The seller needs a separate block adjustment
For FY 2025–26 and AY 2026–27, section 43(6)(c) of the Income-tax Act, 1961 contains a specific decrease for assets leaving a block in a slump sale. Item (i)(C), read with item (ii), uses actual cost reduced by the specified historical depreciation, including depreciation that would have been allowable treating the transferred asset as the only asset in its block for the stated assessment years. The decrease cannot exceed the relevant written down value. This is not an instruction to deduct an arbitrary allocation of business-sale consideration from the block.
Read the applicable text: Income-tax Department: section 43(6)(c)(i)(C) and (ii).
Confirm the transaction before the calculation
Obtain the executed business-transfer agreement, completion evidence and transferred-asset schedule. A sale described commercially as a business sale needs a legal classification review before this specific rule is applied. This article assumes a qualifying slump sale and focuses on the seller's surviving depreciation register. It does not replace the separate section 50B capital-gains computation, net-worth analysis, valuation or reporting requirements.
Rebuild the transferred asset's own history
Trace actual tax cost and acquisitions, additions and adjustments in the historical record. The clause distinguishes depreciation actually allowed for previous years relevant to assessment years before 1 April 1988 from depreciation that would have been allowable for assessment years commencing on or after 1 April 1988 under its sole-asset assumption. Item (ii)(A) carries the item (i) adjustments into the computation for assessment years beginning on or after 1 April 1989. The illustrations assume their historical reconstruction inputs; their arithmetic does not validate an actual asset’s unprovided acquisition and rate history. Reconstruct the applicable period history rather than applying one pooled figure. A company's pooled block balance generally does not identify one machine's remaining statutory amount without reconstruction. Book carrying value, market value and an allocation in management's deal model do not automatically supply that reconstruction.
Apply the ceiling to the correct block
Map each departing asset to its actual tax block. Aggregate and reconcile transferred-asset workings for each block, then apply the statutory WDV restriction using a properly sequenced computation. Do not use headroom in an unrelated block to absorb a decrease that the relevant block cannot support. Other additions, ordinary disposals and annual depreciation require their own treatment and sequence; the simple illustrations isolate the stated slump-sale adjustment and assume no other movements unless expressly included.
Keep three bridges distinct
Prepare a fixed-asset derecognition bridge for the books, a tax-block bridge for section 43(6), and the independently determined slump-sale capital-gains working. Link common source documents, but do not collapse the measures into one balancing amount. A difference between book carrying value and the reconstructed tax amount is a reconciliation question, not automatically an additional taxable receipt of that amount.
Avoid repeat reductions after completion
Mark assets transferred with completion dates and unique identifiers. A preliminary computation and the final return should not both reduce the same block independently. Preserve the original reconstruction, the applied ceiling and the residual block amount so the next year's opening register can be reproduced. Do not treat the residual amount in these illustrations as a final depreciation deduction: eligibility, block continuity and any other applicable provision still need review.
Use the enactment applicable to the period
These workings use the Income-tax Act, 1961 for FY 2025–26 and AY 2026–27. A later tax-year section number should not be inserted mechanically into this return file. Where prior-year data are incomplete, identify the missing cost or depreciation evidence explicitly before finalising the statutory decrease.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: A reconstructed amount below the block ceiling
Assume supported actual cost ₹1,000,000 and the statutory historical depreciation reconstruction ₹600,000. The asset-specific amount is ₹400,000. Against relevant block WDV ₹900,000, the decrease is ₹400,000 and the isolated residual ₹500,000, before other applicable movements or deductions.
Illustrative example 2: The WDV cap binds
Cost ₹800,000 less reconstructed statutory depreciation ₹200,000 gives ₹600,000. If relevant block WDV is ₹450,000, the decrease is capped at ₹450,000. The isolated residual is zero; the ₹150,000 excess reconstruction does not create a negative block in this calculation.
Illustrative example 3: Two transferred assets in one block
Reconstructed amounts are ₹250,000 and ₹180,000, totalling ₹430,000. Against relevant block WDV ₹700,000, the isolated residual is ₹270,000. Keep both source histories even though one aggregate decrease reaches the block register.
Illustrative example 4: Book value is a separate measure
A departing asset's book carrying value is ₹350,000 and its supported statutory reconstructed amount ₹280,000. The ₹70,000 difference belongs in the reconciliation. Assuming sufficient block WDV, use ₹280,000 for this statutory decrease rather than substituting ₹350,000.
Illustrative example 5: Separate blocks cannot share a ceiling
Block A has WDV ₹300,000 and reconstructed transferred amount ₹400,000: decrease ₹300,000. Block B has WDV ₹500,000 and transferred amount ₹100,000: decrease ₹100,000, residual ₹400,000. Combined decreases are ₹400,000, not the uncapped ₹500,000 reconstruction.
Illustrative example 6: Do not post the final working twice
Relevant block WDV is ₹1,200,000 and the supported decrease ₹320,000, giving isolated residual ₹880,000. Posting the same decrease again would reduce it incorrectly to ₹560,000, an additional unsupported ₹320,000 reduction. Link the draft and final entries to one completed transfer.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Fix the period | FY 2025–26 and AY 2026–27. |
| 2 | Confirm slump-sale classification | Executed agreement and separate legal analysis. |
| 3 | Identify transferred assets | Completion schedule and unique asset identifiers. |
| 4 | Map tax blocks | Classification supported by historical tax registers. |
| 5 | Establish actual cost | Original acquisition and subsequent tax-cost adjustments. |
| 6 | Reconstruct statutory depreciation | Actual and hypothetical sole-asset history as applicable. |
| 7 | Compute block-specific decreases | Asset amounts, aggregation and relevant WDV ceiling. |
| 8 | Maintain separate accounting and gains bridges | Book derecognition and independently prepared capital-gains working. |
| 9 | Prevent duplicate postings | One transfer reference across drafts, ledger and final computation. |
| 10 | Carry forward the evidence | Final block schedule, exceptions and next-year opening trail. |
Sixteen practitioner FAQs
1. Does the business-sale price automatically reduce each block?
Not under this specific reconstruction merely by allocating that price.
2. Does this guide establish that a deal is a slump sale?
No. It assumes classification has been independently established.
3. Is section 50B computation replaced?
No. Maintain the separate capital-gains analysis.
4. Why is an asset history needed if depreciation is pooled?
The specific decrease requires the statutory transferred-asset reconstruction.
5. Can book depreciation substitute for the statutory history?
Not automatically. Apply the provision's actual and hypothetical requirements.
6. What does the sole-asset assumption do?
It identifies depreciation that would have been allowable treating the asset as the only asset in the relevant block.
7. Must every period use one guessed rate?
No. Verify classification and applicable historical rates and conditions.
8. Can the decrease exceed relevant WDV?
The provision restricts the amount of the decrease.
9. Can an unrelated block provide extra headroom?
Do not pool unrelated block ceilings.
10. Are several assets' source workings still needed?
Yes, even where their amounts feed one block adjustment.
11. Is book carrying value the statutory decrease?
Not merely because it is available from the asset ledger.
12. Does a book-tax difference automatically become taxable income?
No. Analyse the actual legal effects separately.
13. Is the isolated residual a final current-year deduction?
No. Other applicable depreciation and block rules remain to be assessed.
14. Can a draft and final computation each post the decrease?
No. Reconcile them to one completed transfer.
15. Which Act governs this stated AY working?
The Income-tax Act, 1961.
16. What should a reviewer reproduce?
Transaction classification, asset histories, block mapping, ceiling and a single final posting.