Section 41 — Written down value of depreciable asset

(1) For the purposes of computation of income under the head “Profits and
gains of business or profession”, written down value means—
( a) in case the asset is acquired in the tax year, the actual cost to the assessee;
( b) in case the asset is acquired before the tax year, actual cost to the
assessee less depreciation actually allowed under this Act or under the
Income-tax Act, 1961 (43 of 1961);
( c) in case of block of assets, the written down value computed in the
following manner:
[(A – D) + B – C] – E, where
A = the written down value of the block of assets in the immediately
preceding tax year;
B = actual cost of any asset falling within that block, acquired during
the tax year;
C = moneys payable together with scrap value, if any, in respect
of any asset falling within the block, which is sold, transferred,
demolished, destroyed or discarded during the tax year, where “C”
shall not exceed (A – D) + B;
D = depreciation actually allowed in respect of block of assets in
relation to the said immediately preceding tax year;
E = in the case of a slump sale, the actual cost of the asset falling
within that block as reduced by—
( i) depreciation actually allowed in respect of tax year commenc-
ing on 1st April, 1986 or any earlier tax year; and
( ii) depreciation allowable for tax year commencing on or after
1st April, 1987 under this Act or under the Income-tax Act,
1961 (43 of 1961), as if such asset was the only asset in the
relevant block of asset.
(2) Where any block of asset is transferred by—
( a) a holding company to its subsidiary company and the conditions of
section 70(1)(c) are satisfied;
( b) a subsidiary company to its holding company and the conditions of
section 70(1)(d) are satisfied; or
( c) amalgamating company to the amalgamated company being an Indian
company,
then the actual cost of the block of assets, irrespective of anything contained in
section 39, in the hands of transferee company or amalgamated company, as the
case may be, shall be the same as written down value of the block of assets as in the
case of the transferor company or the amalgamating company in the immediately
preceding tax year as reduced by depreciation actually allowed in respect of that
block of asset in relation to that tax year.
(3) Where any asset, forming part of a block of assets is transferred by a demerged
company to a resulting company, the written down value of block of assets of
demerged company for the immediately preceding tax year, shall be reduced by
the written down value of the assets transferred to the resulting company pursuant
to such demerger.
(4) Where any asset, forming part of a block of assets is transferred by a demerged
company to a resulting company then the actual cost of the block of assets, irrespec-
tive of anything contained in section 39, for resulting company shall be the written
down value of the assets transferred from the demerged company immediately
before such demerger.
(5) Where any block of assets is transferred by a private company or unlisted public
company to a limited liability partnership and the conditions in section 70(1)( ze)
are satisfied, then the actual cost of the block of assets, irrespective of anything
contained in section 39, in the hands of limited liability partnership shall be writ -
ten down value in the hands of said company as on the date of conversion of the
company into limited liability partnership.
(6) Where any asset forming part of the block of assets is transferred to a
company under the scheme of corporatisation of a recognised stock exchange in
India approved by the Securities and Exchange Board of India, the written down
value of the block of assets in the hands of such company, shall be the written down
value of the assets transferred immediately before such transfer.
(7) In a case of succession in business or profession under section 313, where an
assessment is made in the hands of successor under section 313(2), the written
down value of any asset or block of assets shall be the amount which would have
been taken as its written down value, if the assessment had been made directly on
the person succeeded to.
(8) For the purposes of this section, any allowance in respect of any depreciation
carried forward under section 33(11) shall be deemed to be the depreciation
actually allowed.
(9) Where an assessee was not required to compute his total income for the purposes
of this Act for any tax year or tax years preceding the tax year under consideration,—
( a) the actual cost of an asset shall be adjusted by the amount attributable
to the revaluation of such asset, if any, in the books of account;
( b) the total amount of depreciation on such asset provided in the books of
account of the assessee in respect of such tax year or tax years preceding
the tax year under consideration shall be deemed to be the depreciation
actually allowed under this Act for the purposes of this clause; and
( c) the depreciation actually allowed under clause ( b) shall be adjusted by
the amount of depreciation attributable to such revaluation of the asset.
(10) For the purposes of this section, where the income of an assessee is derived, in
part from agriculture and in part from business chargeable to income-tax under the
head “Profits and gains of business or profession”, for computing the written down
value of assets acquired before the tax year, the total amount of depreciation shall
be computed as if the entire income is derived from the business of the assessee
under the head “Profits and gains of business or profession” and the depreciation
so computed shall be deemed to be the depreciation actually allowed under this Act
or under the Income-tax Act, 1961 (43 of 1961).
(11) For the purposes of this section, the term “sold” shall have the meaning assigned
to it in section 38(6)(a).