Power Sector: Choose Straight Line or Written Down Value for Depreciation; Calculate Gains/Losses on Asset Disposal.
Assessees in the power generation or distribution business can claim depreciation using either the Straight Line method for each asset or the Written Down value method for a block of assets. When an asset is sold, discarded, demolished, or destroyed, terminal depreciation (deductible loss) or a balancing charge (taxable gain) is calculated. Terminal depreciation is deductible if the sale proceeds are less than the asset's written down value, provided it is written off in the books. If proceeds exceed the written down value, the surplus is taxed as a balancing charge or capital gain, depending on the amount.