Comparison of Section 39 "Computation of actual cost" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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Comparison of Section 39 "Computation of actual cost" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....organisations, and tax authorities. Effective date or decision date: Not stated in the document. Background & Scope Statutory hook: Clause 39, Income Tax Bill, 2025 - titled "Computation of actual cost." The provision governs computation of the actual cost of assets used for business or profession for the purpose of determining allowable depreciation and consequential tax treatment. It sets reductions to actual cost for amounts met by others, input tax credits, certain duties, and subsidies/grants; prescribes exclusions for payments made otherwise than specified banking/online modes over a threshold; provides a formula for apportioning non-asset-specific subsidies; contains a Table of specified circumstances where a different actual cost ....

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...., use of own property, intra-group transfers (section 70 conditions), reacquisition, transfers back to previous owner where previous owner claimed depreciation, post-research use (section 33(3)), import of asset by non-resident and brought to India, corporatisation of recognised stock exchange, special treatment where deduction u/s 46 was allowed or becomes deemed income, and exclusion of interest relatable to post-use periods. Interpretation The text indicates an intent to exclude from depreciable "actual cost" amounts that have been effectively subsidised or already relieved through tax credits (GST/input credit, excise/Additional duty credits), or funded by third parties. The apportionment formula in sub-section (3) displays a ratio-ba....

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....ial 1.) * Example 2 (inventory converted to capital): Inventory converted into a capital asset is valued at fair market value on date of conversion, determined "in the manner as prescribed." (Table serial 3.) * Example 3 (gifted asset): A taxpayer receives machinery by inheritance; actual cost equals previous owner's actual cost reduced by depreciation allowable up to the immediately preceding tax year, computed as if the asset were the sole asset in the block. (Table serial 4.) Interplay The clause references interplay with: the GST/input tax credit regime ("relevant law"), Central Excise Rules, 1944, Customs Tariff Act, 1975 (section 3), and other sections of Income-tax law (section 33(3), section 46, section 70(1) conditions). ....

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....m actual cost where credit has been claimed. * Aggregation/payment threshold phrasing: Doc 1 states "payment or aggregate of payments exceeding Rs.10000 in a day" while Doc 2 states "ten thousand rupees in a day." This is a formatting/wording difference only. * Practical impact: none. * Conversion of inventory wording: Doc 1: "Where inventory is converted into or treated as a capital asset." Doc 2: "Where inventory is converted into capital asset." Doc 1 adds "or treated as" - potentially broadening scope to assets treated as capital assets even without physical conversion. * Practical impact: Doc 1 could capture more situations where inventory is reclassified without physical conversion; Doc 2 may be slightly narrower. * Gift/inh....

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....auses. * Practical impact: minor drafting variation; substance appears aligned. * Sub-section (5) and (6) differences: Doc 2 sub-section (5) states the AO "shall be determined by the Assessing Officer having regard to all circumstances of the case, subject to the following conditions" and lists conditions (a) & (b). Doc 1 sub-section (5) states the AO "shall be such amount as may be determined by the Assessing Officer having regard to all the circumstances of the case, where - (a) ... and (b) ..." - Doc 1 additionally excludes serial number 8 from the proviso in sub-section (5) by a later clause (5) prefaced with "Irrespective of anything contained in sub-section (4), other than serial number 8...". Doc 2 does not contain that explicit ....

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....depreciation claimed. * Record-keeping/evidence: Documentation evidencing input tax credits, excise/Customs duty credits, subsidy/grant receipts and their allocation across assets (particularly where grants are not directly attributable) is essential. For instances of intra-group transfers, amalgamation/demerger approvals and scheme documents will be necessary to apply the specified Table entries. Where AO may re-determine cost, contemporaneous evidence showing commercial justification for transfers and absence of tax-avoidance motive will be material. For inventory-to-capital conversions, records to support FMV determination per prescribed method are required. Key Takeaways * Clause 39 defines "actual cost" and mandates reductions for....

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Comparison of Section 39 "Computation of actual cost" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)