Section 43(6) Income Tax Act | Written down value |

Section 43(6) of the Income Tax Act prescribes calculation for Written Down Value. Section 43(1) specifies the conditions and rules while computing WDV of an Asset.  Section 43(6) is one of the less known provisions in the Income Tax Act. In this post we will cover the overall Scope of Section 43(6) of Income Tax Act, Calculation of Written Down Value under section 43(6), Case Laws relating to Section 43(6) etc.

The written down means – Section 43(6) Income Tax Act

In the case of assets acquired in the previous year, the actual cost of the assets to the assessee.

In the case of assets acquired before the previous year the actual cost of the assets to the assessee less all depreciation actually allowed to him in that Previous Year.

In the case of any block of assets the written down value will be determined as under:

Total of written down value of all the assets falling within a block at the                     beginning of the previous year relevant to the assessment year                              ………….

Add: The actual cost of, any new assets falling in the block, acquired during

the previous year                                                                                                  ………….

Less: Moneys payable in respect of any asset, falling within that block

which is sold, discarded, demolished or destroyed during the previous year

together with the amount of scrap value in respect of any asset.

The amount of deduction cannot exceed the written down value as so increased      …………

Written down value for the assessment year                                                           …………

Less: Depreciation during the previous year relevant to the assessment year          …………

Written down value at the beginning of the previous year relevant to the                             next assessment year                                                                                             ………….

The addition/deduction as aforesaid may be made for calculating written down value for the concerned previous year.

The written down value of any block of assets may be reduced to nil in the following cases:

  1. Where money receivable in respect of assets sold or otherwise transferred during the previous year plus the amount of scrap value is more than the written down value at the beginning of the previous year as increased by the actual cost of any new asset acquired.
  2. Where all the assets in the relevant block are transferred during the year.

Explanation 1 – Section 43(6) Income Tax Act

When in a case of succession in business or profession, an assessment is made on the successor [under Section 170(2)], the written-down value of any asset or block of assets is the amount which would have been taken as its written-down value if the assessment had been made directly on the person succeeded to.

Explanation 2 – Section 43(6) Income Tax Act

Where in any previous year, any block of assets is transferred:

  1. by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of Section 47 are satisfied; or
  2. by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian Company, then, notwithstanding anything contained in clause (i), the actual cost of the block of assets in the case of the transferee company or the amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year.

Explanation 2a  – Section 43(6) Income Tax Act

Where in any previous year, any asset forming part of a block of asset is transferred by a demerged company to the resulting company then the written down value of the block of asset of the demerged company for the immediately preceding previous year shall be reduced by the written down value of the assets transferred to the resulting company pursuant to the demerger.

Explanation 2b  – Section 43(6) Income Tax Act

Where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then the written down value of the block of assets in the case of the resulting company shall be the written down value of the transferred assets of the demerged company immediately before the demerger.

Provided that the value of the assets as appearing in the books of account of the demerged company immediately before the demerger exceeds the written down value of such assets in the hands of the demerged company, the amount representing such excess shall be reduced from the written down value of the assets.

Explanation 3  – Section 43(6) Income Tax Act

Any unabsorbed depreciation [under Section 32(2)] is deemed to be depreciation actually allowed.

Explanation 4  – Section 43(6) Income Tax Act

For the purposes of this clause, the expression “money payable” and “sold” shall have the same meaning as in the Explanation to Sub-section (4) of Section 41.

Explanation 5  – Section 43(6) Income Tax Act

For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income.

Explanation 6  – Section 43(6) Income Tax Act

Where an assessee was not required to compute his total income for the purposes of this Act for any previous year or years preceding the previous year relevant to the assessment year under consideration,

  1. 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;
  2. the total amount of depreciation on such asset, provided in the books of account of the assessee in respect of such previous year or years preceding the previous year relevant to the assessment year under consideration shall be deemed to be the depreciation actually allowed under this Act for the purposes of this clause; and
  3. the depreciation actually allowed under clause (b) shall be adjusted by the amount of depreciation attributable to such revaluation of the asset.

Explanation 7  – Section 43(6) Income Tax Act

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 previous 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.

Updated: May 2, 2018 — 5:42 pm

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