35% of cost is available for new machinery used for manufacturing or power generation.
Section 43(1) defines actual cost of an asset as the amount incurred to acquire and install the asset, less any amount reimbursed by other parties. Written down value is actual cost minus depreciation. Unabsorbed depreciation is depreciation that could not be set off due to insufficient profits and can be carried forward indefinitely. Additional depreciation of 20-35% of cost is available for new machinery used for manufacturing or power generation.
Section 43(1) defines actual cost of an asset as the amount incurred to acquire and install the asset, less any amount reimbursed by other parties. Written down value is actual cost minus depreciation. Unabsorbed depreciation is depreciation that could not be set off due to insufficient profits and can be carried forward indefinitely. Additional depreciation of 20-35% of cost is available for new machinery used for manufacturing or power generation.
Section 43(1) defines actual cost of an asset as the amount incurred to acquire and install the asset, less any amount reimbursed by other parties. Written down value is actual cost minus depreciation. Unabsorbed depreciation is depreciation that could not be set off due to insufficient profits and can be carried forward indefinitely. Additional depreciation of 20-35% of cost is available for new machinery used for manufacturing or power generation.
▪ The actual cost of an asset to the assessee is normally the amount of capital expenditure incurred in respect of the acquisition, installation etc., and also the expenses to make the asset ready for the purpose of its use in the business. ▪ The word ‘ actual cost’ has been defined in Section 43 (1 ) of the Act to mean that actual cost of the asset to the assessee as reduced by that portion of the cost thereof, met directly or indirectly by any other person or authority. ▪ An assessee, in acquisition of an asset, makes payments in a day otherwise than by an a/c payee cheque/demand draft / ECS/ which is > INR 10000, such expenditure would not be a part of the actual cost. ➢ The provisions of Section 43(1) of the Act clarify that the actual cost of depreciable asset should be determined in the following circumstances as indicated below: ✓ if an asset was first used for scientific research and then used for business later, the actual cost would be the initial cost incurred in acquiring the asset minus the deduction already claimed under section 3. ✓ if the asset is acquired as a gift/inheritance, the actual cost is the WDV of the P. Y ✓ if an asset was once in use, then transferred and later re-acquired, the actual cost would be the WDV at the time of transfer OR the price of re-acquisition, whichever is lower PAPER I : LAW OF TAXATION WRITTEN DOWN VALUE (WDV) [ Section 43 (6) ]
• In case of acquisition of assets during the P.Y, the actual becomes the WDV • In case of assets acquired before the P.Y, the WDV = Actual Cost to the assessee - Depreciation c/f if any • In case of transfer of assets from holding company to subsidiary or vice-versa or from a amalgamating company or an amalgamated company, then the actual cost of assets in the books of the transferee company would be the WDV of the block assets, as in the books of transferor company for the immediately preceding P.Y., minus , the allowable depreciation during the Current Year. • In case of a successor LLP, the WDV in the books of the LLP, would be the WDV in the books of the predessor company on the date of such conversion • The WDV of the following assets may be reduced no NIL : the moneys receivable by the assessee in respect of the assets sold, together with the scrap value if any > than the current WDV of the assets, OR where the entire block assests is sold. PAPER I : LAW OF TAXATION UNABSORBED DEPRECIATION
➢ It’s the depreciation that couldn’t be consumed fully, that is, the profits were not sufficient to absorb it. ➢ Can be carried forward indefinitely ➢ The current year depreciation and the brought forward business losses get priority in the set off over the unabsorbed depreciation, in that order
DEPRECIATION OR STRAIGHT LINE BASIS
▪ In case of Power Units ( Section 2(1 ) ( i) ( optional to power generating units ) from the A.Y 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 can not exceed the actual cost.
TERMINAL DEPRECIATION
o 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. PAPER I : LAW OF TAXATION BALANCING CHARGE ( Section 41 ( 2 )
➢ 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
i. Difference between the actual cost and WDV
ii. Difference between aggregate of moneys payable and WDV
ADDITIONAL DEPRECIATION - SECTION 32 (1 )
➢ 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 OR transmission 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 P.Y.
➢ In case of investment is made in New Plant and Machinery in Notified Backward areas in state of Andhra Pradesh OR after 1/4/15, Additional depreciation shall be allowed @ 35% of Actual Cost.
