Depreciation limit: aggregate depreciation cannot exceed actual cost; excess sale proceeds treated as capital gains.

Aggregate depreciation, including initial depreciation, must not exceed the asset's actual cost; initial depreciation must be counted when determining exhaustion of cost. Under Section 41(2) profit on sale equals sale price less written down value to the extent of actual cost, and any sale proceeds exceeding actual cost are taxable as capital gains. Officers must maintain depreciation charts, audit depreciation calculations in important cases, review prior assessments for similar irregularities, and submit a compliance report detailing mistakes found and corrective action taken.

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