Landmark Cases on Depreciation and Allowances

An industrial undertaking cannot claim relief under Section 80J if it does not satisfy the prescribed conditions in the initial year, even if it satisfies them in subsequent years.

Goodwill arising on amalgamation is an asset and eligible for depreciation under Section 32(1) of the Income Tax Act, 1961. The actual cost of such goodwill in the hands of the amalgamated company is the same as it would have been in the hands of the amalgamating company.

Deduction under section 35(2AB) cannot be denied for in-house R&D facilities when the assessee has complied with the requirements, even if there is a delay or non-issuance of Form 3CL by DSIR. The expenditure eligible for deduction under section 35(2AB) is not restricted to the amount certified by DSIR in Form 3CL.

Electrical installations, including wiring for lighting and devices like call bells and buzzers, are classified as furniture and fittings for depreciation purposes, entitling them to a 10% depreciation rate.

The conversion of slabs into sizes can be considered as constituting an 'industry'.

Additional depreciation under Section 32(1)(iia) is available for plant and machinery in the business of generation and distribution of power, provided there is operational connectivity with the article manufactured. The insertion of specific language regarding power generation in Finance Act 2012, effective from 01.04.2013, does not preclude eligibility for earlier periods.

Purchasing an asset towards the end of a financial year to claim depreciation for that year is considered tax planning.

An assessee is entitled to depreciation under section 32 of the Income Tax Act on assets where ownership is proven and the income generated from their use is treated as business income.

Depreciation can be claimed on a capital asset even if its cost of acquisition was treated as an application of income in the year of acquisition, and claiming depreciation does not amount to double deduction.

Depreciation may be allowed even if machinery is not actively in use or is kept idle. The term 'used for the purposes of the business' can be interpreted broadly to include passive use.

A golf course is considered a building, not plant and machinery, for tax purposes.

Electricity generated by an assessee is considered 'goods', and therefore, the generation of electricity constitutes the production of an 'article or thing'. Consequently, an assessee cannot be denied the admissibility of additional depreciation on electricity generated solely on the grounds that it is not an article or thing manufactured in an industrial undertaking.

Depreciation on intangible assets like computer software is limited to 25% as per Section 32 of the Income Tax Act, and higher rates are contrary to the decision in Dinamalar v. CIT.

Incentives received by an assessee are in the nature of capital receipts and are not chargeable to tax, a position affirmed by the Supreme Court.

Unabsorbed depreciation cannot be carried forward and set off beyond the statutory period of eight years. The Income Tax Appellate Tribunal (ITAT) has held that a claim for set-off of brought forward unabsorbed depreciation is not permissible if the period of eight years for carrying forward such depreciation has expired.

The expression 'used' in relation to assets for tax purposes can be interpreted to mean 'ready for use', not necessarily actual user. This interpretation can extend even to periods of non-user for a number of years.

A partnership firm is entitled to claim depreciation on assets used in its business, even if the asset was originally owned by a partner and contributed to the firm. The firm's use of the asset for its business makes it eligible for depreciation, and the partner cannot claim depreciation on such assets.

The waiver of a loan is not equivalent to reimbursement for the cost of capital assets, and therefore, Explanation (10) to Section 43(1), which reduces the actual cost by portions met by others, does not apply to loan waivers.

The generation of power/electricity is considered the manufacturing and production of an article or thing, qualifying for deductions such as additional depreciation under Section 32(1)(iia).

The principle of beneficial interpretation applies only when there is a genuine doubt or two equally reasonable interpretations of a statutory provision; it cannot be used to misinterpret a clear provision to grant an unintended benefit to the taxpayer.

The Assessing Officer is obligated to grant eligible depreciation to an assessee when computing total income, irrespective of whether the assessee claimed it in their return. This principle applies even if subsequent amendments to depreciation provisions were intended to clarify existing law.

Depreciation at 60% is allowable on a UPS used exclusively for computers, as it is considered an integral part of the computer. This is because a UPS is essential for the continuous and stable functioning of computer systems.

A taxpayer's claim for depreciation can be disallowed if the underlying transaction is not proven and the disallowance is upheld by all appellate authorities.

Depreciation is allowable on the cost of civil works and electrical works integral to the installation and operation of a windmill, at the rate applicable to the windmill itself.