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39. Determination of initial depreciation
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39. Determination of initial depreciation.—(1) A person shall be allowed, in addition to depreciation, an initial depreciation of business capital assets if,—
(a) the person is engaged in the business of manufacture or production of any article or thing ;
(b) the asset is a new asset forming part of the class of assets "Machinery and Plant" specified in the Fifteenth Schedule ;
(c) the asset was not used either within or outside India by any other person before its installation by the person ;
(d) the asset is not installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house ;
(e) the asset is not in the nature of any office appliances ; and
(f) the whole of the actual cost of the asset is not allowed as a deduction (whether by way of depreciation or otherwise) in computing the income under the head "Income from business" of any financial year.
Clause 39 seeks to provide that in addition to depreciation, an initial depreciation of business capital assets shall be allowed to the person if he is engaged in the business of manufacture or production of any article or thing, the asset is a new asset (other than any office appliance) not used either within or outside India by any other person before its installation by the person and the whole of the actual cost of the asset is not allowed as a deduction (whether by way of depreciation or otherwise) in computing the income under the head "Income from business" of any other financial year.
The said clause further provides that the initial depreciation referred shall be an amount equal to twenty per cent. of the actual cost of the asset and it shall be allowed in the financial year in which the asset is used for the first time for the purposes of the business of the person. The deduction under this clause shall be restricted to fifty per cent of the allowable sum, if the asset is used for the purposes of business for a period of less than one hundred and eighty days in the relevant financial year.
(2) The initial depreciation referred to in sub-section (1),—
(a) shall be an amount equal to twenty per cent. of the actual cost of the asset ; and
(b) shall be allowed in the financial year in which the asset is used for the first time for the purposes of the business of the person.
(3) The deduction under this section in respect of such asset shall be restricted to fifty per cent. of the sum referred to in sub-section (2), if the asset is used for the purposes of business for a period of less than one hundred and eighty days in the relevant financial year.
Clause 38, inter alia, seeks to provide that the amount of depreciation of business capital assets shall be the aggregate of the following, namely :—
(a) such percentage of the adjusted value of any block of assets as specified in clause 45 read with 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.
The said clause further provides that the deduction under this clause in respect of such asset shall be restricted to fifty per cent. if the asset is acquired by the person during the financial year, and is used for the purposes of business for a period of less than one hundred and eighty days in the relevant financial year.
Clause 38 provides that the depreciation in respect of any business capital asset shall, notwithstanding anything contained in any other provisions of the Code, not be deemed to have been actually allowed, if the asset does not form part of any block of assets specified in the Fifteenth Schedule or the expenditure incurred for acquiring the asset has been allowed as a deduction under any provision of this Code.
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