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Can gifter (proprietor) claim depreciation on gifted assets

Priyanth (Owner) (33 Points)

18 September 2017

Hi,

We have a case where the owner (say Mr.A) of one proprietorship concren has gifted assets, which has machinery and sheds, related to that firm to his son (Mr.B) on 1-1-17.

Mr A firm and Mr B firms are two different entities as they are proprietorship in nature.

Now can Mr.A firm claim Depreciation on the assets for the peroid 1-4-16 to 31-12-16 and can Mr.B claim depeciation for the period 1-1-17 to 31-3-17.

Kindly share your views on this!

Thank you

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11 Replies

RAJA P M ("Do the Right Thing...!!!") (127058 Points)
Replied 18 September 2017

In my view,

Mr A claim the depreciation for the asset above said period...

Mr B can't.

Bcoz, The gift is given individual not to the firm.

Poltu Ghosh (Job) (1865 Points)
Replied 18 September 2017

From the income tax perspective, if any other asets in that block exist then Mr. A can claim depreciarion on the entire block. Since in case of gifted asset no money is payable so no deduction is allowed. If no asset exist in that block of assets then the wdv of the asset will become short term capital Loss.

Pushpak Lal (Student CA Final ) (286 Points)
Replied 18 September 2017

By the facts of the case, my understanding is as under -

Gift is not regarded as Transfer for the purpsoses of income tax act. Since the asset is not transferred, then Mr.A can still claim depreciation on it. Mr. B cannot claim depreciation of the same.

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 18 September 2017

Mr B can show the asset in his balance sheet by way of capital introduction and then he can claim depreciation

Priyanth (Owner) (33 Points)
Replied 19 September 2017

Originally posted by : RAJA P M
	In my view, Mr A claim the depreciation for the asset above said period... Mr B can't. Bcoz, The gift is given individual not to the firm.

He has given gift to Mr.B only, but it was mentioned that the gift is given for the purpose of doing business and Mr.B started a new firm on his name.

Now how to consider this?

Priyanth (Owner) (33 Points)
Replied 19 September 2017

Originally posted by : Pushpak Lal
	By the facts of the case, my understanding is as under - Gift is not regarded as Transfer for the purpsoses of income tax act. Since the asset is not transferred, then Mr.A can still claim depreciation on it. Mr. B cannot claim depreciation of the same.

Thank you sir,

The asset is indeed transfered by gift deed in registaror office. Kindly consider this and post your views please. thank you

RAJA P M ("Do the Right Thing...!!!") (127058 Points)
Replied 19 September 2017

Yeah...
The gift to Mr. B's name not to the firm. In case it's to the firm name then it ll be treat as Sales / Purchase for A / B's. It's follow business deal then both are claim the depreciation on above said period. Otherwise not applicable to B.....

Priyanth (Owner) (33 Points)
Replied 19 September 2017

Originally posted by : RAJA P M
	Yeah... The gift to Mr. B's name not to the firm. In case it's to the firm name then it ll be treat as Sales / Purchase for A / B's. It's follow business deal then both are claim the depreciation on above said period. Otherwise not applicable to B.....

Sir. Thank you for the reply.

I found this article @ https://www.moneymantan.com/2011/05/05/allowability-of-depreciation-section-32/

In this the author mentiones these lines

"Circumstances in which proportionate depreciation can be allowed under IT Act.

Circumstances: Under the following circumstances depreciation can claimed on a proportionate basis-