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Income-tax Act, 1961 Section - 43
Definitions of certain terms relevant to income from profits and gains of business or profession
Definitions of certain terms relevant to income from profits and gains
of business or
profession
43. In
sections 28 to 41 and in this section, unless the context otherwise requires—
32
(1) "actual
cost" means the actual cost of the assets to the assessee, reduced
by that portion of the cost thereof, if any, as has been met directly or indirectly by any
other person or authority:
33
[Provided
that where the actual cost of an asset, being a motor car
which is acquired by the assessee after the 31st day of March, 1967,
34[but
before the 1st
day of March, 1975,] and is used otherwise than in a business of running it on hire for
tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such
amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five
thousand rupees.]
Explanation 1.—Where an
asset is used in the business after it ceases to
be used for scientific research related to that business and a deduction has to be made
under 35
[clause (ii)
of sub-section (1)] of section-32 in respect of that asset, the actual
cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the
amount of any deduction allowed under clause (iv)
of sub-section (1) of section-35 or
under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922).
36
[Explanation
2.—Where an asset is acquired by the assessee by way of
gift or inheritance, the actual cost of the asset to the assessee shall be the actual cost to
the previous owner, as reduced by—
(
a) the amount of
depreciation actually allowed under this Act and the
corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of
any previous year relevant to the assessment year commencing before the 1st day of
April, 1988; and
(
b) the amount of
depreciation that would have been allowable to the assessee
for any assessment year commencing on or after the 1st day of April, 1988, as if the asset
was the only asset in the relevant block of assets.]
Explanation
3.—Where, before the date of acquisition by the assessee,
the
assets were at any time used by any other person for the purposes of his business or
profession and the
37[Assessing]
Officer is satisfied that the main purpose of the transfer
of such assets, directly or indirectly to the assessee, was the reduction of a liability to
income-tax (by claiming depreciation with reference to an enhanced cost), the actual cost
to the assessee shall be such an amount as the
37[Assessing]
Officer may, with the
previous approval of the
38[Deputy]
Commissioner, determine having regard to all the
circumstances of the case.
39
[Explanation
4.—Where any asset which had once belonged to the
assessee and had been used by him for the purposes of his business or profession and
thereafter ceased to be his property by reason of transfer or otherwise, is re-acquired by
him, the actual cost to the assessee shall be—
(
i) the actual
cost to him when he first acquired the asset as reduced by—
(
a) the amount of
depreciation actually allowed to him under this Act or under
the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect
of any previous year relevant to the assessment year commencing before the 1st day of
April, 1988; and
(
b) the amount of
depreciation that would have been allowable to the assessee
for any assessment year commencing on or after the 1st day of April, 1988, as if the asset
was the only asset in the relevant block of assets; or
(
ii) the actual price
for which the asset is re-acquired by him,
whichever
is less.]
Explanation 5.—Where a
building previously the property of the assessee
is brought into use for the purpose of the business or profession after the 28th day of
February, 1946, the actual cost to the assessee shall be the actual cost of the building to
the assessee, as reduced by an amount equal to the depreciation calculated at the rate in
force on that date that would have been allowable had the building been used for the
aforesaid purposes since the date of its acquisition by the assessee.
40
[Explanation
6.—When any capital asset is transferred by a holding
company to its subsidiary company or by a subsidiary company to its holding company,
then, if the conditions of clause (iv)
or, as the case may be, of clause (v)
of section-47 are
satisfied, the actual cost of the transferred capital asset to the transferee-company shall be
taken to be the same as it would have been if the transferor-company had continued to
hold the capital asset for the purposes of its business.]
41
[Explanation
7.—Where, in a scheme of amalgamation, any capital
asset is transferred by the amalgamating company to the amalgamated company and the
amalgamated company is an Indian company, the actual cost of the transferred capital
asset to the amalgamated company shall be taken to be the same as it would have been if
the amalgamating company had continued to hold the capital asset for the purposes of its
own business.]
42
[Explanation
8.—For the removal of doubts, it is hereby declared that
where any amount is paid or is payable as interest in connection with the acquisition of
an asset, so much of such amount as is relatable to any period after such asset is first put
to use shall not be included, and shall be deemed never to have been included, in the
actual cost of such asset;]
(
2) "paid"
means actually paid or incurred according to the method of
accounting upon the basis of which the profits or gains are computed under the head
"Profits and gains of business or profession";
42a
(3) "plant"
includes ships, vehicles, books, scientific apparatus and surgical
equipment used for the purposes of the business or profession;
(
4)
43[(
i) "scientific research"
means any activities for the extension of
knowledge in the fields of natural or applied science including agriculture, animal
husbandry or fisheries;]
(
ii) references to expenditure
incurred on scientific research include all
expenditure incurred for the prosecution, or the provision of facilities for the prosecution,
of scientific research, but do not include any expenditure incurred in the acquisition of
rights in, or arising out of, scientific research;
(
iii) references to scientific
research related to a business or class of
businesses include—
(
a) any scientific
research which may lead to or facilitate an extension of that
business or, as the case may be, all businesses of that class;
(
b) any scientific
research of a medical nature which has a special relation to
the welfare of workers employed in that business or, as the case may be, all businesses of
that class;
44
(5)
45
"speculative transaction"
means a transaction in which a contract for the
purchase or sale of any commodity, including stocks and shares, is periodically or
ultimately settled otherwise than by the actual delivery or transfer of the commodity or
scrips:
Provided that for the purposes
of this clause—
(
a) a contract in
respect of raw materials or merchandise entered into by a
person in the course of his manufacturing or merchanting business to guard against loss
through future price fluctuations in respect of his contracts for actual delivery of goods
manufactured by him or merchandise sold by him; or
(
b) a contract in
respect of stocks and shares entered into by a dealer or
investor therein to guard against loss in his holdings of stocks and shares through price
fluctuations; or
(
c) a contract
entered into by a member of a forward market or a stock
exchange in the course of any transaction in the nature of jobbing or arbitrage to guard
against loss which may arise in the ordinary course of his business as such member;
shall
not be deemed to be a speculative transaction.
46
(6) "written
down value" means—
(
a) in the case of
assets acquired in the previous year, the actual cost to the
assessee;
(
b) in the case of
assets acquired before the previous year, the actual cost to
the assessee less all depreciation actually allowed to him under this Act, or under the
Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any
executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force:
47
[Provided
that in determining the written down value in respect of
buildings, machinery or plant for the purposes of clause (ii)
of sub-section (1) of section-32, "depreciation actually allowed" shall not include depreciation allowed under sub-clauses
(a), (b
) and (c)
of clause (vi) of sub-section
(2) of section-10 of the Indian
Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in
determining the written down value for the purposes of the said clause (vi);]
48
[(c) in
the case of any block of assets,—
(
i) in respect
of any previous year relevant to the assessment year
commencing on the 1st day of April, 1988, the aggregate of the written down values of
all the assets falling within that block of assets at the beginning of the previous year and
adjusted,—
(
A) by the increase
by the actual cost of any asset falling within that block,
acquired during the previous year; and
(
B) by the reduction
of the moneys payable in respect of any asset falling
within that block, which is sold or discarded or demolished or destroyed during that
previous year together with the amount of the scrap value, if any, so, however, that the
amount of such reduction does not exceed the written down value as so increased; and
(
ii) in respect of
any previous year relevant to the assessment year
commencing on or after the 1st day of April, 1989, the written down value of that block
of assets in the immediately preceding previous year as reduced by the depreciation
actually allowed in respect of that block of assets in relation to the said preceding
previous year and as further adjusted by the increase or the reduction referred to in item
(i).]
Explanation
1.—When in a case of succession in business or profession,
an assessment is made on the successor under sub-section (2) of section-170 the written
down value of
49[any
asset or any block of assets] shall be the amount which would have
been taken as its written down value if the assessment had been made directly on the
person succeeded to.
50
[Explanation
2.—Where in any previous year, any block of assets is
transferred,—
(
a) by a holding
company to its subsidiary company or by a subsidiary
company to its holding company and the conditions of clause (iv)
or, as the case may be,
of clause (v) of section-47 are satisfied; or
(
b) by the amalgamating
company to the amalgamated company in a scheme
of amalgamation, and the amalgamated company is an Indian company,
then,
notwithstanding anything contained in clause (1),
the actual cost of
the block of assets in the case of the transferee-company or the amalgamated company, as
the case may be, shall be the written down value of the block of assets as in the case of
the transferor-company or the amalgamating company for the immediately preceding
previous year as reduced by the amount of depreciation actually allowed in relation to the
said preceding previous year.]
Explanation 3.—Any allowance
in respect of any depreciation carried
forward under sub-section (2) of section-32 shall be deemed to be depreciation "actually
allowed".
51
[Explanation
4.—For the purposes of this clause, the expressions
"moneys payable" and "sold" shall have the same meanings as in the Explanation
below
sub-section (4) of section-41.]
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