r the Head : Gains of Business or Profession" [Sections 28 to 44D) Income unde! “profits and eet von 2(13) to nto any tnd, commer OF MADATASTTS CF Ay ay, is defined in sect eens for manufacture, The activities wich cp ae de, commerce or manufacture oF ace iets crane saya) ee : aa Cor onan “ ei ys a a eine ox manufactur.” The word business ey undestoo as seat and OES cose ogg! eh ‘action can also be considered as business. ‘The requirement i thane saceniduct with a set purpose. But an isolated trans have an element of trade. } jntellectual skill or manual skill on the a esc involves the idea ofan occupation requiing purely imelleew ; ee fe ton ea sould be sme Special suaicaon of « person apa oa, skill and ability, which is reqiaay a si ot as a profession. This could be having edueation in a particu sq ‘carying on any act 0 earns tollege, university oF institute or it may be even by experience, ss a major part of his time in order to earn his livelihood, ‘Vocation refers to any activity on which a person sP=n« y ae ainznan barwomn buazest, profession cr yoradon is however af material Decsise the income from all ey cc thle under the same head Le. Profs and gains of business or profession ta a teallation of provision relating to conversion of iaventory into Capital Asset [Section 28(va)] Teproide thatthe fai market value of inventory as onthe date on which it is converted nv, oF wened 3 a asset detenained in the prescribed manner shall be chargeable to tax as business income. For details sce par. 7 ea Chapter 7. 6.3 Profits and gains of business Profits and gains of business or profession: Necessary ingredients: Clause (i) of section 28 isthe mein clause dal with te haope of profits and gains ofa business in general, Onan analysis of clause (i) ive ingredients ar found one: (@ there should be a business or profession; (B) the business or profession should be carried on by the assessee; (©). the business or profession should be carried on for some time during the previous year, (@)_ the charge isin respect of the profits and gains of the previous year of the business or profession; and (6) the charge extends to any business or profession carried on, {6.4 Business must be carried on during the previous year Under section 28, the income is chargeable as profit of the business, only if the busi y the asses any time during the previous year. It is, however, not necessary that the cae is ae an a ee - scare or tll the end of the previous year. Hence the year in which the business income is aa re Al sme uM i i vant. Also relevant re rae a ected not cary busines Leas applied and the amount that he receives cannot bear the character of profits of a business. Teas ere There are, however, six exceptions to the above rule. In these cases, certain receipts are taxable 8 ness’ even though no business is being carri eee, ; ing carried on by the assessee in the year of receipt. (Recovery against any loss, expenditure or trading liabili 2 : Been es ing liability earlier allowed as a deduction (Section 41(1) pe eine - Be electricity companies (Section 41(2)). pital asset used for scientific research (Section 41(3)]. {6.1 Business oF Pri ‘The word ‘Business’ is concer in the nature of trade, “The word business has a wider contet carying on of business need not necessarily consistIncome under th der the Head “Prop "ofits and Gains of Busi of Business or Profession” 149 ae acme oc art vt owing a busines loss, A trading loss of business is i no specific provision inthe Act for allowance ee (@ Tkshould be one that is incidental to the cary incidental the carrying ou ofan operuicn since MBNDESS and must at o sping diel fom of be ly anticipated as certain to occur in future, chargeable under tis hea: alto business and is deductible in computing the income (@ oss on account of embezzlement ‘embezzlement is discovered. (i) 1088 of stock-n-tade by fire and other natural cal (Gi) 10ss on account of robbery or theft provided itis Ge reaeratpet e201 Mctualons in exchange rio a the tine of remiting the money TRF yurchasé of raw (0) loss caused by non-recovery of advances made in course of bu Imoney palo a soplies for supply of raw material who doesnot supply oe gongs, MAME WM 6 vance (01) oss eaused due to breach of contrat for delivery of goods by either pany. (it) toss of raw material, finished goods in transit. (oy Toss caused by forfeiture of security deposits given at the ime of submission of tenders for supply of goods, n 28(via)) (2x) loss by the failure of bank in which money is deposited, ergy ls ekin ae no con re icp) iced enn covey of gen saa cai fit eeu sin 65a Losses which are not deductible from business income. is the main clue (@ Loss sustained before the business is commenced e.g. the pre-incorporation losses of the business taken over by a on a a ompany canot be claimed by the company os ure ‘Losses incurred in the closing down of the business. Loss incurred due to damage, destruction, etc. of capital assets. Loss which is not incidental to the carrying on of the business ofthe assessee, joc (¥) Loss due to sale of securities held as investments as it will be a capital loss and not the business loss (vi) Loss caused by forfeiture of advance given for purchase of capital assets. (vi) Violation of law is not a normal incident of trade and an expense incurred by way of penalty for infraction of laws is not deductible as business loss. ed on by thea (vii) Trading loss due to loss of goods in transit in normal course of business. ghout oe 6.6 Legal business ¥ illegal business ant. Also For purposes of taxation, there should not be, and indeed there is no distinction made between legal and illegal business. not ae Profits from an illegal business are subject to tax just as from a legal business. of bus ‘6.7 Cases where income from certain business is not taxable under the head Profits and gains of business’ receipts wm (W) Rent from House Property: Where an assessee is carrying on a business of owning and letting out of residential . ‘houses, the income derived by him, from such letting, shall be taxable under the head ‘Income from house property’ and not jon 41(1)h ‘as business income. However, if residential houses/flats are let out to the employees for efficient conduct of assessee’s own business and letting of house properties is not the main business of the assessee but is subservient and incidental to the main business, income from such letting shall be taxable as business income.nto Income TaX Chay ¢ simplified Apprvae! ne pees ating in shares and securities and ca «on a business of dealing sss wha Is caring Om 8 DURSIE Cy tye ividends, under the bead “Income nome it be taxable, i way adeno Senter nder this Bea ee ting ram Losers Races et ron ar Soma yeni Ha gateea a ATMEL ne ped eas of income ave bee esi under hove hea on £8 tnvome from busines oF ion 2 powitions contained io sections 3 secon i ip ack Ms oO a eduction of expereince Hs ory General principles for allowability of deductions 1 the previous year: wining from Lamers, Races te: 7° taxable under the head jp, business activity coe income from ilies therefore they have ope these three activi ion — how to be com ited 5: rte ded here hat he PWN Sm professi fits and gains of | (i) Expenditure should have been incurred dunn iy. Expenditure shouldbe incurred for the PurPost ‘ofthe business ii) No deduction is allowable in respect of 8 ‘discontinued business. (Go) Expenses incurred before the sting up of « business 0 not allowed. tingencies or anticipated losses cannot Pe claimed as a deduction: In cases yi, have not arisen during the previcay yt {69a Reservesprovisions for com the assessee provides for any contingent lat the asst Piipatd io arse in he future, no deduction i ll ane loxs has been actually incurred during the previous Year 6.10 Losses and expenditure “The terms “Loss” and “Expenditure” have Dictionary (a) Loss — the damage, disadvantage, (@)_ Expenditure — an expending/a spending or using of money. Busines losses are different from expenditure and shall be allowed ‘as deduction by computing the profits or gains undg the hen Profits and gains of business or profession ws 28. The scheme of allowing business expenses while computing hy profits or gains under the head ‘Profits and gains of business oF profession’ is as under: a (a) expenses which are expressly allowed (Sections 30 to 3 (b) expenses which are specifically disallowed (Section 40); (0) expenses or payments not deductible in certain cases (Section 404). 6.11 Method of Accounting [Section 145) (1) Income tobe computed either on the bass of cash or mercantile system of accounting [Section 145(1)] Tncome chargeable under the head "Profits and gains of business oF profession” or "Income from other sources” sal, subject to the provision of section 145(2), be computed in accordance with either cash or mercantile system of account regularly employed by the assessee. (2) Central Government empowered to notify income computation and disclosure standards (Section 145(2)] ‘The Central Government may notify, in the Official Gazette from time to time, standards to be followed by any class of assessees or in respect of any class of income. 016, dated 29.92 ity like bad debts, sales tax, ete. whic! saple, Deduction can be claimed only when the expend tu distinct meanings and are defined as follows in the Webster New Woy etc. caused by losing something. income computation and disclose | Disclosure Stand Q) Assessing Officer ‘ ano ‘empowered to make assessment in the manner provided under section 144 o re joes Officeris not satisfied about the comectnes or completeness ofthe accouns ofthe asses ‘ Where Bete! eee in section 145(1) has not been regularly followed by the assessee. oF ae ae ‘computed in accordance with the standards notified under section 145(2). oon cer may make an assessment inthe manner provided in section 144 Ss I ies a sae ae eee seen ere 316 3) : ining of the term ‘paid’: lis i ea eas eRe ane spp te meet of the nail ae a a ee en at nem actually paid or incured ea ee ee h the profits or gains are computed under the head Profits nd fession’. Therefore, assessee follows the mercantile system of accounting expenses incur certain cases. ia 1st ‘Sey have been actualy paid . jr not. ithe ‘Bey have been actully paid during La a prec in case of any eligible new machinery and aircraft) which has been acquired and (@) by am assessee engaged in the business of manufacture or | generation or generation Production of any article or things or in the business of | and distribution of generation, transmission or generation and distribution of | power {Section Power [Section 32(1)(iia). 32001. (®) before 14-2020 by an assessee engaged in the business of ‘manufacture or production of any article or things which is set up in a notified backward area in the State of Andhra Pradesh Or in the State of Bihar or in the State of Telangana or in the State of West Bengal | ‘mentioned, two methods are commonly used for allowing normal depreciation. In case of block of assets x ation is allowed on the basis of written down value method whereas, in case of power generating or ‘and distributing undertaking, depreciation is allowed on the basis of straight line method on each and every asset ti depreciation is allowed @ 20%/35% of the cost of the eligible plant and machinery acquired and in the previous year and itis allowed only in first year in which asset is acquired and installed. Such depreciation is, ctible while calculating the written down value for the next year.1 Simplified Approach to Income Ta General principles regarding Depreiain unde Incometex AC (0 Deprecaion allowed o0— ( aldings, machinery plant nd fairs (©, Ano how. pats ong, cadet So Ee alae 7 include land because the land does not depreciate. angen ul des nt = Dearne ging ang comes ne eon I ig, a son i rare ct : e sn py oes bok ces du per scion 0), Pa inn Sor tina es rcs, sage famiture and fitings. being tangible asets: and : tain ranhises or any other business oF commercial , fanel y non tu Alowedto ove of ae ee ony oe het. The Pe Denes owed eo emg Grane acne ei oe ton ho ee nro ner ind waivers een he iste owner. is ay ox pret fn asmtn cared cn nm bung oon 6 Nn by However, where the basins Pease orthe ight of occupancy and any capital expenditure Paes rep of ih oy pfenon on te cnstucon of ns 5g of ny wo ‘Sti ap te ies ens erent ele na ceo sad aracure or work ba aiding owned byte assess, (uv) Msalowedeven fests wholly o party owned by the assess. Cy ren the ated oh pone of Dns oes: Bigg sw} owed only wie he to have nen ed mal or the prose the employers ties Sm, el i rand rire. provided bythe employer athe estes of the emplye ta rete nave been used wholly fr the employer’ business. iy. allowed onthe basis ofthe actual costo the owner. 1 lowed onthe system of block of esse bu ot incase of eeticy undertakings ae Meo ren dora ave mcd Howeres nhc of et of ondeang ed ee ons iibon of owe, depreciation may be claimed onthe Dass of rap is a, (oan Pete onthe writen down ale of set onthe Lat dy ofthe previous yea, Hower se Co generation or generation and sibuton of power although it allowed on elt ao rae eesepcsiation may be claimed xt certain percentage of acts cst ‘The following conditions must be sts Ged inorder to claim deprecation: (e)_ the aset must be owned by the assessee, wholly or pal. (0) the aset must be used forthe purposes ofthe business or profession, (6) the aset must be used during the previous year any ofthe above conditions is not satisfied, deprecation shall not be allowed. 6.154 What is ‘block of assets lock of Asets (Section 2(11)] "Block of assets” means a group of assets falling within a class of asses comping — Nee buildings, machinery, plant o furniture; (©) imangible assets, being know-how, patents, , trademark, or ines 0 fs ae copytighis, trademarks licences, franchises or any other basins in espec of which the same percentage of depreciation is prescribed. Class of Assets His ‘Asset eligible for deprecation have been classified into four clases i (a) building; © plantand machinery, (©) furniture; a ae (@)_ intangible assets ofthe type discussed above.ach class of assets other than Gation are prescribed and for each cept tes an facies under econ S0ta(y) © "Puen of bss af mae a ee Beteig, LL Parl temporary erections sch as wooden structures ae suchatog aye bu ne FN pyre ed in "Siang [lost [Rumiture and fings including elecicalFiting a | (aa eet eee Wig wines ena : Morag | [MBE and plane ila jg | BRE. [Motorcars oter than those used in busines of ming Wom HIS i 4 plesk 5 for rate of depreciation of motor car acquired on or after 23.8 2619 en eee es sha, oo ured onor ater 2382019 but before 142020 and| [Machinery and plant other than those covered by block Nos. 20 8 below. Block? | Ships: J Ocean-going ships including dredgers, rugs, barges, srw similar shi 5 tugs, barges, survey launches and other similar shi com used mainly for dredging purposes and fishing vessels with wooden hall St wh am aia (@) Vessels ordinarily operating on inland waters, not covered by sub-item (c) below. al (ii) Vessels ordinarily operating on inland waters being speed boats Blosk3 ]( Motor buses, motor lorries and motor taxis used in a business of runing them oa hie: (Also see block 5 for rate of depreciation of Motor buses, motor lorries, ete. acquired on ov after 23.8.2019 but before 1.4.2020 and is put to use before 14.2020) (Moulds used in rubber and plastic goods factories, (iii) Machinery and plant, used in semi-conductor industry covering all integrated circuits (ICs) (excluding hybrid integrated circuits) ranging from small scale integration (SSI) large seale| aq integration/very large scale integration (LSUVLSI) as also discrete semi-conductor devices such as diodes, transistors, thyristor, triacs, etc.) other than those entitled to 80% rate of depreciation, given in block 7 below. (iv) Motor cars, other than those used in a business of running them on hire, acquired on or ne . after 23.8.2019 but before 1.4.2020 and is put to use before 1.4.2020. [Inserted by Notification No. 69/2019, dated 20.9.2019) ‘Block4 |( Aeroplanes — Aeroengines. | Commercial vehicle which is acquired by the assessee on or after 1.10.1998, but before 1.4.1999 and is put to use for any period before 1.4.1999 for the purposes of business or profession (iii) Specified life saving medical equipment @) Containers made of glass or plastic used as refills. (%) New commercial vehicle which is acquired on or after 1.1.2009 but before 1.10.2009 and is ‘Put to use before 1.10.2009 for the purposes of business or professionBlock 5. | Motor buses, motor lorries and motor taxis used in ab put to use before 1.4.2020. [Inserted by) ach to Income Ta st Approach 01 ee 154 ‘Simplifie | wi) Come uaters including computer sefrware at Po | | (eee ag waves rect Gre glass melting Fumaces used in (below grou cow fm field operations (distribution) by mineral] Cplinders ie Gas erating concer: PM! Ce in el operas and Ela round aks ad in titconeen Sorin Pou il Rolling mill wed i Role a, Enerey saving 8% Sree als and any secaly designed | in i) after 1-4-2014 oy) Any special devices including. lestric generio% and pumps running on wind energy| installed on or after 1-4-2014 ater supply project or a wate treatment o ne _ acquired and installed in a Ws a) enna a re eof nn of Ps facility under section S0-1A(4Y¢. ey) Wooden pas wedi arial sik manufetring meChn®. | civ) Cinematograph films — bubs of studio lights i>), Match factories — Wooden match frames- | ee) Tub, winding ropes. haulage ropes and sand sowing DIPS, and Safety lamps used in| ‘Mines and quasies. enn. Sale works — Salt pans reservoirs and condenser el» made of earthy, sandy or clayey| material or any other similar material. | oni Books owned by asesses caring on a profession, ing anu publications | faz Books owoed by assessees carrying on business in raning ending Iibrares. He) Ave polluion control equipment, Water pollution control equipment, Solidwaste contol} SGhipments, Solidaste recycling and resource recovery ystems I yusiness of running them on hire, acquired on | e for after 238.2019 but before 14.2020 and is 69/2019, dated 20.9.2019) { a aett | from the source of supply of raw water to the plant and fom | building, electrical fitngs, et. cannot te | | re ights of similar nature. Tima be observed that forthe above four clases of assets, tere can be 10 blocks of assets according to differen ae of depreciation prescribed. Bs buildings 3 blocks (5%, 10% and 40%) ae (6) fomninor Stns 1 block (10%) = este ‘machinery 5 blocks (15%, 20%, 30%, 40% and 45%) intangible assets 1 block (25%) blocks of buildit i buildings. All buildings owned by the assessee and used for business, carrying 5% depreciation will be groupe! Bloc used and used for business carrying 100% (40% w.e-f. 1.4.2017) depreciation will be grouped under Block-I1l. to form blocks: Since building is one of the class of assets which has three rates of depreciation, there will be tet k-L. These wil ‘identi: sildin r ee Meee ee sc lone eile ‘employees of the assessee. All buildings owned by the assessee ant -preciation grouped under Block-II. Similarly, all buildings ‘owned by the assesseeIncome under the Head “Py G Pr ‘ rad “Profits and Gains of Busi ee f Business or Profession a spore and fitings there will be only one bloc Ibasration 61: The following are thease Sets owned by Xas on 1.4 ing blocks of plant ineach case, PM and machinery. However, for intangible assets and [(B) Fumiture & Fixture used in meeting hall Rates of | Depreciation Mita tH 10% 105% Se | [owen 15% iia se | 30% | rx sei |Furniture and Fixture 15% Fumiture & fixtures used in meeting hall 10% dis used in a business of runnin; 108 econo a ‘Classify the assets into different block of assets. ; = cle Bt) Solution Block for Buildings First Block (10%) PEDVEC)| ‘Building A |Building B 2,40,000 Building D ee a 520,000| aa 11,20,000) [Second Biock (5%) Building C Torna for Plant & Machinery WDv.0] Block (15%) A 40,000) B 1,00,000) D 80,000 2,20,000| ie 440,000) \Second Block (30%) Machinery C 1,60,0001 rd Block (45%) "axis used in a business of running them on hire, acquired on or after 23.8.2019 but before ream ‘and is put to use before 1.4.2020 for Furniture & Fittings wDv.@| | Furniture & Fixture 2,40,000| | 3,00,000 [ 5,40,000|Cag Income Tax ritten down value of block of ee simplified Approach 12 oa [section 4360: 156 15h wetten down valve pups orcharpng sprint se he eae of ets seated prev J can all depression oe, sist of block of e880 hal be coy id, inthe case of assets assessee of all the assets falling me However ifany asset of the following sep ofthe previous Year which wi 2 a wn Sov at aia he seten value of that block of assets “athe said preceding previous year, ms 5 the previous year ing within the block, acd! during falling: ‘which is sold or discarded or demoii, eg ‘ctually allowed in respect of 1 actual cost of any asset add the actual cost of any sti orth ame loc ite, iat, Step 3 ar ine money pagable, in respect : Sent eel Sng ist per wi ce aio f SPT any, siep1v osu is wil ween Gwe 77 Ht the ed ofthe 38a FO BE PUSS of a, nrren year depreciation = f , eo (Fin exceeds such amoun, aap ris subject to the provision | Money payable”. As per Explanation (© “money payable” in respect of any bud se in respect thereof: section 41, ‘Meaning of te words machinery, lant and furniture includes: piney insurance, salvage or compensation money Pa (0). where the building, machinery, plant or fits is ‘sold, the price for whic “The word money’ has to be interpreted only creep or cash and not as an'y ber ting oF Benefit which cag evaluated in terms of money. (CIT v Kasturi & Sons ‘Lid, (1999) 237 ITR 24 (SO) ke IMeaning of the word “sold”: "Sold includes a transfer 6Y 40) of exchange or a compulsory acquisition under any} ee re inte aheme of amalgamation, of any asset bythe amalgamating for te time being in force but does not ero the amalgamated company whee the amalgamated oman ‘an Indian company. ing assets as on 14,2019: Illustration 6.2: X owns the followir Asset Rates of Depreciation Written down value as on 1.4. . 2018) | Building A 10% a Building B 10% al Building C 3% Building D_ 10% ‘Machinery P 15% | Machinery Q 15% ‘Machinery R 30% Car X 15% The following assets are acquired during the previous year 2019-20: Asset ase ‘Rates of Depreciation Cost of Acquisition (%) ; 15% IE Machinery S 15% |Machinery T olae 30% Patents 25% Know-how se 80000 (Car ¥ acquired on 59.2019 and 30% S000 put fo use immediately | 50,00 J1s7 [ Sale Consideration @] 1,20,000) {SACS 10,00) Amount @| Amount @) 70,000) 1,10,000) 60,000| 2,490,000 2,40,000) 1,20,000) 1,20,000) 2,20,000] 2,20,000] 2,20,000| 30,000) 40,000 1,50,000| __2,20,000 ‘Assets acquired during the year s 20,000 2,50,000[ _2,70,000 4,90,000 : Assets sold during the previous year P 10,000| down value as on 31.3.2020 for charging current year depreciation 4,80,000 Block (30%) down value as on 1.4.2019 R 70,000158 Simplified Approach 9 Income Tak Bc [add Assets acquired during the [Machinery T 2 Pee acquicd on 59.2079 ad paw we immediate? previous year jous year eas: Assets sold during the previ 0 for charging current year depreciation ‘as on 31.3:2024 Written down value Intangible Assets "writen down value as on 142019 [Assets acquired “during the year (80,000 + 60,000) | Toul Less: Sold during the year | 2 Fwriten down value as on 31.3:2020 for charging dePre=ia0°° =, - eprtinien is compa on vaso aves acai 0 heen of Le comm ore, Mn cnpmi gees te se ck ned of er tn ead ash SS ce “154 Steps for computing depreciation: Assets acquired during the yearin the ‘Rapective blocks to which the new ‘aseets belong, «the money received receivable along with scrap value, ifany in respect ofthe assets f the same block which are sold, discarded or during the year ‘+The written down value ofeach block as on the lst day of the previous year jpreciation atthe rates prescribed for each block. «+ Find value ofeach book atthe beginning of exchyear ‘On the closing written down value, compute the de Illustration 6.3: M Lid. owns the following assets on 1,4.2019: Assets WDY as on 1.4.2019 (| Rates of Depreciation (%) | Building A 10,20,000 10 x ‘Building B 5,40,000 10 Building C 635,000 | Building D 2,60,000} Building E 3,10,000 [Machinery A 60,0001 Machinery B 1,82,000 Machinery C 1,65,000) ‘Machinery D 4.0001wp & 159 ae 30 a 0 > 10 Me Rate of Depreciation Ss | eo Depreation Date of acquisition I Remar ppp 3 | (ea eo iS 1452019 ae MeN | pee 1552019 aay | ae 167.2019 y | a 15 2192019 ia | aan 30 21.9.2019 ~ as 25 154.2019, Sr 35 1752019, 30 acquired on 59.2019 and spss lowing S865 Sold bythe company ding the previous year DIDI ae 2 Sale consideration @) Date of Sale 1,10,000 29.2019 e 4,00,000 21.10.2019 ocr e 80,000 283.2020 ~ Determine the depreciation for the assessment year 2020-21 ‘Solution Pao ® ® 3) ®) @ 1 Building 10% 21,95,000| '5,40,000| —| 27,35,000| 2,73,500| ek 2 Building 5% 5,70,000) = 4,00,000] 1,70,000 '8,500| jlock 3 Machinery 15% 2,42,000] 1,78,000) a 4,20,000| 63,000) |Block 4 Machinery 30% 2,19,000} 5,16,000| 1,90,000 5,45,000) 1,63,500| ck 5 Furniture & Fixtures 1,18,000} =| = 1,18,000| 11,800] ck 6 Intangible assets Nill 100,000) = 1,00,000| 25,000| 545,300} _ 6,15e Depreciation on asset in the previous year of acqi mn if the asset is put to use for less than 180 days that previous year: Where any asset, falling within a block of asset, is acquired by the assessee during the previous ‘and is put to use for the purposes of business or profession for a period of less than 180 days in that previous year, ation in respect of such asset shall be restricted to 50% of the amount calculated at the percentage prescribed for the ‘of asset comprising such asset. Therefore, depreciation will be restricted to 50% ofthe normal depreciation, ifthe following conditions are satisfied: “(@) The asset is acquired during the previous year; and (&) tis put to use during the previous year; and (c) Ithas been used for a period of less than 180 days during the previous year. ie Example _ (@ Ifanew machinery eligible for 15% depreciation, business on 28.12.2019 depreciation would be allowabl is purchased on 15.12.2019 and put to use for the purpose of the le on this machinery @ 7.5% rather than the normal rate of 15%,ey “simpiied Approach to Income Tat (ap anew maciney pare ef eprecation would be allowable c 7 than 180 days during the Previous Yo f ie, uy Hnenen ome ON a Se ‘peat ri amo re wien a on tra ase Cs at reas pis ithe ae reciation @ 50% of that waitten down, put to use for less ih that case, depreciation @ 30% of vided te sa sset exes im tha OK at the beginning of the to use forthe purpose of the Busines o Teen acquired during the previo Mlustration 64: Ws block of assets carrying ition was 85. [Machines [Date when put to use Pp 14.1.2020 ia 4 1552019 R s.52019 [a1.1.2020 is fis.11.2019 [273.2020 Gn oir an oe WS wae seed nd atin we rw DD 120 day) wee aa. 400,000. ld (a) Calculate the depreciation forthe assessment Year 2020-21. fr machines were sold fr €7,00,000 instead of €4,00,0007 (b) What will be the answer Solution c it 1229 Be res tan 180 der ho mre 1.500 ae than 180 days but put to use So aad a na te cscs a 2 has not been acquired during the yo for asset acquired and put to Use for ls fon wet of the year is less than actual con’) oof val of ng to previns oats pole 0 a of a revi be charged on the ene ween dove nt mae ton down value of 4 machines previous year 2019-20, forming 00,000. The following 4machines of the same block. vere bout i Fay [WV ate bsining of be em ‘adione during the year nthe same block (i) Machine acquired last ‘but put to use this (depreciation to be allowed | this yea) Sear bt put we is year Gepesiaon toe allowed fom) 5,999 Tay Machine @ segue and pt ws for 160 days or more 700,000 Gin Machine § qi wi pu oe fr es ha 180 8 an y i Masti vious ou fora pid exceding 180 days but puto we for es then | | 180 days 3,50,000| 5.00.00), |_| c2,00,000+ 1.50.00 \ | Total ; 10,00,000 [Les Asst sol ring the year 000%) [WDV on which depreciation isto be charged 00,001 i | ) rs vi | | 37500) | [on 83,50,000 @ 7.5% 26250| 10 | Weta ori at end of he year 5,36250| (@)_[WDV at the beginning ofthe year =n (Additions during the year in the same block 5; | (i) Machine acquired last year but put to use this year 50,000 al Gi) acquired and put to use for 180 days or more Tooa00 qa il) acquired and put to use for less than 180 days z -sanon eg 3,50,000| _5,00,000| | Less: Assets sold during the year 0 - = 7.0; Income under the Hea Depreciation on '3,00,000 @ 7.5; pat to use for less than 180 days tion 6.5: W.D.V. of the ‘on 5.11.2019 for 83,00,000 Sold instead of machine “Snd'Y machines are sold instead of machine Z Sale price of machine Z sold during the year V. as on 31 3.2020 forthe purpose of charging depreciation Sa jation on 85,00,000 @ 15% or as on 1.42020 6,00,000) ition during the year of Machine Z put to use forless than 180 days 3,00,000) 9,00,000) 4,00,000] 5,00,000| 22,500 30,000] 52,500] —_[ 447,500) ® ® 6,00,000 3,00,000 9,00,000] 4,00,000| 5,00,000] 2,500 30,000] 52,500) 4,47,500