Profit and gains from Business or profession- Depreciation
Section 32(1)(ii) of Income Tax Act
Rule 5 of Income Tax Rules 1962 defines treatment of
Depreciation against Profit and Gainst from Business or
profession.
Provisions in Income Tax Rules 1962 related to Rule 5 is as
under:
Depreciation
5. (1) Subject to the provisions of sub-rule (2), the allowance
under clause (ii) of sub-section (1) of section 32 in respect of
depreciation of any block of assets shall be calculated at the
percentages specified in the second column of the Table in
Appendix I to these rules on the written down value of such
block of assets as are used for the purposes of the business or
profession of the assessee at any time during the previous year.
(1A) The allowance under clause (i) of sub-section (1) of
section 32 of the Act in respect of depreciation of assets
acquired on or after 1st day of April, 1997 shall be calculated
at the percentage specified in the second column of the Table in
Appendix IA of these rules on the actual cost thereof to the
assessee as are used for the purposes of the business of the
assessee at any time during the previous year :
Provided that the aggregate depreciation allowed in respect of
any asset for different assessment years shall not exceed the
actual cost of the said asset :
Provided further that the undertaking specified in clause (i) of
sub-section (1) of section 32 of the Act may, instead of the
depreciation specified in Appendix IA, at its option, be allowed
depreciation under sub-rule (1) read with Appendix I, if such
option is exercised before the due date for furnishing the
return of income under sub-section (1) of section 139 of the
Act,
(a) for the assessment year 1998-99, in the case of an
undertaking which began to generate power prior to 1st day of
April, 1997; and
(b) for the assessment year relevant to the previous year in
which it begins to generate power, in case of any other
undertaking :
Provided also that any such option once exercised shall be final
and shall apply to all the subsequent assessment years.
(2) Where any new machinery or plant is installed during the
previous year relevant to the assessment year commencing on or
after the 1st day of April, 1988, for the purposes of business
of manufacture or production of any article or thing and such
article or thing-
(a) is manufactured or produced by using any technology
(including any process) or other know-how developed in, or
(b) is an article or thing invented in,
a laboratory owned or financed by the Government or a laboratory
owned by a public sector company or a University or an
institution recognised in this behalf by the Secretary,
Department of Scientific and Industrial Research, Government of
India,
such plant or machinery shall be treated as a part of block of
assets qualifying for depreciation at the rate of 40 per cent of
written down value, if the following conditions are fulfilled,
namely :-
(i) the right to use such technology (including any process) or
other know- how or to manufacture or produce such article or
thing has been acquired from the owner of such laboratory or any
person deriving title from such owner ;
(ii) the return furnished by the assessee for his income, or the
income of any other person in respect of which he is assessable,
for any previous year in which the said machinery or plant is
acquired, shall be accompanied by a 88certificate from the
Secretary, Department of Scientific and Industrial Research,
Government of India, to the effect that such article or thing is
manufactured or produced by using such technology (including any
process) or other know-how developed in such laboratory or is an
article or thing invented in such laboratory ; and
(iii) the machinery or plant is not used for the purpose of
business of manufacture or production of any article or thing
specified in the list in the Eleventh Schedule to the Act.
Explanation : For the purposes of this sub-rule,-
(a) "laboratory financed by the Government" means a laboratory
owned by any body [including a society registered under the
Societies Registration Act, 1860 (21 of 1860)], and financed
wholly or mainly by the Government ;
(b) "public sector company" means any corporation established by
or under any Central, State or Provincial Act or a Government
company89 as defined in section 617 of the Companies Act, 1956
(1 of 1956) ; and
(c) "University" means a University established or incorporated
by or under a Central, State or Provincial Act and includes an
institution declared under section 3 of the University Grants
Commission Act, 1956 (3 of 1956), to be a University for the
purposes of that Act.
Rule 1 of Income Tax Rule 1962 - Short Title and Commencement
Rule 2 of Income Tax Rule 1962 - Definitions of Income Tax Rules
Rule 2A Limits for the Purposes of Salary income Income Tax Rules 1962
Rule 3 Valuation of Perquisites to employees and Tax on Perquisites: Rule 3 of Income Tax Rules 1962
Rule 4 Unrealized rent of Income from House Property: Rule 4 of Income Tax Rules 1962
Rule 5AA Prescribed authority for Investment Allowance: Rule 5AA of Income Tax Rules 1962