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Depreciation

Vikas (Accountant) (42 Points)

10 December 2016

Sir,

Is it mandatory to claim depreciation under the income tax act 1961? Can I pay income tax without claiming benefit of depreciation under income tax act, 1961?

Regards,

Vikas

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Sanjay S (Chartered Accountant) (1375 Points)
Replied 11 December 2016

No. It is not possible to compute tax liability without claiming depreciation. Depreciation as per Income Tax Act is a mandatory deduction to be applied in Income Tax computation.

Legal Provisions:

I. With reference to Explanation 5 to Section 32(1) of the Income Tax Act, 1961, Depreciation shall be allowed to the assessee whether or not the assessee has claimed deduction in respect of depreciation in computing his Total Income.

II. Besides, a plain-reading of section 32(1):

"32. Depreciation

(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions SHALL, subject to the provisions of section 34, be allowed-"

The Act uses the word 'shall'. Hence it again proves the point.

Hope this clarifies the issue.