Depreciation Depreciation allowance allowance

an allowance for loss due to an allowance for loss due to depreciationdepreciation

Condition 1 Asset must be owned by the assessee

Condition 2 It must be used for the purpose of business or profession.

Condition 3 It should be used during the relevant previous year.

Condition 4 Depreciation is available on tangible as well as intangibleassets.

Asset must be owned by the assesseeAsset must be owned by the assessee

Registered ownership is not necessary.

Depreciation in case of any other lease

Capital expenditure in a building taken on lease

Depreciation in case of higher purchase

Asset must be used for the purpose of business or profession

Active versus passive user

Asset used partly for business purposes

Residential quarters

Asset must be used in the previous year

Normal depreciationNormal depreciation (i.e., full year’s depreciation) is available

if an asset is put to use at least for sometime during the previous year

a. where an asset is acquired during the previous year; and

b. it is put to use for the purpose of business or profession for less than 180 daysduring that year

However, depreciation allowance is limited to 50 per cent of normal depreciation, if the following two conditions are satisfied—

Tangible as well as Tangible as well as intangible assetintangible asset

Conditions satisfiedConditions satisfied Depreciation Depreciation availableavailable

Depreciation not Depreciation not availableavailable

YesYes

NNOO

Concepts Concepts

• BLOCK OF ASSETS- BLOCK OF ASSETS- The term The term “block of assets” means a group of “block of assets” means a group of assets falling within a class of assets assets falling within a class of assets comprising —comprising —

• a. tangible assets, a. tangible assets, • b. intangible assets,b. intangible assets,

WRITTEN DOWN VALUE WRITTEN DOWN VALUE [SEC. 43(6)][SEC. 43(6)]

Find out the depreciated value of the block on

the April 1, 2005.

To this value, add “actual cost” of the asset

deduct money received/receivable

EXCEPTIONS EXCEPTIONS 1 If the written down value of the block of asset is reduced to If the written down value of the block of asset is reduced to

zero,though the block is empty.zero,though the block is empty.

2 If the block of assets is empty or ceases to exitst on the last If the block of assets is empty or ceases to exitst on the last day of previous year (though written down value is not day of previous year (though written down value is not zero)zero)

3 In the case of imported carsIn the case of imported cars

4 In the case of succession ore amalgamation or business re-In the case of succession ore amalgamation or business re-organization or demerger.organization or demerger.

5 If in the first year in which an asset is acquired,it is put to use for less If in the first year in which an asset is acquired,it is put to use for less than 180 days.than 180 days.

If the written down value of the block of asset is reduced to If the written down value of the block of asset is reduced to zero, though the block is empty.zero, though the block is empty.

If block of assets ceases to If block of assets ceases to exist exist

imported carsimported cars

Imported car acquired after Imported car acquired after February 28,1975 but February 28,1975 but before april ,2001 before april ,2001

Imported car acquired after Imported car acquired after march 31, 2001 march 31, 2001

Imported car is used for Imported car is used for

The purpose of running it The purpose of running it on hire for tourist on hire for tourist

Depreciation available Depreciation available Depreciation availableDepreciation available

The purpose of business The purpose of business and prefession outside and prefession outside India India

Depreciation availableDepreciation available Depreciation availableDepreciation available

The purpose of business or The purpose of business or profession in India profession in India

Depreciation not availableDepreciation not available Depreciation availableDepreciation available

succession , amalgamation, business succession , amalgamation, business

reorganization or demergerreorganization or demerger

• conversion of firm or sole proprietary concern into conversion of firm or sole proprietary concern into company .company .

• succession to business other than on death – business of succession to business other than on death – business of HUF taken over by a member,business of a firm taken HUF taken over by a member,business of a firm taken over by a partner , conversion of HUF concern into over by a partner , conversion of HUF concern into company. company.

• Amalgamation of a companyAmalgamation of a company• Demerger of a company Demerger of a company

• Amalgamation or demerger of co-operative banksAmalgamation or demerger of co-operative banks

when an asset is put to use for less when an asset is put to use for less than 180 days in the year of than 180 days in the year of

acquisition – acquisition –

1 1 If the asset is acquired during the previous year.If the asset is acquired during the previous year.

2 2 It is put to use for a period of less than 180 days.It is put to use for a period of less than 180 days.