New table u/s 32. - Income Tax - 416/CBDT

INSTRUCTION NO. 416/CBDT Dated: May 12, 1972 Section(s) Referred: 32 Statute: Income - Tax Act, 1961 As you are aware the Table of rates of depreciation laid down in the I.T. Rules, 1962 was substituted by a new Table under an amendment made by the I.T. (Sixth Amendment) Rules, 1969 with effect from the assessment year 1970-71. Although depreciation allowance for the assessment year 1970-71 and later years will be allowed in accordance with the new Table. Depreciation allowance for the assessment year 1969-70 and earlier years will continue to be allowed at the rates laid down in the previous Table. 2. Under the Table of rates previously in force, the rates of depreciation in respect of machinery and plant were classified under three heads, namely, (i) general rate; (ii) special rates to be applied to the whole of the machinery and plant used in specified concerns; and (iii) special rates to be applied to other machinery and plant from a number of cases which have come to the notice of the Board it has been observed that some of the I.T. Officers do not appear to be quite clear about the cases or circumstances in which the rates of depreciation laid down under the aforesaid three heads have to be applied. This question has been examined by the Board and the following clarification is being given for the guidance of the I.T. Officers:- (a) Income-tax Officer should, in the first instance see whether the case of the assessee falls under item III(ii) of the aforesaid Table i.e., whether the assessee is entitled to the grant of depreciation at special rates to be applied to the whole of the machinery and plant used in specified concerns. If the machinery and plant is used in any of the concerns listed under the aforesaid item III(ii) depreciation allowance will, ordinarily, be granted on the whole of the machinery or plant at the appropriate special rate specified therein for the concern. However, in respect of machinery and plant specified hereunder the assessee can opt that depreciation allowance should be allowed at the appropriate special rates laid down for such machinery or plant under item III(iii) of the list instead of at the appropriate special rate applicable to the concern under item III(ii). The machinery or plant in respect of which this option can be exercised by the assessee are (a) electrical machinery, (b) air conditioning machinery (c) locomotive rolling stock tramways and railways (d) weighing machines, calculating machines, typewriters, Neo-post Franking machines accounting machines other office machinery, (e) refrigeration plant, containers, etc. and (f) motor vehicles. If such an option is exercised by the assessee depreciation in respect of such machinery and plant will have to be allowed at the appropriate special rate laid down under item III(ii) of the list; in relating to the remaining machinery and plant depreciation will have to be allowed at the appropriate special rate applicable to the concern under item III(ii). (b) If the case of the assessee does not fall under (a) above, i.e., the machinery and plant is not used in any of the concerns specified under item III(ii) of the list, the I.T. Officer should then see whether any machinery or plant is eligible for the grant of depreciation allowance at the special rates laid down under item III(iii) of the list. Depreciation allowance in respect of machinery and plant which falls under item III(iii) will have to be allowed at the appropriate special rate specified therefor. (c) Depreciation allowance at the general rate of 7 per cent prescribed under item III(i) will be applicable only in respect of machinery and plant to which the special rates of depreciation allowance laid down under item III(ii) and (iii) of the list are not applicable. 3. For the assessment year 1970-71 and later years depreciation allowance will have to be allowed in accordance with the Table of rates as revised under the I.T. (Sixth Amendment) Rules, 1969. Under the new Table, special rates of depreciation have been prescribed in respect of machinery and plant specified under item III(ii) of the Table and a general rate of 10 per cent is applicable to machinery and plant (not being a ship) for which no special rate has been prescribed. 4. The above instructions may please be brought to the notice of all I.T. Officers in your charge.