Section - 32

88. See also Circular No. 9, dated 23-3-1943, Circular No. 29-D(XIX-14), dated 31-8-1965, Letter [F. No. 10/14/66-IT (A-I), dated 12-12-1966 and Letter [F. No. 10/47/68-IT (A-II)], dated 17-7-1968 read with letter dated 21-6-1968, Circular No. 609, dated 29-7-1991 and Circular No. 622, dated 6-1-1992.

90. Substituted for "in the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed;" by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.

91. See rule 5 and Appendix I.

92. Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.

93. Substituted for "seven hundred and fifty" by the Finance Act, 1983, w.e.f. 1-4-1984.

94. Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to substitution, second proviso, as inserted by the Finance Act, 1975, w.e.f. 1-4-1975 and amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988, read as under :

" Provided further that no deduction shall be allowed under this clause in respect of any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 and is used otherwise than in a business of running it on hire for tourists:"

95. Inserted by the Taxation Laws (Amendment) Act, 1991, w.e.f. 15-1-1991.

96. Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.

97. Inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.

*Should be read as ‘sub-clause’.

†Should be read as ‘clause’.

98. Omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original clause (iia), as inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, stood as under :

‘( iia) in the case of any new machinery or plant (other than ships and aircraft) which has been installed after the 31st day of March, 1980, but before the 1st day of April, 1985, a further sum equal to one-half of the amount admissible under clause (ii ) exclusive of extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year :

Provided that no deduction shall be allowed under this clause in respect of—

( a) any machinery or plant installed in any office premises or any residential accommodation;

( b) any office appliances or road transport vehicles; and

( c) 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.

Explanation : For the purposes of this clause,—

( a) "new machinery or plant" shall have the meaning assigned to it in clause (2) of the Explanation below clause (vi) of this sub-section;

( b) "residential accommodation" includes accommodation in the nature of a guest house but does not include premises used as a hotel;’

99. Clause ( iii) was omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Prior to its omission, original clause (iii), as amended by the Finance Act, 1966, w.e.f. 1-4-1966 and later amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, stood as under :

‘( iii) In the case of any building, machinery, plant or furniture 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;’

1. Clause (iv) was omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original clause (iv), as amended by the Finance Act, 1983, w.e.f. 1-4-1984, the Finance Act, 1978, w.e.f. 1-4-1979, the Finance Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1966, w.e.f. 1-4-1966, stood as under :

‘( iv) in the case of any building which has been newly erected after the 31st day of March, 1961, where the building is used solely for the purpose of residence of persons employed in the business and the income of each such person chargeable under the head "Salaries" is ten thousand rupees or less, or where the building is used solely or mainly for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, a sum equal to forty per cent of the actual cost of the building to the assessee in respect of the previous year of erection of the building;’

2. Clause (v) was omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original clause (v), as inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and later amended by the Finance Act, 1983, w.e.f. 1-4-1984, stood as under :

‘( v) in the case of any new building, the erection of which is completed after the 31st day of March, 1967, where the building is owned by an Indian company and used by such company as a hotel and such hotel is for the time being approved in this behalf by the Central Government, a sum equal to twenty-five per cent of the actual cost of erection of the building to the assessee, in respect of the previous year in which the erection of the building is completed or, if such building is first brought into use as a hotel in the immediately succeeding previous year, then in respect of that previous year;’

3. Clause (vi) was omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original clause (vi), as inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1975 and later amended by the Finance Act, 1976, w.e.f. 1-4-1976, stood as under :

‘( vi) in the case of a new ship or a new aircraft acquired after the 31st day of May, 1974, by an assessee engaged in the business of operation of ships or aircraft or in the case of new machinery or plant (other than office appliances or road transport vehicles) installed after that date for the purposes of business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in items 1 to 24 (both inclusive) in the list in the Ninth Schedule or in the case of new machinery or plant (other than office appliances or road transport vehicles) installed after that date in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other articles or things, a sum equal to twenty per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee, in respect of the previous year in which the ship or aircraft is acquired or the machinery or plant is installed, or if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year; but any such sum shall not be deductible in determining the written down value for the purposes of clause (ii) :

Provided that the assessee may, before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139, whether fixed originally or on extension, for furnishing the return of income for the assessment year in respect of which he first becomes entitled to deduction under this clause, furnish to the Income-tax Officer a declaration in writing that the provisions of this clause shall not apply to him, and if he does so the provisions of this clause shall not apply to him, for that assessment year and for every subsequent assessment year; so, however, that the assessee may, by notice in writing furnished to the Income-tax Officer before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139, whether fixed originally or on extension, for furnishing the return of income for any such subsequent assessment year, revoke his declaration and upon such revocation, the provisions of this clause shall apply to the assessee for that subsequent assessment year and for every assessment year thereafter :

Provided further that no deduction shall be allowed under this clause in respect of—

( a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house,

( b) any ship, aircraft, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33, and

( c) any ship or aircraft acquired after the 31st day of March, 1976, or any machinery or plant installed after that date.

Explanation : For the purposes of this clause,—

( 1) "new ship" or "new aircraft" includes a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any time previous to the date of such acquisition owned by any person resident in India;

( 2) "new machinery or plant" includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely :—

( a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India;

( b) such machinery or plant is imported into India from any country outside India; and

( c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee;

( 3) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed seven hundred and fifty thousand rupees; and for this purpose the value of any machinery or plant shall be,—

( a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee; and

( b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.’

4. Sub-section (1A) was omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original sub-section (1A), as inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, stood as under :

‘(1A) Where the business or profession is carried on in a building not owned by the assessee 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 after the 31st day of March, 1970, 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, in respect of depreciation of such structure or work, the following deductions shall, subject to the provisions of section 34, be allowed—

( i) such percentage on the written down value of the structure or work as may in any case or class of cases be prescribed;

( ii) in the case of any such structure or work which is sold, discarded, demolished, destroyed or is surrendered as a result of the determination of the lease or other right of occupancy in respect of the building in the previous year (other than the previous year in which it is constructed or done) the amount by which the moneys payable in respect of such structure or work 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,—

( i) "moneys payable", in respect of any structure or work, includes—

( a) any insurance or compensation moneys payable in respect thereof;

( b) where the structure or work is sold, the price for which it is sold; and

( ii) "sold" shall have the meaning assigned to in the Explanation to clause (iii) of sub-section (1)’.

5. Words "(or, if the assessee is a registered firm or an unregistered firm assessed as a registered firm, in the assessment of its partners)" shall be omitted by the Finance Act, 1992, w.e.f. 1-4-1993. This expression was earlier omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

6. Substituted for "under clause (i) or clause (ii) or clause (iia) or clause ( iv) or clause (v) or clause (vi) of sub-section (1) or under clause (i) of sub-section (1A)" by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.

Section 32

Depreciation

Footnotes