Section 43(1) - "Actual Cost", Section 43(2) - "Paid", Section 43(3) - "Plant" - Income Tax - Ready Reckoner - Income Tax

Section 43(1) : Actual Cost Actual cost means the actual cost of the asset to the assessee, reduced by that portion of the cost which has been directly or indirectly met by any other person or authority provided Provided where assessee incurs an expense for which payment is made in a day otherwise than by an account payee drawn or account payee bank draft or use of electronic clearing system through a bank account or such other electronis mode as may be prescribed exceeding 10.000/-, then such expenditure shall be ignored for the purposes of determination of actual cost. Explanations to Section 43(1) Determination of Actual Cost in special cases Expl. to Sec. 43(1) Mode of Acquisition Actual Cost 1 Asset acquired for scientific research subsequently brought into business use Actual Cost less deduction availed u/s 35 . 1A Stock converted into Capital asset and used for Business or Profession Fair Market Value on the date of conversion. 2 Asset acquired by way of gift/will or inheritance Actual cost to the previous owner minus depreciation actually allowed to him. 3 Asset acquired at higher price from any other person using the asset for his business or profession with a intention to claim depreciation on enhanced cost and reduce tax liability Actual cost to be determined by the assessing officer with prior approval of Joint commissioner. 4 Asset once belonged to the assessee which was used by him for business is transferred and reacquired by him (Re-acqusition of asset sold) The WDV at the time of original transfer or the price paid for reacquiring the asset, whichever is less. 4A Asset acquired by an assessee from other person who has claimed depreciation on such asset and the asset is leased back to such other person ( Asset purchased Leased back to the same person) The WDV of the asset to the transferor (Previous owner or Lessee) at the time of transfer to the assessee. 5 Building used for private purpose or held as investment subsequently brought into business use The cost of purchase or construction of the building as reduced by the notional depreciation calculated up to the year of bringing the asset to business use at the depreciation rate applicable to that year. 6 Exp. 2 to Section 43(6) Asset transferred by a holding Co. to its subsidiary Co. or vice versa if the following two conditions are satisfied: Shares of the subsidiary Co. should be wholly owned by the holding Co. or its nominees. The transferee Co. should be an Indian Company. WDV to the transferor company at the beginning of the previous year will be taken as the actual cost to the transferee company. 7 Exp. 2 to Section 43(6) Transfer of asset in a scheme of amalgamation by amalgamating company to amalgamated Indian company. WDV to the amalgamating company at the beginning of the previous year will be taken as the actual cost to the amalgamated company. 7A Asset transferred by a demerged company to the resulting Indian company. Actual cost shall be the written down value in the hands of the demerged company. 8 Asset acquired out of borrowed funds Interest on loan borrowed relating to the period after the asset is first put to use shall never form part of actual cost. 9 Asset acquired subject to levy of GST, excise duty or customs duty in respect of which ITC/CENVAT credit is availed. So much of the duty in respect of which a claim of credit has been made and allowed shall not form part of the actual asset. 10 A portion of the cost of an asset acquired is met directly or indirectly by Govt. or any authority or insurance company or any other person in the form of a subsidy or grant or reimbursement. So much of the cost as is relatable to such subsidy or grant or reimbursement shall not form part of the actual cost. If subsidy is not directly relatable to the asset acquired, but subsidy is with reference to the assets then the subsidy shall be proportionately reduced from the actual cost of the assets with reference to which subsidy has been granted. 11 Asset brought into India by a Non-resident assessee or a foreign company for use in his business or profession Actual cost as reduced by the amount of depreciation calculated at the rate in force as if the asset was used in India since the date of acquisition. 12 Any capital asset acquired under a scheme of corporatisation of a recognized stock exchange (AOP/BOI to company) in India, approved by SEBI The amount, which would have been regarded as actual cost, had there been no such corporatisation shall be deemed to be the actual cost. 13 Actual cost of capital asset has been allowed as deduction under section 35AD and capital asset is transferred to non-specified business after 80years from the year of acquisition or transfer by way of transactions referred to in Section 47 . The actual cost of such asset to the transferee shall be Nil. Provided where the capital asset on which deduction u/s 35AD is allowed is deemed to be the income of assessee under sub section (7B) of said section, then its AC shall be the AC minus depreciation at the rate inforce if asset has been used for business purpose since its acquisition [AC = Actual Cost] 14 The inventory converted into, or treated as, a capital asset, [clause (via) of section 28 ] which is used for the purposes of business or profession The actual cost of such asset to the assessee shall be the fair market value. SEC 43(2) : MEANING OF PAID Paid means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head Profits and gains of business or profession SEC 43(3) : MEANING OF PLANT Plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession but does not include tea bushes or livestock OR BUILDINGS OR FURNITURE AND FITTINGS even if specifically designed.