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40. Deduction for terminal allowance
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40. Deduction for terminal allowance.—(1) A person shall be allowed a terminal allowance in respect of a block of assets, if,—
(a) the block of assets has ceased to exist by reason of being demolished, destroyed, discarded or transferred during the financial year ; and
(b) the percentage specified in the Fifteenth Schedule for computing depreciation in respect of the block of assets is zero.
(2) The terminal allowance referred to in sub-section (1) shall be computed in accordance with the formula—
A + B – C
Where
A = the written down value of the block of asset at the beginning of the financial year ;
B = the actual cost of any asset falling within that block, acquired during the financial year ; and
C = the amount accrued or received in respect of the assets which are demolished, destroyed, discarded or transferred during the financial year together with the value of the carcass or the scrap, if any.
(3) The terminal allowance referred to in sub-section (1) shall be treated as "nil", if the net result of the computation, thereunder, is negative.
Clause 40 seeks to provide that terminal allowance shall be allowed in respect of a block of asset, if the block of assets has ceased to exist by reason of being demolished, destroyed, discarded or transferred during the financial year and the percentage specified in the Fifteenth Schedule for computing depreciation in respect of the block of assets is zero.
The terminal allowance shall be aggregate of the written down value of the block of asset at the beginning of the financial year and the actual cost of any asset falling within that block, acquired during the financial year, as reduced by the amount accrued or received in respect of the assets which are demolished, destroyed, discarded or transferred during the financial year together with the value of the carcass or the scrap, if any.
The said clause further provides that the terminal allowance shall be treated as "nil", if the net result of the computation is negative.
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