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CHAPTER IV Pains of Business or Profession Profits and Gains of Business or Profession Computation of actual cost 39.(1) The actual cost of an asset used for the purposes of the business or profession shall be the actual cost to the assessee,as reduced by the following amounts:— (a)part of cost of asset, if any, met by any other person or authority,directly or indirectly; (b)goods and services tax paid in respect of which credit of input tax has been claimed and allowed under the relevant law; (c)duty of excise or additional duty leviable under section 3 of the Customs Tariff Act, 1975in respect of which a claim of credit has been made and allowed under the Central Excise Rules, 1944; (d)subsidy, grant or reimbursement, by whatevername called, if any, relatable to the acquisition of the asset, received, directly or indirectly,by the assessee from— (i)the Central Government; (ii)a State Government; (iii)any authority established under any law; or (iv)any other person. (2)The payment or aggregate of payments exceeding ?10000 in a day for acquisition of an assetor part thereof,made to a personin a mode otherwise thanbyspecified banking or online mode, shall be excluded from the actual cost of thatasset. (3) In a case where the subsidy, grant or reimbursement referred to in sub-section (1)(d) is not directly relatable to the asset acquired, the amount of reduction under sub-section (1)(d) shall be determined as under: A× B C where,— A = total amount of subsidy, grant or reimbursement not directly relatable to the asset; B = cost of the asset acquired for which actual cost isto be determined; C = cost of all the assets in respect of or in reference to which the subsidy or grant or reimbursement is so received. (4)In circumstances specified under column B of the Table below, the actual ,cost of the asset shall be as specified in column C thereof Table
Sl.No. | Specified circumstances | Determination of actual cost |
A | B | C |
1. | | |
2. | | |
3 | | |
4. | | |
5. | | |
6. | | |
7. | Where an asset, which previously belonged to the assessee and had been used by him for the purpose of his business or profession, is reacquired by the assessee. | (a)Actual cost of the asset in the hands of assessee, when it was first acquired, as reduced by— (i) depreciation actually allowed in respect of tax year commencing on 1stApril,1986 or any earlier tax year; and (ii) depreciation allowable for tax year commencing on or after 1stApril, 1987 under this Act or under the Income-tax Act, 1961(43 of 1961), as if such asset was the only asset in the relevant block of asset; or (b) actual price for which suchasset is reacquired bythe assesse, whichever is lower. |
8. | Where anasset is acquired by the assessee from previous owner and subsequently asset is given back to the previous owner by way of lease, hire or otherwise, and— (a) the asset was being used for the purpose of business or profession by the previous owner; and (b) depreciation has been claimed by the previous owner. | Actual cost of asset to the assessee shall be the written down value of the asset in the hands of the previous owner at the time of transfer by the previous owner. |
9. | Where an asset is used in business after it ceases to be used for scientific research related to that business and a deduction is allowable under section 33(3). | Actual cost of asset as reduced by deduction allowed for the capital assetunder section 45(1)(a) (i)or under section 35(1)(iv)of the Income-tax Act, 1961(43 of 1961). |
10. | Where the assesseehad acquired an asset outside India, as a non resident, and the asset is brought by him to India and put to use in his business or profession in India. | Actual cost of the asset as reduced by the depreciation– (a) that would have been allowable had the asset been used for the purpose of business or profession in India since the date of its acquisition; and (b)calculated at the rate in force. |
11. | Where capital asset is acquired under the scheme of corporatisation of a recognised stock exchange approved by the Securities and Exchange Board of India. | Actual cost of the asset, as if there was no corporatisation. |
12. | (a) Where deduction under section 46 was allowed or allowable in respect of the capital asset— (i)to the assessee; or (ii) to any person and the assessee acquires or receives such asset through special modes of acquisition from such person. (b) Where deduction allowed under section 46 in respect of a capital asset becomes deemed income as per section 46(9)(b). | (a)Actual cost shall be deemed to be nil. (b)Actual cost of the asset as reduced by the depreciation,— (i) that would have been allowable had the asset been used for the purpose of business since date of acquisition; and (ii)calculated at the rate in force. |
13. | Where any amount is paid or payable as interest in connection with the acquisition of an asset. | Actual cost shall not include so much of such amount as is relatable to any period after such asset is first put to use. |
(5)Irrespective of anything contained in sub-section (4),other than serial number 8 of the Table in the said sub-section, in a case where the asset is acquired by the assessee, its actual cost shall be such amount as may be determined by the Assessing Officer having regard to all the circumstances of the case, where— (a) the asset was used by any other person for the purposes of his business, before such acquisition; and (b)the Assessing Officer is satisfied that the main purpose of the transfer of the asset, directly or indirectly,was to reduce tax liability (by claiming depreciation on enhanced actual cost). (6)The determination of actual cost under sub-section (5) shall be made with the prior approval of the Joint Commissioner. (7)For the purposes of thissection, “special modes of acquisition” means acquisition— (a)by way of a gift or will or an irrevocable trust; or (b)upon distribution on the liquidation of a company; or (c)by such mode of transfer as is referred to in section 70(1)(a), (c),(d),(e), (j),(zd),(ze) and (zf).
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