Opinion Of Eminent Legal Luminaries On Controversial Issues

Depreciation on income assessed under other sources

QUERY: The main object of the company is to carry on the business of the construction. However, construction business was not carried on. The querist has purchased the wind mill and received the charges for use of electricity. Whether income can be assessed a business income or income from other sources. If income is assessed as income from other sources, the depreciation is allowable?
ANSWER: From the fact, it is clear that the company has not started construction business but received electricity charges by letting out wind mill; which is presumed to be not business of the company.
So whatever electricity charges received would be assessed as “Income from other sources” under section 56(2)(ii) of the Income tax Act, 1961.
Section 57 of the Act, provides that the income chargeable under the head “Income from other sources” shall be computed after making deductions mentioned in that section.
Clause (ii) of section 57 provides for deduction, which reads as under:
“in the case of income of the nature referred to in clauses (ii) and (iii) of sub section (2) of section 56, deductions, so far as may be, in accordance with provisions of sub clause (ii) of clause (a) and clause (c) of section 30, section 31and sub sections (1) and (2) of section 32 and subject to provisions of section 38”.
Thus, the company is entitled for depreciation allowance on the said income.

Posted in Income-tax

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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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