Home › CA Inter › taxation › Profits and Gains of Business or Profession › A company claimed Rs 50,00,000 under section 35A…
A company claimed Rs 50,00,000 under section 35AD for a warehouse building in A.Y. 2025-26 and transferred the building to a non-specified business in February 2026 (within 8 years). If notional depreciation for the period is Rs 5,00,000, the deemed business income of A.Y. 2026-27 is:
ARs 50,00,000
BRs 5,00,000
CRs 45,00,000
DRs 55,00,000
Answer & Solution
Correct answer: C. Rs 45,00,000
1. Section 35AD(7A) requires the asset to be used only for the specified business for 8 years from the year of acquisition.
2. On breach, section 35AD(7B) taxes the deduction claimed as reduced by the depreciation that would have been allowable under section 32.
3. Deemed income = 50,00,000 - 5,00,000 = Rs 45,00,000, taxable in the year of the breach (A.Y. 2026-27).
4. The building's actual cost for the receiving business then becomes Rs 45,00,000 (cost minus notional depreciation).
5. Option A ignores the depreciation relief built into section 35AD(7B); option B taxes only the depreciation; option D adds the notional depreciation instead of reducing it.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 61_
Related questions
Which statement about the deductibility of Securities Transaction Tax (STT) and CommoditieA firm's net profit is Rs 17,00,000 before deducting partner salary of Rs 9,60,000, deprecA tyre manufacturer (opted out of the default regime) instals plant and machinery of Rs 12Unpaid interest of Rs 45,00,000 due to a State Financial Corporation and a bank was converA trader's turnover for P.Y. 2025-26 is Rs 8 crore. Cash receipts are 3 per cent of total An eligible 44AD assessee has turnover of Rs 2,98,50,000, of which Rs 14,00,000 was receivA car purchased on 10.8.2022 for Rs 5,25,000 for personal use was brought into professionaAn employer contributes 20 per cent of basic salary to the NPS account of an employee whos