Interpretation of 35ad(7b) specified business

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Harish (Querist)
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01 January 2015 A company has acquired a machinery and claimed deduction under 35AD but transfered it to non specified business in 5th year of its acquisition. As per sec. 35AD(7b), it's required that deduction claimed to be treated as Income of 5th year after deducting depreciation. Can you please help on which year's depreciation is to be deducted from such deemed income- 1st year's or 1-4 year's or 1-5 year's?

Amol S Joglekar

Amol S Joglekar (Expert)
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02 January 2015 Where any asset, in respect of which a deduction is claimed and allowed under this section, is used for a purpose other than the specified business during the period specified in sub-section (7A), otherwise than by way of a mode referred to in clause (vii) of section 28, the total amount of deduction so claimed and allowed in one or more previous years, as reduced by the amount of depreciation allowable in accordance with the provisions of section 32, as if no deduction under this section was allowed, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used.
What is confusion??? The whole amount of deduction they are saying..

Harish

Harish (Querist)
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02 January 2015 Yes Sir, whole amount of deduction 'as reduced by depreciation' shall be treated as Income of the assessee. But my point is 'which year's depreciation' is to be taken to reduce such income? Is it all years up-till asset is used by assessee before transferring (including the year of transfer).

Amol S Joglekar

Amol S Joglekar (Expert)
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02 January 2015 Let us try to find out the RQTIONALE behind the provision OK?
I tax has given some additional benefit under this section. ok?
What is that?....the entire amount on capital expenditure of "specifeds"

Now when it wants to withdraw these benefits because assessee has not complied with some conditions.....what it can do?

It can now disallow that much amount which the assessee has gained EXTRA....i.e. over and above depreciation u/s 32.... Isnt it?

So the depreciation as per 32 to be allowed in FULL, the remaining amount to be added back as income.... is it ok?

Your views please.

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Harish

Harish (Querist)
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02 January 2015 I Agree, Sir. Depreciation of all the years are to be provided and as you described, its logical too. Thank you very much for taking out your time.

Amol S Joglekar

Amol S Joglekar (Expert)
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02 January 2015 You are most welcome.....

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