Income Tax Act, 2025
Section 5: Ins. by Act 14 of 2001, s. 26 (w.e.f. 12002).
5. Ins. by Act 14 of 2001, s. 26 (w.e.f. 12002).
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1[Explanation 13.—The actual cost of any capital asset on which deduction has been allowed or is
allowable to the assessee under section 35AD, shall be treated as 'nil',—
(a) in the case of such assessee; and
(b) in any other case if the capital asset is acquired or received,—
(i) by way of gift or will or an irrevocable trust;
(ii) on any distribution on liquidation of the company; and
(iii) by such mode of transfer as is referred to in clauses (i), (iv), (v), (vi), (vib), 2[(xiii), (xiiib)
and (xiv)] of section 47:]
3[Provided that where any capital asset in respect of which deduction or part of deduction allowed
under section 35AD is deemed to be the income of the assessee in accordance with the provisions of subsection (7B) of the said section, the actual cost of the asset to the assessee shall be the actual cost to the
assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that
would have been allowable had the asset been used for the purpose of business since the date of its
acquisition.]
(2) “paid” means actually paid or incurred according to the method of accounting upon the basis of
which the profits or gains are computed under the head “Profits and gains of business or profession”;
(3) “plant” includes ships, vehicles, books, scientific apparatus and surgical equipment used for the
purposes of the business or profession 4[but does not include tea bushes or livestock]5[or buildings or
furniture and fittings];
(4) (i) “scientific research” means any activities for the extension of knowledge in the fields of natural
or applied science including agriculture, animal husbandry or fisheries;
(ii) references to expenditure incurred on scientific research include all expenditure incurred for the
prosecution, or the provision of facilities for the prosecution, of scientific research, but do not include any
expenditure incurred in the acquisition of rights in, or arising out of, scientific research;
(iii) references to scientific research related to a business or class of business include—
(a) any scientific research which may lead to or facilitate an extension of that business or, as the
case may be, all businesses of that class;
(b) any scientific research of a medical nature which has a special relation to the welfare of
workers employed in that business or, as the case may be, all businesses of that class;
(5) “speculative transaction” means a transaction in which a contract for the purchase or sale of any
commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual
delivery or transfer of the commodity or scrips:
Provided that for the purposes of this clause—
(a) a contract in respect of raw materials or merchandise entered into by a person in the course of
his manufacturing or merchanting business to guard against loss through future price fluctuations in
respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by
him; or
in the case of such assessee; and
in any other case if the capital asset is acquired or received,—
by way of gift or will or an irrevocable trust;
on any distribution on liquidation of the company; and
by such mode of transfer as is referred to in clauses
and
of the said section, the actual cost of the asset to the assessee shall be the actual cost to the
assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that
would have been allowable had the asset been used for the purpose of business since the date of its
acquisition.]
“paid” means actually paid or incurred according to the method of accounting upon the basis of
which the profits or gains are computed under the head “Profits and gains of business or profession”;
“plant” includes ships, vehicles, books, scientific apparatus and surgical equipment used for the
purposes of the business or profession 4[but does not include tea bushes or livestock]5[or buildings or
furniture and fittings];
(i) “scientific research” means any activities for the extension of knowledge in the fields of natural
or applied science including agriculture, animal husbandry or fisheries;
references to expenditure incurred on scientific research include all expenditure incurred for the
prosecution, or the provision of facilities for the prosecution, of scientific research, but do not include any
expenditure incurred in the acquisition of rights in, or arising out of, scientific research;
references to scientific research related to a business or class of business include—
any scientific research which may lead to or facilitate an extension of that business or, as the
case may be, all businesses of that class;
any scientific research of a medical nature which has a special relation to the welfare of
workers employed in that business or, as the case may be, all businesses of that class;
“speculative transaction” means a transaction in which a contract for the purchase or sale of any
commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual
delivery or transfer of the commodity or scrips:
Provided that for the purposes of this clause—
a contract in respect of raw materials or merchandise entered into by a person in the course of
his manufacturing or merchanting business to guard against loss through future price fluctuations in
respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by
him; or