Section 34 — Conditions for Depreciation

Section 34 of the Income-tax Act, 1961 outlines the conditions under which depreciation can be claimed as a deduction. This section specifies that depreciation is allowable only if the prescribed conditions are met, including the use of the asset for business or profession and ownership by the assessee. The section also mandates that the asset must be put to use during the relevant previous year. The significance of this section lies in its role in ensuring that only genuine claims for depreciation are allowed, thereby preventing tax evasion through inflated depreciation claims. The burden of proof lies with the taxpayer to demonstrate compliance with these conditions. In practice, this section is crucial for businesses as it directly impacts the computation of taxable income by allowing deductions for the wear and tear of assets.

Common Litigation Flashpoints

1. Disputes over the actual use of the asset during the year
2. Ownership of the asset at the time of claiming depreciation
3. Classification of assets for depreciation rates
4. Partial use of assets and proportional depreciation claims

Judgments on Section 34 — Conditions for Depreciation

• Roshan-Di-Hatti vs Commissioner of Income Tax — SC,
  The Tribunal's finding of undisclosed income was without material and unreasonable given the circumstances of migration and business conditions.
• Kishinchand Chellaram vs The Commr. of Income-Tax Bombay City II, Bombay — SC,
  The burden of proof lies on the Revenue to show that the remittance was made by the assessee and constituted its undisclosed income.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.