1. DEPRECIATION
Depreciation as per law of lexicon is defined as positive decline in the
real value of a tangible asset because of consumption, wear and tear
or obsolescence. The concept of depreciation is widely used for the
purpose of writing off the cost of an asset against profit over an
extended period (its depreciable life), irrespective of the real value of
the asset. Depreciation is charged against income or the profit and
loss account, and there are different methods of calculating it like
straight line method or written down value method. The Income-tax
Act save and except for undertaking engaged in generation and/or
distribution of power the method of computing the depreciation is
WDV method.

2. DEPRECIATION
BLOCK OF ASSET [SECTION 2(11)]
Prior to the 1986, the Income-tax Act required the calculation of
depreciation in respect of each capital asset separately. Due to differences in
depreciation rates depending on the date of purchase, the type of asset, the
intensity of use etc., computation of depreciation allowance involved a
detailed exercise on the part of the assessee and AO. Moreover, the system
of granting the terminal allowance or taxing the balancing charge at the
time an asset was sold, demolished, discarded, etc., necessitated the
maintenance of records of depreciation already allowed in respect of each
asset.
The amendments sought to simplify the system to a great extent by introducing
the concept of "block of assets". Sec. 2(11) defines the term block of assets as
"a group of assets falling within a class of assets, being building, machinery,
plant & furniture, in respect of which the same percentage of depreciation is
prescribed."

3. DEPRECIATION
WRITTEN DOWN VALUE [SECTION 43(6)]
WDV under the Income-tax Act, means
1.where the asset is acquired in the previous year the actual cost of asset
shall be treated as WDV
2.where the asset is acquired in earlier year WDV shall be equal to the
actual cost incurred less depreciation allowed under The Income Tax Act.

4. DEPRECIATION
In case of Block of assets WDV is computed as under:
Sr. No. Particulars Amount Amount
1 In case of assets acquired prior to 31.03.1988
a. The aggregate WDV of all assets falling within the same block in
XXX
the beginning of PY relating to AY commencing from 01.04.1988
b. Add : Assets acquired during the previous year XXX
c. Lees: Moneys payable (including the scrap value) on assets sold,
discarded or demolished or destroyed during the previous year to (XXX) XXX
the extent it does not exceed (a+b)
2 In case of slum sale
a. Actual cost of assets falling in the same block XXX
b. Less : Depreciation actually allowed prior A.Y.s 1988-1989 (XXX)
c. Less : Depreciation allowable after 1.4.1988 However deduction
(XXX) XXX
under b & c shall not exceed the total WDV

5. DEPRECIATION
Note : In case of PY relevant to AY commencing on 01.04.1989 the
WDV would be the amount of WDV of block of asset in immediately
preceding PY as reduced by depreciation actually allowed in respect
of said preceding PY and as adjusted by clauses b & c of 1 above.

6. DEPRECIATION
RATES OF DEPRECIATION (%)
Buildings:
(a) Buildings which are used mainly for residential purposes except hotels and Boarding House 5
(b) Buildings which are not used mainly for residential purposes and other than mentioned in a & c 10
(c) Buildings acquired on or after 1-9-2002 for installing P & M forming part of water supply project or water treatment 100
system and put to use for the purpose of providing infrastructure facilities u/s. 80- IA(4)(i)
(d) Purely temporary erections such as wooden structures 100
Note
• "Buildings" include roads, bridges, culverts, wells and tube wells.
• A building shall be deemed to be a building used mainly for residential purposes, if the built up floor area thereof used for
residential purposes is not less than sixty-six and two-thirds per cent of its total built-up floor area and shall include any
such buildings in the factory premises.
• Water treatment system includes system for desalination, demineralisation and purification of water.
Furniture and fittings including electrical fittings 10
• Electrical fittings include electrical wiring, switches, sockets, other fitting and fans, etc
Machinery and plant:
Plant has been held to include :
• movable partitions
• sanitary & pipeline fitting

7. DEPRECIATION
• ceiling and pedestal fans
• wells
• hospital
However, w.e.f. A.Y. 2004-05, it shall not include buildings, furniture and fittings.
1) Machinery & plant other than those covered by sub-items 2, 3 and 8 below 15
• Machinery and plant includes pipes needed for delivery from the source of supply of raw
water
to the plant and from the plant to the storage facility.
2) Motor-cars (other than those used in business of running them on hire) acquired or put 15
to use on
or after 1st April, 1990
3) (i) Aeroplane-Aeroengines 40
(ii) Motor buses, Motor lorries and Motor used in a business of running them on hire 30
(iii) Commercial vehicle acquired on or after 1-10-1998 but before 1-4-1999 and is put to 40
use before 1-4-1999 for the purposes of business or profession.
(iv) New commercial vehicle acquired on or after 1-10-1998 but before 1-4-1999 and is put 60
to use before 1-4-1999 in replacement of condemned vehicle of over 15 years of age for the
purpose of business or profession.
(v) New commercial vehicle acquired on or after 1-4-1999 but before 1-4-2000 in 60
replacement of condemned vehicle of over 15 years of age and is put to use before 1-4-2000
for the purpose of business or profession.

8. DEPRECIATION
(vi) New commercial vehicles acquired on or after 1-4-2001 but before 1-4-2002 50
and is put to use before 1-4-2002 for the purpose of business or profession.
(vii) New Commercial vehicle acquired on or after 1-1-2009 but before 1-10- 50
2009 and put to use before 1-10-2009 for the purpose of business or profession
• "Commercial vehicle" means — heavy goods vehicle, heavy passenger motor
vehicle, light motor vehicle, medium goods vehicle, medium passenger motor
vehicle.
• It does not include "maxi-cab", "motor-cab", "tractor" and "road-roller".
(viii) Moulds used in rubber and plastic goods factories 30
(ix) Air pollution control equipments 100
(x) Water pollution control equipments 100
(xi) Solid waste control equipments 100
(xii) P & M used in semi-conductor industry 30
(xiii) Life saving medical equipments 40
4) Containers made of glass or plastic used as refills 50
5) Computers (including computer software) 60
• "Computer Software" means any computer programme recorded on any disc,
tape, perforated media or other information storage device.

9. DEPRECIATION
6) Machinery and plants used in weaving, processing and garment sector of 50
textile industry purchased under TUFS on or after 1-4-2001 but before 1-4-2004
and is put to use before 1-4-2004
7) Machinery and plant, acquired and installed on or after the 1-9-2002 in a 100
water supply project or a water treatment system and which is put to use for the
purpose of business of providing infrastructure facility under 80-ia(4)(i)
8) For other items of P & M refer to Rule 5 App. 1 100/80/60
9) (i) Books owned by assessees carrying on a profession
— Annual publications 100
— Other books 60
(ii) Books owned by assessees carrying on business in running lending libraries 100
(IV) Ships 20
• "Speed boat" means a motor boat driven by a high speed internal combustion
engine capable of propelling the boat at a speed exceeding 24 kilometers per hour
in still water and so designed that when running at a speed, it will plane, i.e., its
bow will rise from the water.
(V) Intangible Assets 25
Know-how patents, copyrights, trademarks, licenses, franchises or any other
business or commercial rights of similar nature acquired on or after 1-4-1998.

11. Computation of Dep.
WDV of Plant and Machinery on 1-4-2008 500000
Additions to machines on 15-11-2008 100000
600000
Less: Sale consideration of machinery
sold during the year 100000
Machine Damaged by fire:
Amount recd. from Ins. Co. 15000
Amount recd. from Sale of Scrap 10000 125000
WDV of P & m for the A.Y. 2009-10 475000
Less: Dep. @ 15% on Rs. 375000 56250
and 7.5% on Rs. 100000 7500
Additional Dep. on Rs. 100000
@ 10% 10000 73750
Balance Rs. 401250

12. Q. Shri Bhagat Singh is the owner of a factory. The following
particulars are furnished for its depreciation claim for the year
ended 31-3-2012:
Buildings: Rs. Rate
WDV of Factory Building 80000 10%
New additions on 1-9-2011 in above 40000
WDV of Office Building 50000 10%
Machinery:
WDV of Machinery 100000 15%
A new machine purchased and installed in
production department on 1-4-2011 60000
An old machine purchased and installed in
production department on 1-11-2011 50000
Sold an old machine on 1-11-2011 for 40000
Furniture:
WDV of Furniture 15000 10%
New Additions to furniture on 1-12-2011 5000
Work out the depreciation for the A.Y. 2012-13

13. ANS.
Computation of Dep.
For the Assessment Year 2012-13
I Block Rs.
Buildings: Factory & Office Building
10% on Rs. 80000 + 40000 + 50000
= Rs.170000 17000
II Block
Machinery:
Rs. 100000 + 60000 + 50000
= Rs. 210000 – 40000 = Rs. 170000
Dep. on Rs. 120000 @ 15% and on
Rs. 50000 @ 7.5% 21750
Additional Dep. on new machine @ 20% 12000
III Block
Furniture:
Rs. 15000 + 5000 = Rs. 20000
Dep. On Rs. 15000 @ 10% and
on Rs. 5000 @ 5 % 1750
Total Dep. Rs. 52500

14. Q. The particulars of assets of M/s Ram Prakash & Co. for
the previous year from 1st April, 2011 to 31st March, 2012
are as under :
i.A motor car, costing Rs. 40000 was purchased on 10 th
Jan, 2012. It is used partly for private purposes also 60%
of use during the financial year 2011-12 related to
business.
ii.Plant and machinery WDV on 1st April, 2011 Rs. 375000.
Two new machine were installed on 1st Nov, 2011 in
production department costing Rs. 100000 and Rs. 20000
respectively. An old machine was sold during the
previous year for Rs. 300000.
Calculate the amount of dep. Allowable for the A.Y. year
2012-13

15. ANS.
Computation of Dep.
Car Rs. 40000 : Dep. @ 7.5% 3000
Less: 40% for private use 1200 1800
Plant & Machinery
WDV on 1-4-2011 375000
Add: Cost of New Machine 120000
495000
Less: Sale of old machine 300000
195000
Dep. On Rs. 75000 @ 15% 11250
Dep. On Rs. 120000 @ 7.5% 9000
Additional Dep. On Rs. 120000 @ 10 % 12000 32250
Total Rs. 34050

16. Q. The WDV of two plant and machinery A and B 1.4.2010
is Rs. 1000000. Two new machinery C and D have been
acquired for manufacture of an article in Dec. 2010 and
May 2011 respectively at a cost of Rs. 500000 each.
Compute the amount of dep. For the assessment
year 2011-12 and 2012-13.
The assessee is not entitled to additional dep. for
the A.Y. 2011-12.

17. ANS. Computation of Dep.
A.Y. 2011-12
WDV of P & M on 1.4.2010 1000000
Add: Machine purchased in Dec. 2010 500000
WDV for A.Y 2008-09 1500000
Less: Dep. on Rs. 1000000 @ 15% 150000
and on Rs. 500000 @ 7.5% 37500 187500
Balance 1312500
A.Y. 2012-13
WDV of P & M on 1.4.2011 1312500
Add: Machine purchased in May 2011 500000
WDV for A.Y. 2012-13 1812500
Les: Dep. @15% 271875
Additional Dep. @20%
on Rs. 500000 100000 371875
WDV on 1.4.2012 Rs. 1440625

18. Q. On 1st April, 2011, the WDV of a block of assets
comprising ten machines in production department (rate
of dep. 15%) is Rs. 1250000. A new machine falling within
that block is acquired on 5th Dec. 2011 for Rs. 200000.
On 24th Jan, 2012 all ten machines were sold for Rs.
50000 leaving only the newly acquired machine in the
block. Determine the amount of dep.

19. ANS. Computation of Dep.
WDV of machines on 1.4.2011 1250000
Add: Machine acquired & put to use on 15.12.2011 200000
1450000
Less: Selling Price of ten machines 50000
1400000
Dep. On Rs. 1200000 @ 15% 180000
and on Rs. 200000 @ 7.5% 15000
Additional Dep. @ 10% on Rs. 200000 20000 215000
WDV on 1.4.2012 Rs. 1185000

20. Q. Z Ltd. furnishes the following information:
Block I: Plant and Machinery(consisting of 3 plants), rate of
dep. 15%. WDV on April1, 2011: Rs. 250000.
Block II: Buildings(two buildings), rate of dep. 10%. WDV on
April 1, 2011 Rs. 600000.
Acquired on June 2, 2011, 2 plants for Rs. 200000.
Sold on Nov. 30, 2011 all the five plants for Rs. 450000.
Acquired on Dec. 15, 2011, two plants for Rs. 150000 for its
production department.
Admissible rate of dep. In relation to all acquired plants is
15%.
Compute the amount of admissible dep. Claim of M/s Z Ltd.
for the assessment year 2012-13.

21. ANS. Computation of Dep.
Block I: Plant:
1.4.2011 WDV 250000
2.6.2011 Two plants 200000
15.12.2011 Two plants 150000
600000
Less: Selling Price 450000
Rs. 150000
On WDV for P.Y. 2011-12 @ 7.5% 11250
Additional Dep. On Rs. 150000 @ 10% 15000 (a) 26250
Block II : Buildings:
1.4.2011 WDV 600000
Dep. @ 10% (b) 60000
Rs. 540000
Total Dep. a + b Rs. 86250

22. Q. Mr. N purchased a machine on 31.11.2010 for
Rs200000 and spent Rs. 24000 on its installation. It was
used for his own business till 1.5.2011 on which date he
sold it for Rs. 120000. He repurchased it on 1.10.2011 for
Rs. 320000. determine the actual cost and dep.
Admissible for the year ending 31.3.2012. Rate of Dep. Is
15%.

23. ANS. Computation of Dep.
Actual Cost on 30.11.2010 200000
Add: Installation charges 24000
224000
Less: Dep. For P.Y. 2010-11 @ 7.5% 16800
Additional Dep. @ 10% 22400
WDV on 1.4.2011 Rs. 184800
Now machine was sold on 1.5.2011 for Rs. 120000 and reacquired on
1.10.2011 for Rs. 320000.
Hence, the cost of acquisition amount paid Rs. 320000 or
WDV Rs. 184800 whichever is less.
Cost 184800
Less: Dep. @15% 27720
WDV on 1.4.2012 Rs. 157080

24. Q. Compute the dep. For the A.Y. 2012-13 from the following
details:
(a)WDV of assets on 1.4.2011 is as follows:
i. Motor Cars: A 60000
B 50000
ii. Motor Taxis: C 80000
D 150000
iii. Motor Buses: E 100000
F 90000
•During the P.Y. 2011-12, motor car A is sold for Rs.70000 and
motor bus F for Rs. 60000.
•One motor taxi G has been purchased on 15.8.2011 for Rs.
120000 and motor car H for Rs. 110000 on 15.8.2011
•The rate of dep. for motor cars is 15% and for motor taxis and
bus is 30%.

25. ANS. Computation of Dep.
Block I: Motor Cars @ 15%
1.4.2011 WDV (A+B) 110000
Less: Sold car (A) 70000
40000
Add: Motor Car(H) purchased on 15.10.2011 110000
150000
Dep. on Rs.40000 @ 15% 6000
Dep. on Rs. 110000 @ 7.5% 8250
(a) 14250
Block II: Motor Taxis and Buses @ 30%
1.4.2011 WDV(C+D+E+F) 420000
Less: Motor bus F sold 60000
360000
Add: Motor Taxi G purchased on 15.8.2011 120000
480000
Dep. On Rs. 480000 @ 30% (b) 144000
Total Dep. Allowable (a + b) Rs. 158250

26. Q. Mr. X submits the following details about his assets:
Dep. Rate (%) WDV on 1.4.2011
Machine I 25 1,50,000
Furniture 15 50,000
Machine II 25 50,000
Machine III 50 40,000
Computer(one) 60 40,000
Machine II (dep. Rate 25%) was sold for Rs. 62,000 in May 2011. A
machine (dep. rate 25%) and a computer was brought for Rs. 80,000 and
Rs. 20,000 respectively in Nov., 2011. Compute dep. allowance for the
previous year 2011-12. The assessee is not entitled to additional
depreciation on machines.

27. ANS. Computation of Dep.
Block I : Dep. @ 25%
1.4.2008 WDV : Machine I 1,50,000
Machine II 50,000
Nov., 2011 Machine purchased 80,000
2,80,000
Less: Machine Sold 62,000
Rs. 2,18,000
Dep. On Rs. 1,38,000 @ 25% 34,500
Dep. On Rs. 80,000 @ 12.5% 10,000 44,500
Block II : Dep. @ 15%10
1.4.2011 WDV of Furniture 50,000 7,500
Block III : Dep. @ 50%
1.4.2011 WDV of machine 40,000 20,000
Block IV : Dep. @ 60%
1.4.2011 WDV of Computer 40,000
Nov., 2011 Computer purchased 20,000
60,000
Dep. on Rs. 40,000 @ 60% 24,000
Dep. on Rs. 20,000 @ 30% 6,000 30,000
Dep. Allowance Rs. 1,02,000

28. Q. Mr. Krishna has the following machines in his production dept.
Compute Dep.:
(a)Machines as on 1.4.2010 Rs.
(i) Machine A 50000
(ii) Machine B 50000
(iii) Machine C 10000
(iv) Machine D 25000
(b) Machine X purchased on 1.5.2011 25000
(c) Machine Y purchased on 1.12.2011 50000
(d)Machine sold
(i) Machine A and C on 1.6.2011 80000
(ii) Machine C and D on 1.11.2011 59750
(e) Special training expenses for Machine Y 5000

29. ANS. Computation of Dep.
WDV of machines on 1.4.2010 1,35,000
Dep. @ 15% 20,250
WDV of machines on 1.4.2011 1,14,750
Add: New machine purchased X on 1.5.2011 25,000
New machine purchased Y on 1.12.2011 50,000
Training Expenses for machine Y 5,000
1,94,750
Less: Machines sold 1,39,750
WDV on 31.3.2012 55,000
Less: Dep. @ 7.5% 4,125
Additional Dep. @ 10% on 55,000 5,500 9,625
WDV on 1.4.2012 Rs. 45,375