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Depreciation u/s32

26 December 2014

If a machinery A is purchased for 200000 on 15.5.2014 and put to use on 31.1.2015 and depreciation is calculated @ 15%p.a. Does half rule be applicable in this case. If yes, then from which date and why? Assessment year is 2015-16

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15 Replies

Rahul Kumar Chowdhary (CA) (82 Points)
Replied 26 December 2014

Yes half rule will be applicable in this case. As per proviso to Section 32 of the Income Tax Act 1961 if any assest is purchased during the previous year and put to use in the same previous year but the no of days of put use is less than 180 days then the depreciation is calculated at the half of the rate as prescribed.

Kavyaa (Budding CA) (107 Points)
Replied 26 December 2014

U/s 32 of Income Tax Act, the date of put to use must be taken for depreciation calculation.

Accordingly,

if the days for which it is put to use is less than 180days, 50% of the depreciation is eligible for deduction

if the days of put to use is 180 days or more, full amount of depreciation is deductible.

in your case, the D/o put to use i.e.31.01.2015 must be considered.

No. of days from 31.01.2015 to 31.03.2015=60 days

Deduction u/s 32 = 2,00,000 * 15% * 50% = 15,000

Ankur gupta (student) (48 Points)
Replied 26 December 2014

I agree with rahul and kavyaa.....they r r8

Varun Tavaria (Mr) (28 Points)
Replied 26 December 2014

Thanks Everybody!! But of this is case then why Machinery P of the same tax rate and Assessment Year purchased on 5.1.2014 for ₹50000 and put to use on 14.1.2015 being treated being treated as full depreciation? Inspite of no days being 76days which is 180 days from date of put to use?

Rahul Kumar Chowdhary (CA) (82 Points)
Replied 26 December 2014

Mr Varun as i already mentioned that if the assets is purchased in the previous year and put to use in the same previous year but for less than 180 days then the depreciation will be charged @ half of the rate prescribed unlikely if the assets were purchased in any previous year and put to use in another previous year then it is immaterial that the assets is put to use for less 180 days or more than 180 days then the depreciation will be charged at the full rate.

Mukesh Kumar Singh (CA-FINAL) (4094 Points)
Replied 26 December 2014

yes nhalf rate will apply

upta 31st march 2016, the depreciation will be 200000*15%*50%= 15000

CA ANKUSH AGGARWAL (CHARTERED ACCOUNTANT) (2782 Points)
Replied 26 December 2014

Originally posted by : Kavyaa Gunalan
	U/s 32 of Income Tax Act, the date of put to use must be taken for depreciation calculation. Accordingly, if the days for which it is put to use is less than 180days, 50% of the depreciation is eligible for deduction if the days of put to use is 180 days or more, full amount of depreciation is deductible. in your case, the D/o put to use i.e.31.01.2015 must be considered. No. of days from 31.01.2015 to 31.03.2015=60 days Deduction u/s 32 = 2,00,000 * 15% * 50% = 15,000

Arif Ali (Apt Co Advisory) (1230 Points)
Replied 26 December 2014

yes, the half of depreciation rate will be applicable. Since you have put to use it on 31.1.2015, So in the F.Y. 2014-15 the asset is used for less than 180 days.

Normally calculate the depreciation @ 7.5% on the value of asset. However if you have other asset falling in the block of 15%, then you have to add this in the same block. and on this you will calculate @ 7.5% and other remaining balance of block, will calaculate @ 15%.

Futher since it is machinery and it is used in manufacturing activity (assuming) then it is also eligible to take the additional depreciation @ 10%(this is half of 20%). this depreciation will be lessed from the written down value of block.

Arif Ali (Apt Co Advisory) (1230 Points)
Replied 26 December 2014

yes, the half of depreciation rate will be applicable. Since you have put to use it on 31.1.2015, So in the F.Y. 2014-15 the asset is used for less than 180 days.

Varun Tavaria (Mr) (28 Points)
Replied 26 December 2014

Now I got the point.Thank you everyone once again for helping for my tomorrow's class prelims.

Kavyaa (Budding CA) (107 Points)
Replied 26 December 2014

Varun,

Second provisio to clause (ii) of Section 32(1) reads as follows

[Provided further that where an asset referred to in clause (i) or clause (ii) [or clause (iia)], as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in THAT previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) 77[or clause (iia)], as the case may be :]