Mr X transfer an asset from his block as gift to Mr B on 01.01.08 .the said was acquired on 01.01.05. Value of block on the date of the transfer was Rs 5 lachs, Mr x was not claiming any depreciation on the said asset .Now what will be the actual cost in the hands of Mr B in respect of the said asset.
Whether the depreciation allowable as per sec 32 (1)(ii) will be deducted while computing the the actual cost as per explanation 5 to 32(1)(ii) or Rs.5 lacks.
Explanation 2 of Sec 43(1) Says , Where an assets is acquired by the assesseeby way of gift or inheritence , the actual cost of the assets to the assesssee shall be the actual cost to the previous owner as reduced by the depreciation allowable on the asset , as if the asset was the only assets in the block of assets.
in the present case as Mr X had not claimed any depreciaion , hence actual cost to Mr. B shall be the actual cost of Mr X i.e. Rs 5,00,000.
If Mr X had claimed then actual cost to Mr. B Shall be Rs.5 Lacks reduced by allowable depreciation.
In the present situation Mr B Shall Claim depreciation on Rs.5 Lacks in the current year according to the applicable rate of depreciation .Further depreciation % will be reduced to 50% of actual rate of depreciation as asset was used less than 180 days.
Vardhaman Group of India
Pimpri Chinchwad
CA Inter
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