Question 3 OR (a)
Depreciation on a block of buildings with additions and a sale
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 3 OR (a) · 6 marksMr. A owns two buildings (A and B) and uses them for his own business. Their written down value is Rs. 1000000 on 1st April 2026, and depreciation is allowed at 10%. He purchased two more buildings (C and D), at the same rate of depreciation, as follows:
Building C on 1st August 2026 for Rs. 200000 (date of 'put to use' 15th August 2026)
Building D on 1st December 2026 for Rs. 500000. (date of 'put to use' 1st January 2027) and building A was sold on 27th February 2027 for Rs. 600000.
Calculate the depreciation allowable for tax year 2026-27, under section 32 of the Act. (6)
Paper note: Set under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 3 years and every date in the question moves forward by the same 3 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- CalculateHead by head: each income under its head, exempt items marked exempt, then the deductions and the tax.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Days of use and the rate for each building 2 marks 3 min
- 2 Written down value of the block 2 marks 3 min
- 3 Depreciation and notes 2 marks 3 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
- All four buildings are used for business and belong to one block (rate 10%).
- The sale proceeds are first set against the opening value and the asset used for 180 days or more, which gives the assessee the larger deduction.
Days of use of the new buildings (section 33(4))
| Building | Put to use | Days used in tax year 2026-27 | Rate |
|---|---|---|---|
| C | 15th August 2026 | 229 (17 + 30 + 31 + 30 + 31 + 31 + 28 + 31) | Full rate, 10% (180 days or more) |
| D | 1st January 2027 | 90 (31 + 28 + 31) | Half rate, 5% (less than 180 days) |
Written down value of the block (section 41(1)(c))
| Particulars | Rs. |
|---|---|
| Opening written down value (buildings A and B) on 1st April 2026 | 10,00,000 |
| Add: Building C | 2,00,000 |
| Add: Building D | 5,00,000 |
| Less: Sale proceeds of building A | 6,00,000 |
| Written down value of the block | 11,00,000 |
| Particulars | Rs. |
|---|---|
| On ₹6,00,000 (₹10,00,000 + ₹2,00,000 − ₹6,00,000) at 10% | 60,000 |
| On ₹5,00,000 (building D, used less than 180 days) at 5% | 25,000 |
| Allowable depreciation for tax year 2026-27 | 85,000 |
- Building A is sold, but the block continues (B, C and D remain) and its value stays positive, so there is no capital gain or loss on the sale; the sale price simply reduces the block (section 74(2) applies only if the proceeds exceed the block's value, and section 74(3) only if the block ceases to exist).
- Written down value carried to tax year 2027-28 = ₹11,00,000 − ₹85,000 = ₹10,15,000.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Days of use and the rate for each building | 2 |
| 2 | Written down value of the block | 2 |
| 3 | Depreciation and notes | 2 |
| Total | 6 |
Report a problemopens an email to admin@getkunji.com with the question ID871-Q3aORalready filled in.