Depreciation shall be determined according to the provisions of Section 32.
CONDITIONS FOR CLAIMING DEPRECIATION:
Asset must be owned by taxpayer .
It must be used for the purpose of business or profession.
It should be during the relevant previous year.
Depreciation is available on tangible as intangible assets.
The taxpayer should own the asset or the taxpayer should be the co-owner of asset. The following point should be noted-
It is not necessary that the taxpayer should be the registered owner of the asset. If a person acquires a building by satisfying conditions of section 53A of Transfer of property Act [i.e., under a Power of Attorney Transaction], depreciations available even if he is not the registered of the building.
Where an taxpayer carries on a business or profession in a building not owned by him but in respect of which he holds a lease or right of occupancy, he is entitled to depreciation of capital expenditure incurred by him on construction of any structure or any work in relation to the building byway of improvement, renovation or extension.
If a taxpayer acquires an asset under financial lease, he can claim depreciation.
Generally, in the case of a hire purchase agreement, the hire has an uninterrupted right over the asset for all practical purposes if he discharges his obligation (and not seller) can claim depreciation from the year in which the asset is taken on hire.
ASSET MUST BE USED FOR THE PURPOSE OF BUSINESS OR PROFESSION-the asset, in respect of which depreciation is claimed, must have been used for the purpose of business or profession. Even if an asset is put to use for trial production depreciation can be claimed .the user of the asset should be understood in a wide sense so as to embrace passive as well as active user .if a machine is kept ready for at any moment in a particular factory, the machinery can be said to be used “for the purpose of the business and depreciation is available .Any forced idleness of the machinery cannot disentitle the taxpayer form getting the benefit of depreciation allowance. If an asset is used partly for business purpose and partly for other purposes, proportionate depreciation is available.
USER OF THE ASSET IN THE PREVIOUS YEAR-the asset, in respect of which depreciation is claimed, must have been used for the purpose of business during the relevant previous year. Even if an asset is used for a few days (or even for a few hours) during the previous year, depreciation for the entire year is available.However.in the first year, in which an asset is acquired, the asset should be used at least for 180 days to claim fully year’s depreciation (if it is used for less than 180 days, half year’s depreciation in the first year in which the asset is acquired).