Section 33 — Deduction for depreciation

(1) A deduction in respect of depreciation of—
( a) buildings, machinery, plant or furniture, being tangible assets;
( b) know-how, patents, copyrights, trademarks, licences, franchises or any
other business or commercial rights of similar nature, being intangible
assets acquired on or after the 1st April, 1998, not being goodwill of a
business or profession,
owned wholly or partly by the assessee and used wholly and exclusively for the
purposes of the business or profession, shall be allowed, as per the provisions of
this section.
(2) In case of assets referred to in sub-section (1) of an undertaking engaged in
generation or generation and distribution of power, the deduction in respect of
depreciation shall be such percentage of its actual cost to the assessee, as may be
prescribed.
(3) (a) In case of any block of assets, deduction in respect of depreciation shall be
such percentage of its written down value, as may be prescribed;
(b) when any building, machinery, plant or furniture is partly, or not wholly and
exclusively, used for the purposes of the business or profession, the deduction under
clause (a) shall be restricted to the fair proportionate part thereof as determined by
the Assessing Officer, having regard to the usage of such building, machinery, plant
or furniture for the purposes of the business or profession;
(c) when deduction of actual cost in respect of any machinery or plant has been
allowed under section 54, no deduction under this sub-section shall be allowed.
(4) The deduction under this section shall be restricted to 50% of the prescribed
rate, if such asset, being asset referred to in sub-sections (2) and (3) is—
( a) acquired by the assessee during the tax year; and
( b) put to use for the purposes of business or profession for less than one
hundred and eighty days in that tax year.
(5) The aggregate deduction in respect of depreciation allowable to the predeces -
sor and successor in cases of succession under section 70(1)( zd) or (ze) or (zf), or
section 313, or to the amalgamating and the amalgamated company in the case of
amalgamation, or to the demerged and resulting company in the case of demerger,
as the case may be, for any tax year, shall not exceed the deduction calculated at the
prescribed rates under this section as if the succession, amalgamation or demerger
had not taken place, and such deduction shall be allowed on pro rata basis based
on number of days for which assets were used by the following:—
( a) predecessor and successor, in case of such succession; or
( b) amalgamating company and the amalgamated company in case of an
amalgamation; or
( c) demerged company and the resulting company in case of a demerger.
(6) Where a building, not owned by the assessee, is held on lease or by any other right
of occupancy is used for the purposes of business or profession of the assessee, and
if any capital expenditure is incurred by the assessee for the purposes of business
or profession on construction of any structure or any work by way of renovation,
extension or improvement to such building, then such structure or work shall be
treated as a building owned by the assessee for the purposes of this section.
(7) The provisions of this section shall apply whether or not the assessee has claimed
deduction for depreciation in computing his total income.
(8) In addition to deduction under sub-section (3), additional deduction in respect
of depreciation for any new machinery or plant shall be allowed, when—
( a) the assessee is engaged in the business of manufacture or production
of any article or thing or in the business of generation, transmission or
distribution of power;
( b) the assessee acquires and installs the new machinery or plant;
( c) the new machinery or plant is first put to use by the assessee for the
purposes of business; and
( d) the new machinery or plant (not being a ship or an aircraft)—
( i) was not used either within or outside India by any other person
before its installation by the assessee;
( ii) is not installed in any office premises or any residential accommo-
dation, including accommodation in the nature of a guest house;
( iii) is not in the nature of any office appliances or road transport
vehicle; or
( iv) is not an asset on which the whole of the actual cost is allowed as
a deduction (whether by way of depreciation or otherwise) in com-
puting the income under the head “Profits and gains of business or
profession” of any tax year.
(9) The additional deduction in respect of depreciation referred to in sub-section
(8) shall be—
( a) 20% of the actual cost of the new machinery or plant in the tax year when
it is acquired and put to use, subject to the provisions of clause (b); or
( b) 10% of the actual cost, if the new machinery or plant is acquired and
put to use for less than one hundred and eighty days in the relevant tax
year, and 10% of the actual cost shall be allowed in the immediately
succeeding tax year.
(10) The difference between the written down value and the moneys payable
including the scrap value, if any, for any tangible asset in respect of which
depreciation is claimed and allowed under sub-section (2), shall be allowed as
deduction when—
( a) such asset is sold, discarded, demolished or destroyed in the tax year not
being the tax year in which it is first put into use;
( b) the moneys payable including the scrap value, if any, is less than its
written down value; and
( c) such deficiency is actually written off in the books of account of the
assessee.
(11) (a) Where the profits and gains chargeable for the tax year before allowing
the deduction under sub-sections (1) to (10) is less than such allowable deduction,
then—
( i) if such profits and gains is not a loss, the deduction under sub-sections
(1) to (10) shall be allowed to the extent of the available profits and gains;
( ii) if such profits and gains is a loss, no deduction under sub-sections (1)
to (10) shall be allowed;
(b) the amount of deduction which has not been allowed under clause (a) shall be
added to the allowable deduction under this section, whether available or not, for
the succeeding tax year and the total amount shall be deemed to be eligible for
deduction in that year, and so on for the succeeding tax years; and
(c) the provisions of this sub-section shall be subject to the provisions of sections
112(3) and 113(4).
(12) For the purposes of this section,—
( a) “assets” mean—
( i) tangible assets, being buildings, machinery, plant or furniture;
( ii) intangible assets being—
( A) know-how; or
( B) patents; or
( C) copyrights; or
( D) trademarks; or
( E) licences; or
( F) franchises; or
( G) any other similar business or commercial rights, but not being
goodwill of a business or profession;
( b) “know-how” means any industrial information or technique likely to
assist in the manufacture or processing of goods or in the working of a
mine, oil-well or other sources of mineral deposits (including searching
for discovery or testing of deposits for the winning of access thereto);
( c) “sold” includes a transfer by way of exchange or a compulsory acquisition
under any law for the time being in force but does not include a transfer,
in a scheme of amalgamation, of any asset by the amalgamating company
to the amalgamated company where the amalgamated company is an
Indian company or in a scheme of amalgamation of a banking company,
as referred to in section 5(c) of the Banking Regulation Act, 1949 (10 of
1949) with a banking institution as referred to in section 45(15) of the
said Act, sanctioned and brought into force by the Central Government
under section 45(7) of that Act, of any asset by the banking company to
the banking institution;
( d) “written down value of the block of assets” shall have the same meaning
as in section 41(1)(c).