Items used in business provided on rent - depreciation allowance

[DEV KUMAR KOTHARI]

Jewellery, silver utensils used in business of providing them on rent can be considered as 'plant' eligible for depreciaiton. In such business they are used as tool of the business with which such business of renting or hiring any article or thing is carred, thea are durable assets but have limited useful life, hence depreciable assets as per normal accounting standards and norms, they are subject to wear and tear, damages, require repair, renewal and replacement etc.Therefore, all tests including functional test is satisfied, accordingly the articles in nature of jewellery, silver utensils, are 'plant' within the normal definition of plant as well as u/s 43(3). these itesm are not excluded from the wider men\aning of 'plant'. Thus, if such items are used in business, they will be eligible for depreciation allowance. This can be an investmetn activity, if depreciaiton is allowed, return on investmetns will improved. However, once deprecaitioin is claimed ( on block bais) then in case of sale capital gains will have to be considered u/s 50 on the basis of block of assets and benefit of CII and long term capital gains will not be allowaable. Let brain storming be started by readers.

[Rama Krishana]

Your views of welcome are requires more debate. But, I think, first a market survey must be done and the views of stake holders i.e. persons who are engaged in such business must be obtained first to know how would they like to treat the same i.e. as a part of plant or as a part of stock in trade. I believe having the same as part of stock in trade is more flexible option before them.

AI Summary

Depreciation eligibility for rented jewellery: asset treatment permits depreciation but triggers block-of-assets capital gains treatment. Jewellery and silver utensils used in a renting business can qualify as plant for depreciation, meeting functional tests as durable assets subject to wear and tear; claiming depreciation brings them into the block of assets regime and modifies capital gains treatment on sale. Treating such items as stock in trade is an alternative that may offer more commercial flexibility.