A tyre manufacturer (opted out of the default regime) instals plant and machinery of Rs 120 crore, comprising second-hand machinery of Rs 20 crore and new machinery for in-house scientific research of Rs 15 crore. Additional depreciation under section 32(1)(iia) is computed on:

1. Additional depreciation requires NEW machinery, so the second-hand Rs 20 crore is excluded. 2. Machinery on which the section 35 scientific-research deduction is claimed gets no section 32 depreciation at all — normal or additional — so the Rs 15 crore is also excluded. 3. Eligible base = 120 - 20 - 15 = Rs 85 crore; additional depreciation = 20% x 85 = Rs 17 crore. 4. Normal depreciation, by contrast, is computed on Rs 105 crore (only the section 35 machinery excluded), because second-hand assets do earn normal depreciation — the asymmetry options B and C blur. 5. Option A ignores both exclusions. _Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 42_