Allowability of Depreciation (Section 32)

Condition: In order to claim depreciation, the assessee has to fulfill the following conditions-

1. Ownership: The asset shall be owned by the assessee.
2. Used for business purpose: The assets should be wholly or partly used for the purpose of business during the previous year.
3. Block of assets: It shall fall within the classification of the block of the assets.

Mandatory deduction: Whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income, this deduction for depreciation shall apply.

Depreciation on assets in partner’s name: Firm is entitled to claim depreciation on immovable properties brought by partners as their capital contribution even if such assets are not registered in the name of the firm. 

Allowability of depreciation in case of newly acquired assets and capital expenditure incurred on a leasehold building

Assets newly acquired (for Business or Profession) during the current previous year:

1. New asset used in current previous year: In case of newly acquired asset during the previous year is put to use for the purpose of business or profession during the same previous year for a period less than 180 days, then the assessee is entitled to claim depreciation at 50% of the normal rate of depreciation allowable under this act.
2. New assets used in subsequent previous year: If the asset is acquired during the current previous year and put in to use in the subsequent previous year, but for less than 180 days, the above condition does not apply.

Capital Expenditure on a Leasehold Building: In case of leasehold building used by the assessee for the purpose of his business or profession, any capital expenditure incurred in relation to renovation, extension or improvement of such building shall be entitled for depreciation as if such structure or work is owned by him.

Circumstances in which proportionate depreciation can be allowed under IT Act.

Circumstances: Under the following circumstances depreciation can claimed on a proportionate basis-

1. Succession of a partnership firm by a company.
2. Succession of a proprietary concern by a company.
3. Succession of business otherwise than on death.
4. Amalgamation of companies.
5. De-merger of companies.
6. Amalgamation / De-merger of Cooperative banks.

Conditions for Apportionment: The following provisions are applicable in cases of Business Reorganization or Succession

1. Calculation of Depreciation: The depreciation shall be calculated at the prescribed rates as if the succession or amalgamation or de-merger had not taken place.
2. Apportionment: The computed depreciation shall be apportioned between the predecessor and the successor in the ratio of number of days for which the assets were used by them.