Sub-section (1) defines written down value for computing business or professional income: actual cost where the asset was acquired in the tax year, actual cost less depreciation actually allowed under this Act or the Income-tax Act, 1961 where it was acquired earlier, and for a block of assets the formula [(A – D) + B – C] – E. A is the block's written down value in the immediately preceding tax year, B the actual cost of assets in the block acquired during the year, C moneys payable with scrap value for assets sold, transferred, demolished, destroyed or discarded in the year, and D depreciation actually allowed on the block for the preceding year; C shall not exceed (A – D) + B. E, for a slump sale, is the asset's actual cost reduced by depreciation actually allowed for the tax year commencing 1 April 1986 or earlier and by depreciation allowable for a year commencing on or after 1 April 1987, computed as if that asset were the only asset in the block.
Sub-sections (2) to (6) carry written down value across reorganisations, each overriding section 39 on actual cost: a holding-to-subsidiary or subsidiary-to-holding transfer satisfying section 70(1)(c) or (d), and an amalgamation into an Indian company, give the transferee the transferor's block written down value for the preceding year less that year's depreciation actually allowed; a demerger reduces the demerged company's block by the written down value of the assets transferred and gives the resulting company that same value; a conversion into a limited liability partnership satisfying section 70(1)(ze) carries the company's written down value as on the date of conversion; and a corporatisation of a recognised stock exchange approved by the Securities and Exchange Board of India carries written down value immediately before the transfer.
Sub-sections (7) to (11) cover special computations: on a succession under section 313 assessed on the successor, written down value is what it would have been had the assessment been made on the person succeeded to; depreciation carried forward under section 33(11) is deemed actually allowed; for an assessee not previously required to compute total income under the Act, actual cost is adjusted for revaluation in the books, book depreciation for those years is deemed actually allowed and is itself adjusted for the revaluation element; an assessee with part agricultural and part business income computes earlier depreciation as if the whole income were business income; and "sold" has the meaning in section 38(6)(a).
Why it is there
Depreciation can be given only once on the same cost, and written down value is the running record that ensures it. The reorganisation sub-sections stop a group resetting cost to market value by moving assets between companies the Act treats as continuing the same business, and element E stops an undertaking being sold as a going concern with a fresh depreciation base. Sub-sections (9) and (10) reach assessees whose earlier years were outside the Act, so they do not enter the charge with an uneroded cost.
Who it applies to
Any assessee claiming depreciation on an asset or block of assets
A holding company and its subsidiary transferring a block on terms satisfying section 70(1)(c) or (d)
An amalgamating company and an amalgamated Indian company
A demerged company and the resulting company
A private or unlisted public company converting into a limited liability partnership, and that partnership
A company receiving assets on corporatisation of a recognised stock exchange approved by the Securities and Exchange Board of India
A successor assessed under section 313(2)
An assessee not previously required to compute total income under the Act, and one with part agricultural and part business income
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Cap on moneys payable for assets leaving the block
C shall not exceed (A – D) + B
C is moneys payable with scrap value for any asset in the block sold, transferred, demolished, destroyed or discarded during the tax year; the cap prevents the block going negative
Sub-section (1)(c), definition of C
Depreciation deducted in computing E on a slump sale
Depreciation actually allowed for the tax year commencing on 1st April, 1986 or any earlier tax year
Applies to the asset in the block that is the subject of the slump sale
Sub-section (1)(c), definition of E, item (i)
Depreciation deducted in computing E on a slump sale
Depreciation allowable for a tax year commencing on or after 1st April, 1987
Computed under this Act or the 1961 Act as if such asset was the only asset in the relevant block of asset
Sub-section (1)(c), definition of E, item (ii)
What this means in practice
The sequence inside the block formula matters: the preceding year's depreciation (D) comes off the opening value (A) before additions (B) and disposals (C), and C can never exceed (A – D) + B, so a disposal cannot drive a block below nil. Throughout, the phrase is "depreciation actually allowed", not claimed or claimable, except where a sub-section deems otherwise — sub-section (8) for carried-forward depreciation, sub-section (9)(b) for book depreciation of years outside the Act, and sub-section (10) for the notional all-business computation. In every reorganisation in sub-sections (2) to (6) the transferee inherits a value, not a price: "irrespective of anything contained in section 39" means the consideration paid is not the actual cost. Revaluation is stripped out twice in sub-section (9), so writing an asset up before entering the Act's charge buys nothing.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
A company's plant block opens at a written down value of Rs. 4 crore (A), with Rs. 60 lakh of depreciation actually allowed for the preceding year (D). It buys plant costing Rs. 1 crore (B) and scraps a machine for which moneys payable with scrap value are Rs. 30 lakh (C). The block becomes [(4 crore – 60 lakh) + 1 crore – 30 lakh], that is Rs. 4.10 crore. Had the moneys payable been Rs. 6 crore, C would be held to Rs. 4.40 crore, because it shall not exceed (A – D) + B.
Where you meet this section
You meet this section in the depreciation schedule of a return, and in the accountant's report on a slump sale under section 77, where depreciable assets enter net worth at their block written down value under section 41(1)(c). It also decides the opening figures an Assessing Officer works from after an amalgamation, demerger, conversion or succession.
The words themselves
[(A – D) + B – C] – E
Section 41(1)(c), Income-tax Act, 2025.
where "C" shall not exceed (A – D) + B
Section 41(1)(c), definition of C, Income-tax Act, 2025.
What people get wrong
Using depreciation claimed instead of depreciation actually allowed. Clause (b) and the definition of D both say "actually allowed"; only sub-sections (8), (9)(b) and (10) deem other amounts to be so.
Letting a large disposal push a block below zero. The definition of C caps it at (A – D) + B.
Giving the transferee the price it paid as actual cost. Sub-sections (2), (4) and (5) each say "irrespective of anything contained in section 39" and substitute the transferor's written down value.
Reducing the demerged company's block by the consideration received. Sub-section (3) reduces it by the written down value of the assets transferred to the resulting company.
Retaining a revaluation uplift on entering the Act's charge. Sub-section (9)(a) and (c) strip it from both the actual cost and the deemed depreciation.
Treating a part-agricultural assessee's earlier depreciation as only the business share. Sub-section (10) requires it computed as if the entire income were business income.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
43 - Definitions of certain terms relevant to income from profits and gains of business or profession
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 17/2020 — Guidelines under section 194 o 4 and section 206C 1 i of the income tax act 1961 2020-09-29
Circular No. 314 — 255. Investment allowance on new machinery or plant installed in small scale industrial undertaking - Computation of aggregate val 1981-09-17
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 41. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
CIT v Taj Mahal HotelSupreme CourtHelps taxpayertagged s.43(3) The officer says my fittings are part of the building, not plant. Is there a test, or is it just his impression?
CIT v Woodward Governor India P LtdSupreme CourtHelps taxpayertagged s.43(1) I restated my foreign currency creditors at the closing rate and debited an unrealised loss. Can the AO throw it out as a contingent liability?
Shree Choudhary Transport Company v ITOSupreme CourtHelps departmenttagged s.43(2) The AO has disallowed lorry hire I had already paid, not amounts still outstanding. Can section 40(a)(ia) reach sums actually paid?
Snowtex Investment Ltd v PCITSupreme CourtHelps departmenttagged s.43(5) Can I set my share trading loss off against my f&o profits?
CIT v Bharat AluminiumHigh CourtHelps taxpayertagged s.43(6) One machine in my block of assets was not used this year. Can the AO deny depreciation on it?
CIT v Yamaha Motor India P LtdHigh CourtHelps taxpayertagged s.43(6)(c)(B) I discarded machinery this year and did not use it. Can I still claim depreciation on it?
Banwari Sitaram Pasari HUF v ACITITATHelps taxpayertagged s.43(5) The officer has added up my whole commodity contract value as turnover and penalised me under s.271B. Is contract value turnover?
CBDT Circular 14/2021CBDTCuts both waystagged s.43(6)(c) A partner retired and took assets out of the firm. How do s.9B and s.45(4) work together?
Speculation, intraday and F&Otagged s.43(5) Is my intraday and futures-and-options trading speculative, and can I set the loss off against other income?
Succession and business reorganisationtagged s.43(6) My business was taken over mid-year or merged under a court order. Who is assessed, and what happens to depreciation?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.