India: Additional depreciation on machinery | KPMG | GLOBAL

India: Additional depreciation on machinery; interest paid on partners’ capital

India: Additional depreciation on machinery

The KPMG member firm in India has prepared reports describing the following developments (read more at the hyperlinks provided below):


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  • Balance of additional depreciation, to claim in year immediately following year when machinery is installed: The Karnataka High Court held that if the taxpayer is allowed only 10% of additional depreciation in the year of acquisition and installation of new machinery, the 10% balance of additional depreciation is allowed as a deduction in the immediately succeeding financial year. The High Court observed that the grant of additional depreciation is a one-time benefit to encourage industrialisation, and thus must be construed reasonably, liberally, and purposively.
  • Interest paid on partners’ capital is an expenditure, not statutory allowance: The Mumbai Bench of the Income-tax Appellate Tribunal held that interest paid on partners’ capital is an expenditure under section 36(1)(iii) of the Income-tax Act, 1961 and as such is not a statutory allowance under section 40(b). Therefore, such an interest expenditure on the partner’s capital is “liable for disallowance” under section 14A as read with Rule 8D of the Income-tax Rules, 1962.The case is: Pahilajrai Jaikishin.
  • Procedures for e-communications between taxpayers and tax department: India’s Central Board of Direct Taxes (CBDT) issued guidance on the procedures, format, and standards for secured transmissions of the electronic communication between the tax authorities and taxpayers.

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