Clause 26 is another example of poor drafting. In case, an asset acquired by an NRI outside India, is brought to India and used for business or profession, the actual cost on which depreciation will be allowed will be the written down value method. This is a poor attempt made to plug an existing loophole. However, at what rate of exchange will the actual cost be calculated? Assuming that India has a Double Tax Avoidance Agreement (DTAA) with a country and if the permanent establishment (PE) in India introduces the assets in the books at the existing rate of exchange, can the depreciation be claimed as per PE's books?

Any profit or gain on receipt of the insurance on damage or destruction of anasset will now attract capital gains tax. This is interesting. The basic requirement for imposing capital gains tax is that there should be a transfer. In situations defined u/s 45 (1), where is the question of transfer as defined u/s 2(47)? The newly inserted Sec 45(1) is also inconsistent with the provisions of Sec 41(1) and Sec 50 and difficult to apply without amending the definition of transfer. The provisions relating to demergers are a minefield--for instance, how can actual cost not exceed WDV in a demerged company (an impossible event, since post-depreciation cost cannot be lower than actual cost). It is time that for the sake of simplicity and to avoid litigation, direct tax proposals are debated before being introduced.