Amendment of section 43.
17. In section 43 of the Income-tax Act, with effect from the 1st day of April, 2010,—
(a) in clause (1), after Explanation 12, the following Explanation shall be inserted, namely:—
"Explanation 13.— The actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee under section 35AD, shall be treated as 'nil',—
(a) in the case of such assessee; and
(b) in any other case if the capital asset is acquired or received,—
(i) by way of gift or will or an irrevocable trust;
(ii) on any distrbution on liquidation of the company; and
(iii) by such mode of transfer as is referred to in clauses (i), (iv), (v), (vi), (vib), (xiii) and (xiv) of section 47;";
(b) in clause (6), after Explanation 6, the following Explanation shall be inserted, namely:—
'Explanation 7.— For the purposes of this clause, where the income of an assessee is derived, in part from agriculture and in part from business chargeable to income-tax under the head "Profits and gains of business or profession", for computing the written down value of assets acquired before the previous year, the total amount of depreciation shall be computed as if the entire income is derived from the business of the assessee under the head "Profits and gains of business or profession" and the depreciation so computed shall be deemed to be the depreciation actually allowed under this Act.'.
Notes on Clauses:
Clause 17 of the Bill seeks to amend section 43 of the Incometax Act, relating to definitions of certain terms relevant to income from profits and gains of business or profession.
The existing provisions contained in clause (1) of the said section provides that "actual cost" means the actual cost of the assets to the assessee, reduced by the portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. The proposed amendment seeks to insert a new Explanation 13 to the said sub-section to provide that the actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee under section 35AD (relating to deduction in respect of expenditure on specified business and proposed to be inserted as a new section in the Income-tax Act, 1961) and shall be treated as 'nil' (a) in the case of such assessee and (b) in any other case if the capital asset is acquired or received by way of gift or will or irrevocable trust, on any distribution on liquidation of the company and by such mode of transfer as is referred to in clauses (iv), (v), (vi), (vib), (xiii) and (xiv) of section 47. The proposed amendment is consequential in nature.
It is also proposed to insert an Explanation in clause (6) of the said section to clarify that where the income of an assessee is derived, in part from agriculture and in part from business of the assessee chargeable to income-tax under the head "Profits and gains of business and profession", for computing the written down value of assets acquired before the previous year, the total amount of depreciation shall be computed as if the entire income is derived from the business of the assessee under the head "Profits and gains of business or profession" and the depreciation so computed shall be deemed to be the depreciation actually allowed during the previous year under the Income-tax Act, 1961.
These amendments will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.
