Q. > Please Help: CBDT Notification, rules amended to restrict depreciation rate @40%

305 views • Question added Dec 21, 2017 • Income Tax • By sapna , CA , Delhi

[Notification No. 103/2016/ F.No.370142/29/2016 -TPL]

S.O. 3399(E).—In exercise of the powers conferred by section 32, section 115BA and section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby, makes the following rules further to amend the Income-tax Rules, 1962, namely:-
(1) These rules may be called the Income-tax (29th Amendment) Rules, 2016.
(2) In the Income-tax Rules, 1962 ( here after referred to as the principal rules),-
(a) in rule 5, after sub-rule (1), the following proviso shall be inserted with effect from 1st day of April, 2016, namely:-
“Provided that in case of a domestic company which has exercised option under sub-section (4) of section 115BA, the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets entitled to more than forty per cent. shall be restricted to forty per cent. on the written down value of such block of assets.”
(b) in the New Appendix I, in the Table, in the second column, for the figures “ ‘50’, ‘60’, ‘80’, ‘100’ ”, wherever they occur, the figure “40” shall be substituted with effect from the 1st day of April, 2017.

If we study above notification clause a will be found totally separate from clause b. Claus a will be applicable for companies who exercise option u/s 115BA but when we read clause b , it is not linked to clause a and it suggests that maximum limit of depreciation allowed will be 40% from 01.04.2017.

Kindly clarify what is the upper limit of allowable depreciation for the financial year 2017-18 and the categories of applicable assets.

Note: i also attached KPMG articles on above which suggest that upper limit will be 40%.