Rule 50: Attributing reconstitution income to retained assets
Rule 50 addresses attribution of income already charged to a specified entity under section 67(10) to capital assets remaining with that entity for section 72(5). The connection to revaluation or recognition of self-generated assets determines whether attribution is available.
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Bare law
Rule 50 - Attribution of income taxable under section 67(10) to capital assets remaining with the specified entity, under section 72
(1) For the purposes of section 72(5), the amount chargeable to income-tax as income of specified entity under section 67(10), shall be attributed to capital asset remaining with the specified entity in the manner provided in this rule.
(2) Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of balance in his capital account, chargeable to tax under section 67(10) relates to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, the amount attributable to the capital asset remaining with the specified entity for purpose of section 72(5) shall be– A= B*(C/D). Where,– A= the amount attributable to the capital asset remaining with the specified entity for purpose of section 72(5); B= amount charged under section 67(10); C= increase in, or recognition of, value of the asset remaining with the specified entity, because of revaluation or valuation; and D= aggregate of increase in, or recognition of, value of all assets because of the revaluation or valuation.
(3) Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, is in excess of the balance in his capital account, charged to tax under section 67(10) does not relates to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, the amount charged to tax under section 67(10) shall not be attributed to any capital asset for the purposes of section 72(5).
(4) Irrespective of anything contained in sub-rule (2) or sub-rule (3), where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of balance in his capital account, charged to tax under section 67(10) relate only to the capital asset received by the specified person from the specified entity, the amount charged to tax under section 67(10) shall not be attributed to any capital asset for the purposes of section 72(5).
(5) The specified entity shall furnish the details of amount attributed to capital asset remaining with the specified entity in Form No. 27.
(6) The person who is authorised to verify the return of income of the specified entity under section 265 shall verify Form No. 27.
(7) Form No. 27 shall be furnished on or before the due date referred to in section 263(1)(c) for the tax year in which the amount is chargeable to tax under section 67(10).
(8) For the purposes of this rule,– (a) the amount chargeable to tax under section 67(10) shall relate to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, if the revaluation is based on a valuation report obtained from a registered valuer as defined in rule 56 (f); (b) the specified entity shall not be entitled for the depreciation on– (i) the increase in value of an asset on account of its revaluation; or (ii) the recognition of the value of a self-generated asset or self-generated goodwill, due to its valuation; and (c) the expressions "self-generated asset" and "self-generated goodwill" shall have the meanings respectively assigned to them in section 67(11)(b).
Rule breakdown
Distinguish the charge from its attribution
Section 67(10) supplies the specified-entity charge. Rule 50 determines attribution of that charged amount to assets remaining with the entity for the linked section 72(5) purpose.
First complete and document the statutory charge calculation. Attribution should not be treated as a substitute for that calculation or as a new general deduction.
Identify the valuation connection
Sub-rule (2) applies where the charged excess relates to revaluation of a capital asset or valuation of a self-generated asset or goodwill. Sub-rule (8) requires the stated registered-valuer report for that relationship.
Separate the assets that remain with the entity from any asset received by the specified person, and identify the increase or recognised value for each.
Apply the B multiplied by C divided by D formula
B is the amount charged under section 67(10). C is the increase in or recognition of value of the relevant retained asset because of the revaluation or valuation; D is the aggregate increase in or recognition of value of all assets from that exercise.
Hypothetical: B is ₹12 lakh, the relevant retained asset has C of ₹20 lakh, and D is ₹60 lakh. The formula attributes ₹4 lakh to that retained asset, provided the rule’s conditions and exclusions are met.
Apply the two no-attribution rules
If the charged amount does not relate to the described revaluation or valuation, sub-rule (3) provides no attribution to any capital asset. Sub-rule (4) also overrides the earlier provisions where the amount relates only to the capital asset received by the specified person.
Do not allocate the charged amount automatically across retained assets merely because the entity still owns assets after the transaction.
Report the attribution in Form 27
The specified entity must furnish the details in Form No. 27. The person authorised under section 265 to verify the entity’s return must verify that form.
The notified rule refers to the due date in section 263(1)(c) for the tax year in which the amount is chargeable. Check the current amended Act’s applicable return deadline and current official filing instructions when scheduling the form; retain the computation and acknowledgment.
No depreciation on the valuation uplift
Sub-rule (8)(b) denies depreciation on the asset-value increase caused by revaluation and on the recognised value of a self-generated asset or goodwill caused by valuation.
Maintain separate records of original tax values, valuation changes and attribution. A valuation entry is not by itself a depreciable tax cost.
Key takeaways
Retained-asset attribution
The rule concerns capital assets remaining with the specified entity.
Formula and exclusions
B×C/D applies only where the prescribed valuation relationship exists.
Form 27
The entity reports the details with the prescribed verification.
No uplift depreciation
The stated revaluation or self-generated value does not support depreciation.
Practical checklist
- Keep the section 67(10) computation and registered valuation report.
- Separate retained and distributed assets.
- Apply the formula and no-attribution conditions.
- Reconcile Form 27 and the relevant return deadline.
Avoid
- Do not allocate every charge mechanically across retained assets.
- Do not claim depreciation merely on a valuation uplift.
FAQs
Is every section 67(10) charge attributed to retained assets?
No. Sub-rules (3) and (4) specify circumstances in which no attribution is made.
What form reports the details?
Form No. 27, verified by the person authorised to verify the entity’s return under section 265.
Can revaluation create a depreciation claim?
Sub-rule (8)(b) expressly denies depreciation on the specified revaluation increase and recognised self-generated value.
Glossary
- Retained asset
- A capital asset remaining with the specified entity after the relevant receipt by the specified person.
- Attribution
- The allocation for section 72(5) determined under Rule 50.
- Form 27
- The prescribed statement of amounts attributed to retained capital assets.