Section 8 - Amendment of section 43 - Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986

8. Amendment of section 43. In section 43 of the Income-tax Act, with effect from the 1st day of April, 1988- (i) in clause (1),- (a) in Explanation 1, for the words, brackets, figures and letter clause (i), clause (ii) or clause (iii) of sub-section (1) or sub-section (1A) , the words, brackets and figures clause (ii) of sub-section (1) shall be substituted; (b) for Explanation 2, the following Explanation shall be substituted, namely :- 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. ; (c) for Explanation 4, the following Explanation shall be substituted, namely: - 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. ; (ii) in clause (6), - (a) after the proviso, the following clause shall be inserted, namely :- (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 writ- ten 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). ; (b) in Explanation 1, for the words any asset , the words any asset or any block of assets shall be substituted; (c) for Explanations 2 and 2A, the following Explanation shall be substituted, namely :- 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. ; (d) after Explanation 3, the following Explanation shall be inserted, namely: - 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. .