Section 32:
Depreciation.
(1) 1
In respect of depreciation of
(i) buildings, machinery, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or
commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April,
1998,
owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the
following deductions shall be allowed
2
(i) in the case of assets of an undertaking engaged in generation or generation and distribution
of power, such percentage on the actual cost thereof to the assessee as may be prescribed;
(ii) 3
in the case of any block of assets, such percentage on the written down value thereof as may
be prescribed:
4
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5
Provided 6
*** that no deduction shall be allowed under this clause in respect of
(a) any motor car manufactured outside India, where such motor car is acquired by the assessee
after the 28th day of February, 1975 7
but before the 1st day of April, 2001, unless it is used
(i) in a business of running it on hire for tourists; or
(ii) outside India in his business or profession in another country; and
(b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more
years under an agreement entered into by the Central Government undersection 42:
8
Provided further that where an asset referred to in clause (i) 9
or clause (ii) or clause (iia) 10
or the
first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and
is put to use for the purposes of business or profession for a period of less than one hundred and eighty
days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted
to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (i)
9
or clause (ii) or clause (iia), as the case may be:
10
Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the
case may be, is acquired by the assessee during the previous year and is put to use for the purposes of
business for a period of less than one hundred and eighty days in that previous year, and the deduction
under this sub-section in respect of such asset is restricted to fifty per cent. of the amount calculated at the
percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the
balance fifty per cent. of the amount calculated at the percentage prescribed for such asset under
clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect
of such asset:
11
Provided also that where an asset being commercial vehicle is acquired by the assessee on or after
the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of
April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be
allowed on such percentage on the written down value thereof as may be prescribed.
Explanation.For the purposes of this proviso,
(a) the expression commercial vehicle means heavy goods vehicle, heavy passenger motor
vehicle, light motor vehicle, medium goods vehicle and medium passenger motor vehicle but
does not include maxi-cab, motor-cab, tractor and road-roller;
(b) the expressions heavy goods vehicle, heavy passenger motor vehicle, light motor
vehicle, medium goods vehicle, medium passenger motor vehicle, maxi-cab, motor-cab,
tractor and road roller shall have the meanings respectively as assigned to them in section 2 of
the Motor Vehicles Act, 1988 (59 of 1988):
12
Provided also that, in respect of the previous year relevant to the assessment year commencing
on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall,
in the case of a company, be restricted to seventy-five per cent. of the amount calculated at the
percentage, on the written down value of such assets, prescribed under this Act immediately before
the commencement of the Taxation Laws (Amendment) Act, 1991 (2 of 1991):
13
Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery,
plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences,
franchises or any other business or commercial rights of similar nature, being intangible assets
allowable to the predecessor and the successor in the case of succession referred to in 14
clause (xiii),
clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the
amalgamated company in the case of amalgamation, or to the demerged company and the resulting
company in the case of demerger, as the case may be, shall not exceed in any previous year the
deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger,
as the case may be, had not taken place, and such deduction shall be apportioned between the
predecessor and the successor, or the amalgamating company and the amalgamated company, or the
demerged company and the resulting company, as the case may be, in the ratio of the number of days
for which the assets were used by them.
15
Explanation 1.Where the business or profession of the assessee is carried on in a building not
owned by him but in respect of which the assessee holds a lease or other right of occupancy and any
capital expenditure is incurred by the assessee for the purposes of the business or profession on the
construction of any structure or doing of any work in or in relation to, and by way of renovation or
extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the
said structure or work is a building owned by the assessee.
Explanation 2.16
For the purposes of this sub-section written down value of the block of
assets shall have the same meaning as in clause (c) of sub-section (6) of section 43.
17
Explanation 3.For the purposes of this sub-section, 18
the expression assets shall mean
(a) tangible assets, being buildings, machinery, plant or furniture;
(b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises
or any other business or commercial rights of similar nature.
Explanation 4.—For the purposes of this sub-section, the expression “know-how” means any
industrial information or technique likely to assist in the manufacture or processing of goods or in
the working of a mine, oil-well or other sources of mineral deposits (including searching for
discovery or testing of deposits for the winning of access thereto).
19
Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this
sub-section shall apply whether or not the assessee has claimed the deduction in respect of
depreciation in computing his total income;
20
(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been
acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of
manufacture or production of any article or thing 2122
or in the business of generation, transmission or
distribution of power, a further sum equal to twenty per cent. of the actual cost of such machinery or
plant shall be allowed as deduction under clause (ii):
23
Provided that where an assessee, sets up an undertaking or enterprise for manufacture or
production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified
by the Central Government in this behalf, 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, and acquires and installs any new machinery or
plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the
period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the
said backward area, then, the provisions of clause (iia) shall have effect, as if for the words “twenty
per cent.”, the words “thirty-five per cent.” had been substituted:
24
Provided further that no deduction shall be allowed in respect of—
(A) any machinery or plant which, before its installation by the assessee, was used either
within or outside India by any other person; or
(B) any machinery or plant installed in any office premises or any residential accommodation,
including accommodation in the nature of a guest-house; or
(C) any office appliances or road transport vehicles; or
(D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction
(whether by way of depreciation or otherwise) in computing the income chargeable under the
head “Profits and gains of business or profession” of any one previous year;
25
(iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is
claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the
previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the
amount of scrap value, if any, fall short of the written down value thereof:
Provided that such deficiency is actually written off in the books of the assessee.
Explanation.—For the purposes of this clause,—
(1) “moneys payable” in respect of any building, machinery, plant or furniture includes—
(a) any insurance, salvage or compensation moneys payable in respect thereof;
(b) where the building, machinery, plant or furniture is sold, the price for which it is sold,
so, however, that where the actual cost of a motor car is, in accordance with the proviso to
clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect
of such motor car shall be taken to be a sum which bears to the amount for which the motor car is
sold or, as the case may be, the amount of any insurance, salvage or compensation moneys
payable in respect thereof (including the amount of scrap value, if any) the same proportion as the
amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as
it would have been computed before applying the said proviso;
(2) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law
for the time being in force but does not include a transfer, in a scheme of amalgamation, of any
asset by the amalgamating company to the amalgamated company where the amalgamated
company is 26
an Indian company or in a scheme of amalgamation of a banking company, as
referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a
banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and
brought into force by the Central Government under sub-section (7) of section 45 of that Act of
any asset by the banking company to the banking institution.
27
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28
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29
(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under
sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous
year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the
provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of
the allowance to which effect has not been given, as the case may be, shall be added to the amount of the
allowance for depreciation for the following previous year and deemed to be part of that allowance, or if
there is no such allowance for that previous year, be deemed to be the allowance for that previous year,
and so on for the succeeding previous years.
Notes:
1. Subs. by Act 21 of 1998, s. 9, for certain words and figures (w.e.f. 1-4-1999).
2. Ins. by Act 7 of 1998, s. 2 (w.e.f. 1-4-1998).
3. Subs. by Act 46 of 1986, s. 5, for the opening paragraph (w.e.f. 1-4-1988).
4. The first proviso omitted by Act 22 of 1995, s. 7 (w.e.f. 1-4-1996).
5. Subs. by Act 49 of 1991, s. 11, for the second proviso (w.e.f. 1-4-1992).
6. The word further omitted by Act 22 of 1995, s. 7 (w.e.f. 1-4-1996).
7. Ins. by Act 14 of 2001, s. 21 (w.e.f. 1-4-2002).
8. Subs. by Act 7 of 1998, s. 2, for the second proviso (w.e.f. 1-4-1998).
9. Subs. by Act 20 of 2002, s. 14, for or clause (ii) (w.e.f. 1-4-2003).
10. Ins. by Act 20 of 2015, s. 10 (w.e.f. 1-4-2016).
11. Ins. by Act 11 of 1999, s. 5 (w.e.f. 1-4-1999).
12. Ins. by Act 2 of 1991, s. 4 (w.e.f. 15-1-1991). Later Act 2 of 1991 repealed by Act 23 of 2016, s. 2 and the First Schedule
(except s. 6) (w.e.f. 6-5-2016).
13. Subs. by Act 27 of 1999, s. 12, for the fourth proviso (w.e.f. 1-4-2000).
14. Subs. by Act 14 of 2010, s. 8, for clause (xiii) and clause (xiv) (w.e.f. 1-4-2011).
15. Ins. by Act 46 of 1986, s. 5 (w.e.f. 1-4-1988).
16. Subs. by Act 20 of 2002, s. 14, for For the purposes of this clause (w.e.f. 1-4-2003).
17. Ins. by Act 21 of 1998, s. 9 (w.e.f. 1-4-1999).
18. Subs. by Act 33 of 2009, s. 11, for the expressions assets and block of assets (w.e.f. 1-4-2010).
19. Ins. by Act 14 of 2001, s. 21 (w.e.f. 1-4-2002).
20. Subs. by Act 18 of 2005, s. 8, for clause (iia) (w.e.f. 1-4-2006).
21. Ins. by Act 23 of 2012, s. 7 (w.e.f. 1-4-2013).
22. Subs. by Act 28 of 2016, s. 13, for “or in the business of generation or generation and distribution” (w.e.f. 1-4-2017).
23. Ins. by Act 20 of 2015, s. 10 (w.e.f. 1-4-2016).
24. Subs. by s. 10, ibid., for “Provided” (w.e.f. 1-4-2016).
25. Ins. by Act 21 of 1998, s. 9 (w.e.f. 1-4-1998).
26. Subs. by Act 18 of 2005, s. 8, for “an Indian Company” (w.e.f. 1-4-2005).
27. Clauses (iv), (v) and (vi) omitted by Act 46 of 1986, s. 5 (w.e.f. 1-4-1988).
28. Subs-section (1A) omitted by s. 5, ibid. (w.e.f. 1-4-1988).
29. Subs. by Act 14 of 2001, s. 21, for sub-section (2) (w.e.f. 1-4-2002).