Meaning of actual cost
42. (1) The actual cost of a business asset to the assessee shall be computed in accordance with the formula-
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[A-(B+C]-(D x A) / E |
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Where |
A |
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cost of the business asset to the assessee including the interest paid on the capital borrowed for acquiring the asset for the period before the asset is put to use; |
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B |
= |
the amount paid or payable as interest in connection with the acquisition of the asset for any period after the asset is first put to use if the amount is included in the amount 'A'; |
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C |
= |
the amount of additional duty leviable under section 3 of the customs Tariff Act, 1975 or the amount of duty of excise, in respect of which a claim of credit has been made and allowed under the Central Excise Rules, 1944; |
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D |
= |
the amount of subsidy, grant or reimbursement (by whatever name called) received by the assessee, directly or indirectly, from the Central Government, a State Government, any authority established under any law or by any other person in respect of, or with reference to, any asset including the relevant asset; |
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E |
= |
cost of all the assets in respect of or with reference to which the amount 'D' is so received. |
(2) The Assessing Officer may, notwithstanding anything contained in sub-section (1), determine, with the previous approval of the Joint Commissioner, the actual cost if -
(a) the assets were business assets at any time before the date of acquisition by the assessee; and
(b) the Assessing Officer is satisfied that the main purpose of the transfer of the 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).
(3) The actual cost of the business asset to the assessee shall be the deemed written down value, if -
(a) the asset is acquired by the assessee by way of gift or inheritance or under a slump sale; or
(b) the asset is converted by the assessee into a business asset in any financial year; or
(c) the assessee is transferee holding or a transferee subsidiary company.
(4) The actual cost of a business asset to the assessee shall, in a case of sale and buy back transaction in the business asset, be the lower of the following:-
(a) the actual price for which the asset is re-acquired by him; and
(b) the deemed written down value.
(5) The actual cost of the business asset to a transferee assessee shall be the written down value of the asset at the beginning of the financial year in the case of the transferor if the transferor re-acquires the asset by way of lease, hire or otherwise from the transferee assessee.
(6) The actual cost of an asset to an assessee shall be the actual cost of the asset, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used in India for the said purposes since the date of its acquisition by the assessee if,-
(a) the assessee is a non-resident;
(b) the asset was acquired by him outside India; and
(c) the asset is brought by him to India.
(7) The actual cost of an asset being the prescribed preliminary expenses shall not exceed an amount equivalent to five per cent. of -
(a) the cost of the project, or
(b) at the option of the assessee being an Indian company, the capital employed in the business.
(8) The actual cost of an asset shall be treated as 'nil', if-
(a) deduction in respect of the cost of the asset has been allowed or is allowable to the assessee under The Eleventh Schedule or The Twelfth Schedule or The Thirteenth Schedule; or
(b) deduction in respect of the cost of the asset has been allowed or is allowable under any of the aforesaid Schedules to any other person and the assessee has acquired or received the asset by any of the 'special modes of acquisition'.
(9) The Board may, for the purposes of determining the acutal cost of a business asset, prescribe-
(a) any other cost which may be included in determining the actual cost; and
(b) the method of determining the actual cost in the circumstances which are not provided for under this section.
(10) For the purposes of this section, deemed written down value of a business asset shall be the actual cost to the assessee or the previous owner, as the case may be, when he first acquired the asset as reduced by the aggregate amount of depreciation that would have been allowable to the assessee or the previous owner, as the case may be, for the preceding financial year as if the asset was the only asset in the relevant block of assets.
