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38. Determination of depreciation
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38. Determination of depreciation.—(1) The amount of depreciation of business capital assets referred to in section 37 shall be the aggregate of the following, namely :—
(a) such percentage of the adjusted value of any block of assets as specified in the Fifteenth Schedule, in respect of all the business capital assets forming part of the relevant block of assets specified therein ; and
(b) "nil", in respect of any other business capital asset not forming part of any block of assets specified in the Fifteenth Schedule.
(2) The depreciation allowance on assets referred to in section 37 shall, notwithstanding the fact that all business capital assets in any block of assets have ceased to exist by reason of being demolished, destroyed, discarded or transferred, be allowed to the person in respect of the block of assets, if the adjusted value of the block of assets is greater than zero.
(3) The deduction under this section in respect of an asset shall be restricted to fifty per cent. of the sum referred to in sub-section (1) if—
(a) the asset is acquired by the person during the financial year ; and
(b) is used for the purposes of business for a period of less than one hundred and eighty days in the relevant financial year.
(4) The depreciation in respect of any business capital asset, notwithstanding anything contained in any other provision of this Code, shall not be allowed if,—
(a) the asset does not form part of any block of assets specified in the Fifteenth Schedule ; or
(b) the expenditure incurred for acquiring the asset has been allowed as a deduction under any provision of this Code.
Clause 37 provides for the determination of capital allowances in relation to business expenditure which shall be the aggregate of the operative expenditure, finance charges and capital allowances. The said clause seeks to provide that the amount of capital allowances shall be the aggregate of the amount in respect of depreciation of business capital assets, initial depreciation of business capital assets, terminal allowance, scientific research and development allowance and deferred revenue expenditure allowance.
The said clause further provides that the depreciation, initial depreciation or terminal allowance shall be allowed in respect of any business capital asset if the asset is owned, wholly or partly, by the person, and used for the purposes of the business of the person. However, the condition of ownership, whether whole or in part, shall not apply in the case of a business capital asset being a capital expenditure on any building which is held by the person under a lease or other right of occupancy. A business capital asset shall be deemed to be owned by the person if he is a lessee in terms of a financial lease.
The said clause also provides that the amount of deferred revenue expenditure allowance referred to above shall be as specified and computed in accordance with the Twenty-second Schedule.
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