Section 41: written down value of a depreciable asset

The basic WDV formula

Section 41(1) defines written down value as: the actual cost to the assessee, for an asset acquired in the tax year itself; the actual cost less depreciation actually allowed, for an asset acquired in an earlier year; and for a block of assets, a formula that starts with the previous year's WDV, adds the actual cost of assets acquired during the year, and subtracts the moneys payable (plus scrap value) for assets sold/transferred/demolished/destroyed/discarded during the year (capped so it cannot exceed the opening WDV plus additions).

Carry-over of WDV in corporate reorganisations

The section sets out how WDV is inherited by the transferee in several reorganisation scenarios:

• Holding company to subsidiary, or subsidiary to holding company (conditions in Section 70(1)(c)/(d) met), or amalgamating to amalgamated Indian company: the transferee's actual cost is the transferor's WDV in the immediately preceding tax year, reduced by depreciation actually allowed for that year (Section 41(2)).
• Demerged company to resulting company: the demerged company's WDV for the preceding year is reduced by the WDV of assets transferred to the resulting company (Section 41(3)); the resulting company's actual cost is the WDV of those transferred assets immediately before the demerger (Section 41(4)).
• Private/unlisted public company converting to an LLP (conditions in Section 70(1)(ze) met): the LLP's actual cost is the company's WDV as on the date of conversion (Section 41(5)).
• Assets transferred under a stock-exchange corporatisation scheme approved by SEBI: the transferee company's WDV is the WDV of the assets immediately before the transfer (Section 41(6)).
• Succession in business under Section 313, where assessment is made on the successor: WDV is what it would have been had the assessment been made directly on the person succeeded to (Section 41(7)).

Other adjustments

Depreciation carried forward as unabsorbed depreciation under Section 33(11) is deemed to be "depreciation actually allowed" for WDV purposes (Section 41(8)).

Where an assessee was not required to compute total income for earlier years, the actual cost is adjusted for any revaluation reflected in the books, and the depreciation provided in the books for those years is deemed to be "depreciation actually allowed", itself adjusted for the revaluation impact (Section 41(9)).

Where income is derived partly from agriculture and partly from business, WDV for assets acquired before the tax year is computed as if the entire income were business income (Section 41(10)).

Frequently asked questions