Disallowance of depreciation is a provision in the Income Tax Act that allows the government to disallow the depreciation claimed by taxpayers on certain types of assets. This can happen if the asset is not used for business purposes, if it is not used in India, or if it is not used for a long enough period of time.

The disallowance of depreciation can have a significant impact on a taxpayer’s bottom line, as it can increase their taxable income. This is because depreciation is a deduction that can be used to reduce taxable income. If depreciation is disallowed, then the taxpayer will have to pay more tax.

There are a number of reasons why the government might disallow depreciation. One reason is to prevent taxpayers from claiming deductions for assets that are not actually used for business purposes. Another reason is to discourage taxpayers from investing in assets that are not located in India. Finally, the government may also disallow depreciation in order to raise revenue.

The disallowance of depreciation is a complex topic, and there are a number of factors that can affect whether or not depreciation will be disallowed. If you are unsure whether or not you can claim depreciation on an asset, you should consult with a tax advisor.

Here are some specific examples of when depreciation can be disallowed:

• If an asset is not used for business purposes. For example, if you buy a car for personal use, you will not be able to claim depreciation on it.
• If an asset is not used in India. For example, if you buy a machine that is used in your US business, you will not be able to claim depreciation on it for Indian tax purposes.
• If an asset is not used for a long enough period of time. The Income Tax Act specifies a minimum period of time that an asset must be used in order to be eligible for depreciation. If an asset is not used for this minimum period, then depreciation will be disallowed.

If you think that you may be eligible to claim depreciation on an asset, you should consult with a tax advisor to make sure that you are following the correct rules.

EXAMPLES FOR DISALLOWANCE OF DEPRECIATION:

Section 37(4) of the Income Tax Act, 1961 allows a deduction for expenditure incurred by an assesses on the following items:

• Taxes and duties, including customs duties, excise duties, sales tax, octroi, and entry tax.
• Legal charges, including court fees, stamp duty, and fees paid to lawyers.
• Rent paid for premises used for the purposes of the business or profession.
• Interest on loans taken for the purposes of the business or profession.
• Repairs and maintenance of premises used for the purposes of the business or profession.
• Insurance premium paid for the purposes of the business or profession.
• Depreciation on assets used for the purposes of the business or profession.

The deduction under section 37(4)of the Income TaxAct, is available to all assesses, regardless of the state in which they are located. However, there are some specific states in India where the deduction is more commonly claimed, such as:

• Maharashtra: Mumbai is the financial capital of India, and there are many businesses and professionals located there. As a result, the deduction under section 37(4)of the Income TaxAct, is commonly claimed by taxpayers in Maharashtra.
• Gujarat: Ahmedabad is the commercial capital of Gujarat, and there are many businesses and professionals located there. As a result, the deduction under section 37(4)of the Income TaxAct, is commonly claimed by taxpayers in Gujarat.
• Tamil Nadu: Chennai is the capital of Tamil Nadu, and there are many businesses and professionals located there. As a result, the deduction under section 37(4)of the Income TaxAct, is commonly claimed by taxpayers in Tamil Nadu.

It is important to note that the deduction under income tax section 37(4)of the Income TaxAct, is subject to certain conditions. For example, the expenditure must be incurred wholly and exclusively for the purposes of the business or profession. Additionally, the expenditure must be supported by documentary evidence.

If you are an assesses who is considering claiming a deduction under section income tax

CASE LAWS OF DEPRECIATION

Disallowance of depreciation under income tax case laws are cases in which the courts have ruled that the taxpayer’s claim for depreciation was disallowed. There are a number of reasons why a taxpayer’s claim for depreciation may be disallowed, including:

• The asset may not be used for business purposes.
• The asset may not be depreciable.
• The taxpayer may not have met the requirements for claiming depreciation.
• The taxpayer may have made a mistake in calculating the depreciation.

In some cases, the disallowance of depreciation may lead to the imposition of a penalty. The penalty for disallowance of depreciation is typically 20% of the amount of depreciation that was disallowed.

Here are some examples of disallowance of depreciation case laws:

• In the case of K. L. Bhasin& Co. v. Commissioner of Income Tax, the Supreme Court of India ruled that the taxpayer’s claim for depreciation on motor cars that were used for both business and personal purposes was disallowed. The court held that the taxpayer had not met the requirements for claiming depreciation on assets that were used for both business and personal purposes.
• In the case of Santosh Synthetics, Ulhasnagar v. Assesses, the Income Tax Appellate Tribunal (ITAT) ruled that the taxpayer’s claim for depreciation on machinery that was put to use for less than 180 days in a year was disallowed. The ITAT held that the taxpayer had not met the requirement that assets must be used for at least 180 days in a year in order to be eligible for depreciation.
• In the case of ZilaSahkari Bank Ltd v. DCIT, the ITAT ruled that the taxpayer’s claim for depreciation was disallowed because the depreciation figure was not reflected in column no. 45 of the taxpayer’s income tax return (ITR). The ITAT held that the taxpayer had not complied with the requirements for claiming depreciation and that the disallowance was justified.