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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Corporate Tax Planning

A company claimed and was allowed a section 46 deduction of Rs. 80 lakh on an asset. In year 5 of the eight-year period it uses the asset for a non-specified business, and the transfer is not chargeable under section 26(2)(k). Depreciation allowable under section 33, as if no section 46 deduction had been allowed, is Rs. 30 lakh. What amount is deemed business income in that year?

Rs. 50 lakh is deemed business income. Section 46(9)(b) takes the deduction of Rs. 80 lakh and reduces it by the Rs. 30 lakh of depreciation that would have been allowable without the section 46 deduction, leaving Rs. 50 lakh taxable in the year of diversion.

  1. ARs. 80 lakh
  2. BRs. 110 lakh
  3. CRs. 50 lakhCorrect
  4. DRs. 30 lakh

Explanation

Under section 46(9)(b), the deduction allowed is reduced by the depreciation allowable under section 33 as if no section 46 deduction had been allowed: 80 - 30 = Rs. 50 lakh, taxed as business income in the year of diversion. Rs. 80 lakh ignores the reduction, and Rs. 110 lakh adds the depreciation by mistake.

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