Income Tax Act, 2025
Section 3: Ins. by Act 16 of 1981, s. 8 (w.e.f. 11981).
3. Ins. by Act 16 of 1981, s. 8 (w.e.f. 11981).
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43. Definitions of certain terms relevant to income from profits and gains of business or
profession.—In section 28 to 41 and in this section, unless the context otherwise requires—
(1) “actual cost” means the actual cost of the assets to the assessee, reduced by that portion of the
cost thereof, if any, as has been met directly or indirectly by any other person or authority:
1[Provided that where the actual cost of an asset, being a motor car which is acquired by the
assessee after the 31st day of March, 1967 2[, but before the 1st day of March, 1975,] and is used
otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees,
the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be
taken to be twenty-five thousand rupees:]
3[Provided further that where the assessee incurs any expenditure for acquisition of any asset or
part thereof in respect of which a payment or aggregate of payments made to a person in a day,
otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of
electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure
shall be ignored for the purposes of determination of actual cost.]
Explanation 1.—Where an asset is used in the business after it ceases to be used for scientific
research related to that business and a deduction has to be made under 4[clause (ii) of sub-section (1)]
of section 32 in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to
the assessee as reduced by the amount of any deduction allowed under clause (iv) of sub-section (1)
of section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922).
5[Explanation 1A.—Where a capital asset referred to in clause (via) of section 28 is used for the
purposes of business or profession, the actual cost of such asset to the assessee shall be the fair market
value which has been taken into account for the purposes of the said clause.]
6[Explanation 2.—Where an asset is acquired by the assessee by way of gift or inheritance, the actual
cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by—
(a) the amount of depreciation actually allowed under this Act and the corresponding provisions
of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to the
assessment year commencing before the 1st day of April, 1988; and
(b) the amount of depreciation that would have been allowable to the assessee for any assessment
year commencing on or after the 1st day of April, 1988, as if the asset was the only asset in the
relevant block of assets.]
Explanation 3.—Where, before the date of acquisition by the assessee, the assets were at any time
used by any other person for the purposes of his business or profession and the 7[Assessing Officer] is
satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the
reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the
actual cost to the assessee shall be such an amount as the 7[Assessing Officer] may, with the previous
approval of the 8[Joint Commissioner], determine having regard to all the circumstances of the case.
“actual cost” means the actual cost of the assets to the assessee, reduced by that portion of the
cost thereof, if any, as has been met directly or indirectly by any other person or authority:
1[Provided that where the actual cost of an asset, being a motor car which is acquired by the
assessee after the 31st day of March, 1967 2[, but before the 1st day of March, 1975,] and is used
otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees,
the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be
taken to be twenty-five thousand rupees:]
3[Provided further that where the assessee incurs any expenditure for acquisition of any asset or
part thereof in respect of which a payment or aggregate of payments made to a person in a day,
otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of
electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure
shall be ignored for the purposes of determination of actual cost.]
Explanation 1.—Where an asset is used in the business after it ceases to be used for scientific
research related to that business and a deduction has to be made under 4[clause
of sub-section
of sub-section
of section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922).
5[Explanation 1A.—Where a capital asset referred to in clause
of section 28 is used for the
purposes of business or profession, the actual cost of such asset to the assessee shall be the fair market
value which has been taken into account for the purposes of the said clause.]
6[Explanation 2.—Where an asset is acquired by the assessee by way of gift or inheritance, the actual
cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by—
the amount of depreciation actually allowed under this Act and the corresponding provisions
of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to the
assessment year commencing before the 1st day of April, 1988; and
the amount of depreciation that would have been allowable to the assessee for any assessment
year commencing on or after the 1st day of April, 1988, as if the asset was the only asset in the
relevant block of assets.]
Explanation 3.—Where, before the date of acquisition by the assessee, the assets were at any time
used by any other person for the purposes of his business or profession and the 7[Assessing Officer] is
satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the
reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the
actual cost to the assessee shall be such an amount as the 7[Assessing Officer] may, with the previous
approval of the 8[Joint Commissioner], determine having regard to all the circumstances of the case.