Section 2(11) Income Tax: Block of Assets – Meaning & Concept

Section 2(11) of Income Tax defines ‘Block of Assets’ as a ‘group of assets’ in respect of which the same percentage of depreciation is to be applied, i.e. proper calculation of Depreciation based on WDV of each block of assets has been prescribed for determining exact tax liability on capital gains/ business profits.

a) Definition or Meaning of ‘Block of Assets’: Section 2(11) Income Tax

Section 2(11) of Income Tax has defined ‘Block of Assets’ as a ‘group of assets’ falling within a ‘class of assets’ comprising-

(a)  tangible assets, being buildings, machinery, plant or furniture;

(b)  intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, not being goodwill of a business or profession,

in respect of which the same percentage of depreciation is prescribed.

Meaning and Concept of 'Block of Assets' for the purpose of 'Depreciation' under Income Tax

b) Concept of ‘Block of Assets’ for Depreciation

Depreciation on block of assets is mainly charged for the purpose of computing Capital Gains or Business Profit or Loss. Individual assets are sorted and assigned to the relevant block of assets, in the year of purchase itself, based on terminology prescribed under Income Tax, like Land and Buildings, Plant & Machinery, Motor Vehicles, Furniture & Fixtures. Different rates of depreciation have been prescribed under Income Tax, for different types of block of assets. Accordingly, the Written Down Value (WDV) is worked out for each block of assets.

It may be noted that concept of individual asset was used upto AY 1987-88 for calculating the depreciation in respect of each asset. However, from AY 1988-89, the concept of Block of Assets has been introduced. Accordingly, the depreciation can’t be claimed for individual assets under Income Tax due to existence of concept of Block of Assets. However, an Individual Asset alone can form/ create a block of assets, if no similar asset is available in that category/ block, for the purpose of claiming depreciation under the Income Tax Act.

Leave a Reply