Written Down Value

The "Written Down Value" WDV of a "block of asset" has been defined under section 43(6) of the Act: -

"Opening Balance" of the "Block of Asset" xxx
Add: "Actual Cost" of assets acquired during the previous year xxx
---
xxx
Less: "Moneys Payable" to the assessee in respect of asset falling within that block, which is "sold" or discarded or demolished or destroyed during that previous year, together with the scrap value, if any xxx
---
WDV for the Previous Year xxx
---

"Opening balance" of the "block of asset" = "WDV" of the previous year immediately preceding the previous year minus Depreciation for the said preceding previous year.

However, for assessment year 1988-1989, the opening balance is the aggregate of WDVs of all the assets falling within the block of assets.

"Moneys Payable" in respect of any building, machinery, plant or furniture includes -

  1. any insurance, salvage or compensation moneys payable in respect thereof;
  2. where the building, machinery, plant or furniture is sold, the price for which it is sold.

However, the total deduction for moneys payable cannot exceed the aggregate of "Opening Balance" and "Actual Cost" of assets acquired.

"Sold" includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force.

But does not include a transfer,

  1. in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company or
  2. in a scheme of amalgamation of a banking company with a banking institution approved by Central Government under Banking Regulation Act, 1949.

In case of slump sale, the WDV in the hands of the person who has sold the undertaking, shall first be determined as above and be further reduced by the following amount:

Actual cost of the asset falling within that block xxx
Less: Depreciation actually allowed up to assessment year 1988-1989 xxx
Depreciation allowable thereafter, as if it is the only asset in the Block xxx
----
xxx
----
Amount to be reduced from the above "WDV" xxx
----

However, the above amount to be reduced cannot exceed the "WDV".

The "WDV" of the "block of asset" under different situations have been provided in the explanations to section 43(6).

Succession

In the case of succession in business or profession, if assessment is made under section 170(2) of the Act, on the successor, Written Down Value of the "Assets" or the "Block of Assets" shall be the WDV, which would have been taken, if the assessment were made directly on successor.

Transfer Between Holding and Subsidiary

"Block of assets" transferred by a Holding Co. to Subsidiary Co. or vice versa in any previous year and the conditions mentioned in sections 47(iv) or 47(v), as the case may be, is satisfied.

Written Down Value of the previous year preceding the Previous Year (Transferor Company) xxx
Less: Depreciation for the previous year preceding the Previous Year xxx
---
WDV (Transferee Company) xxx

Amalgamation

Block of asset transferred by the amalgamating company to the amalgamated company, where the amalgamated company is an Indian Company:

WDV of the previous year preceding the Previous Year (Amalgamating Company) xxx
Less: Depreciation for the previous year preceding the Previous Year xxx
---
WDV (Transferee Company) xxx

Demerger

1. Any asset forming part of a "Block of Asset" is transferred by a "Demerged Company" to the "Resulting Company"

WDV of the previous year preceding the Previous Year (Demerged Company) xxx
Less: WDV of assets transferred to Resulting Company xxx
---
Written Down Value (Demerged Company) xxx

2. A resulting company from the demerged company receives any asset forming part of a "Block of Asset", then the Written Down Value of the transferred assets of the demerged company immediately before demerger shall be taken as the Written Down Value of the Resulting Company.

Corporatisation

A Block of Asset acquired by the assessee under a scheme of Corporatisation of a Recognised Stock Exchange in India, approved by SEBI, the WDV will be taken as Written Down Value of the transferred assets immediately before such transfer.

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Related Topics

Additional Depreciation »

Depreciation Rates »

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