Check the previous owner’s use and depreciation first
For tax year 2026–27, section 39(4), Table row 8 of the Income-tax Act, 2025 addresses an asset acquired from its previous owner and subsequently given back to that owner by lease, hire or otherwise, where the stated prior business-use and depreciation-claim conditions apply. The buyer’s actual cost under that row is the previous owner’s WDV at transfer. This guide checks the Finance Act, 2026 text on 27 October 2026; it does not apply the new section numbering to the earlier financial-year return. Income-tax Act, 2025: section 39(4), Table row 8 and subsection (5).
Trace the transaction rather than relying on its label
Identify the asset, seller, buyer, transfer and subsequent lease or hire to the previous owner. Retain agreements, possession and use records and the previous owner’s depreciation history. A purchase of a used machine from an unrelated seller, without the stated return arrangement, should not be placed in this row solely because the seller once depreciated it. Income-tax Act, 2025: section 39(4), Table row 8 and subsection (5).
Obtain tax WDV evidence, not just a book schedule
The row refers to the WDV in the previous owner’s hands at transfer. Reconcile that figure to the relevant tax computations and asset/block records. Book cost, accumulated book depreciation and a fair-value report can produce different figures. The examples assume that a reliable, applicable tax WDV has independently been established; they do not invent an allocation rule for a multi-asset block. Income-tax Act, 2025: section 39(4), Table row 8 and subsection (5).
Do not substitute the reacquisition formula
Table row 7 addresses reacquisition by a former owner and contains a different lower-of comparison. Row 8 instead states the previous owner’s WDV for its specified transaction. Do not mechanically copy the row 7 formula, or reset the buyer’s basis to the invoice because the sale is commercially documented. Apply all other relevant provisions separately to the actual facts. Income-tax Act, 2025: section 39(4), Table row 8 and subsection (5).
Keep tax basis and accounting measurement distinct
The acquisition and leaseback accounting assessment under the applicable reporting standards is a separate exercise. Build a buyer-side book-to-tax cost bridge, avoiding an immediate expense claim merely from a cost difference. Section 39(5) expressly excepts row 8 from its stated overriding determination; that wording is not a certificate that every sale-and-leaseback arrangement escapes all other tax or legal scrutiny. The illustrations isolate the cost input, not final depreciation, ownership eligibility or the seller’s disposal tax. Income-tax Act, 2025: section 39(4), Table row 8 and subsection (5).
Applicable primary references
Income-tax Act, 2025: section 39(4), Table row 8 and subsection (5)
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: New invoice exceeds tax WDV
All amounts are ₹ lakh. Assume the row applies, new purchase price is 150 and the seller’s verified tax WDV at transfer is 60. Row 8 cost is 60. The difference from the 150 invoice is 90; the new invoice does not itself provide a 150 depreciation basis.
Illustrative example 2: Book WDV is a different number
Seller’s book cost is 200 and accumulated book depreciation 80, giving book WDV 120. Its independently verified tax WDV is 75. Buyer pays 140. Under the stated row, use 75, not 120 or 140. The buyer’s price-to-tax-cost difference is 65.
Illustrative example 3: Do not import a lower-of formula
Assume the specified transaction satisfies row 8, seller’s established tax WDV is 80 and actual price is 65. The row itself states tax cost 80 rather than a row 7 lower-of result of 65. Assess other applicable provisions separately; this illustration does not establish an unrestricted additional deduction.
Illustrative example 4: Reconcile two supported assets separately
Asset A has verified seller tax WDV 40 and buyer price 70. Asset B has verified WDV 90 and price 120. Assuming row 8 applies to both, combined cost is 130 against combined price 190. The reconciliation difference is 60, retaining separate support for both WDVs.
Illustrative example 5: Replace an invoice-based draft register
A buyer’s draft tax register shows 180 because it imported the invoice. The applicable row 8 WDV is verified at 110. Correct the cost input downward by 70. That correction does not itself calculate a current tax payment or a book loss.
Illustrative example 6: Avoid treating book depreciation as the tax reduction
Assume historical seller cost 100. A separately validated tax working gives WDV 55, while book depreciation 30 produces book WDV 70. Buyer price is 90. Row 8 cost is 55; using book WDV would overstate the cost input by 15. Preserve the independent tax working rather than assuming historical cost less book depreciation is the tax result.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the applicable tax period | 2025 Act versus earlier-law return |
| 2 | Identify the asset and parties | Agreements and asset identity |
| 3 | Trace subsequent return to seller | Lease, hire or other arrangement |
| 4 | Verify seller’s prior business use | Use records |
| 5 | Verify prior depreciation claim | Tax history |
| 6 | Establish transfer-date tax WDV | Applicable tax computation support |
| 7 | Distinguish rows 7 and 8 | Correct statutory route |
| 8 | Bridge invoice, book and tax amounts | Buyer-side reconciliation |
| 9 | Review other eligibility and cost issues | Separate statutory assessment |
| 10 | Approve the tax register input | Evidence and reviewer working |
Sixteen practitioner FAQs
1. Does every used-asset purchase use row 8?
No. Establish the stated previous-owner and return-arrangement conditions.
2. Must the asset be given back only through a lease?
The row also refers to hire or otherwise; assess the actual facts.
3. Does the seller’s earlier business use matter?
Yes. It is one of the stated conditions.
4. Does a depreciation claim by the previous owner matter?
Yes. Preserve the relevant tax-history evidence.
5. Is the buyer’s invoice automatically actual cost here?
No. The row specifies the previous owner’s WDV at transfer.
6. Can book WDV replace tax WDV?
No. Reconcile and establish the applicable tax amount.
7. Does a valuation report replace that tax history?
No. It is not the WDV evidence specified by the row.
8. Is this the same formula as former-owner reacquisition?
No. Row 7 and row 8 describe different circumstances and computations.
9. Does row 8 itself prescribe a lower-of-price-and-WDV test?
It states the previous owner’s WDV; do not import row 7’s separate formula.
10. Does the article invent an individual-asset block allocation method?
No. The examples assume the applicable WDV has independently been established.
11. Should two asset WDVs be supported separately?
Yes, before aggregating the buyer’s cost inputs.
12. Is the invoice-to-tax difference automatically deductible immediately?
No. A cost bridge is not an automatic revenue expense.
13. Does the cost rule settle depreciation eligibility?
No. Assess ownership, use, rate and other applicable requirements separately.
14. Does it determine the seller’s disposal income?
No. That is a separate computation.
15. Does section 39(5)’s row 8 exception remove every other scrutiny?
No. Read that exception within its own provision and review other applicable law.
16. Does tax cost dictate the complete leaseback accounting?
No. The reporting-standard analysis is separate.
Conclusion
Identify section 39’s sale-and-leaseback cost rule and reconcile the buyer’s tax basis to the previous owner’s tax WDV rather than the new invoice or book value.