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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallThe strongest evidence is an asset-wise file that connects each qualifying machine from purchase and payment through installation, commissioning, first use, tax depreciation and the return. For a power-generation, transmission or distribution business claiming additional depreciation under Section 32(1)(iia), retain documents proving ownership, actual tax cost, new status, business use, the exact put-to-use date, compliance with the 180-day rule, the depreciation method selected for the power business, and the prescribed particulars required by Section 34.
For the wording applicable to Assessment Year (AY) 2026-27, check the relevant Finance Act and the assessment notice before filing. The documents below are a practical evidence framework; the Income Tax Department does not publish one universal invoice-and-certificate checklist for every plant.
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What the assessing officer must be able to verify
An additional-depreciation claim is not proved by a single commissioning certificate or a fixed-asset-register line. The file should let an officer trace every amount and date through the same asset identifier. The statutory questions are:
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- Was it used for the taxpayer’s business?
- Was it a qualifying new plant or machine rather than an excluded asset?
- What was its actual tax cost after permitted reductions?
- On what date was it first put to use?
- Was it used for at least 180 days in the acquisition year?
- Was the depreciation method used for the power business consistent with the additional-depreciation condition?
- Were the prescribed particulars furnished, and does total depreciation stay within actual cost?
Build the file by asset or identifiable asset block, not only by project. A turbine, generator, transformer, boiler, control system or other unit should have a code that appears on the purchase order, invoice, capitalization approval, fixed-asset register, commissioning record and tax schedule wherever the supplier or plant records permit.
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Eligibility and ownership documents
Purchase and title trail
Keep the purchase order, contract, supplier invoice, delivery challan, acceptance certificate and title or ownership documents for each item. Where a project contract contains several machines, retain the equipment schedule and the allocation used to capitalize each component. A tax invoice that does not identify the machine should be accompanied by the contract, packing list or engineering schedule that does.
Payment and capitalization approval
Preserve bank advice, payment vouchers, letters of credit, goods-receipt records and the internal capitalization approval. These documents show that the taxpayer, rather than another group entity or contractor, acquired and paid for the asset. The fixed-asset register should record the asset code, description, location, supplier, invoice number, capitalization date and amount.
Business-use evidence
For a generating station, retain the plant asset map, operating-licence or project records applicable to the facility, and internal records showing that the equipment served generation, transmission or distribution. The purpose is to connect the particular machine to the business that earned the income; ownership alone is not enough.
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Proving actual cost, not merely the invoice total
Additional depreciation is calculated on actual cost. Reconcile the amount claimed to the cost ledger and show how each component was treated:
| Cost element | Documents to retain | What the reconciliation should show |
|---|---|---|
| Equipment purchase price | Supplier invoice, purchase order, contract and goods receipt | Invoice amount mapped to the asset code |
| Freight and insurance in transit | Freight invoice, insurance certificate and customs or transport records | Amount included in the asset’s capitalized cost |
| Import duties and charges | Bill of entry, duty challan and customs assessment | Duty included where it forms part of actual cost |
| Installation, erection and commissioning | Contractor invoices, work certificates, engineer’s measurement sheets and commissioning bill | Directly attributable cost allocated to the relevant machine |
| Technical and engineering fees | Consultancy agreement, invoices, timesheets or deliverables | Capitalized amount and the asset or project to which it relates |
| Borrowing costs capitalized before use | Loan agreement, drawdown statement, interest calculation and capitalization policy | Interest capitalized only up to the put-to-use date, with the date supported |
| Subsidies, grants, reimbursements or credits | Sanction letter, receipt advice, grant ledger and tax reconciliation | Reduction made to actual cost where applicable, rather than claiming on the gross figure |
Prepare a bridge from gross invoices to tax actual cost. It should identify capitalized additions, amounts expensed, foreign-exchange or other adjustments used in the books, and every subsidy, grant, reimbursement or credit that reduces the tax base. The general ledger, fixed-asset register, financial statements and tax depreciation schedule should agree or explain each reconciling item.
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Evidence that the machinery was new and not excluded
New-asset proof
Obtain a manufacturer or authorized-supplier certificate stating the machine’s manufacturing or supply status, serial number and whether it was new when sold. Keep the technical specification, model history, warranty commencement record and delivery documentation. If a component was refurbished, exchanged or previously operated, document that fact and obtain tax advice before including it; a second-hand machine does not satisfy the new-asset condition.
Exclusion checks
Section 32(1)(iia) does not cover every item installed at a power project. The Department’s list of exclusions includes:
- ships and aircraft;
- buildings and furniture;
- second-hand machinery;
- machinery used in an office or residential setting;
- road transport vehicles; and
- an asset that has already been fully depreciated.
Create a signed exclusion declaration for each asset block. State why the item is plant or machinery used in the power business and identify the records that rule out each relevant exclusion. Separate civil works, buildings, office equipment, furniture, vehicles and residential facilities in the register instead of combining them with eligible plant.
Proving the first-use date and the 180-day threshold
What counts as a persuasive first-use record
Keep the installation completion certificate, mechanical-completion certificate, trial-run log, synchronization approval, first-generation meter reading, commercial-operation declaration and plant operating log. A signed asset-wise schedule should state the date on which each machine was first used, who approved that date and which contemporaneous record supports it.
For a generator, synchronization with the grid or the first recorded generation may be relevant evidence, but use the date actually supported by the plant’s records and the applicable operating arrangements. Do not use only the invoice date, capitalization date or financial-year-end date as a substitute for proof of use.
Calculating the 180-day rule
Additional depreciation is generally 20% of the actual cost of qualifying new plant and machinery. When an asset is used for fewer than 180 days in the year it is acquired, only half of that additional depreciation is allowed in that year; the balance is allowed in the following year. On a 20% entitlement, the file should therefore show a 10% first-year amount and a 10% next-year balance for the affected asset.
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| Use in acquisition year | Additional-depreciation treatment | Schedule evidence |
|---|---|---|
| 180 days or more | 20% of actual cost in the acquisition year, subject to all other conditions | First-use date and day-count calculation |
| Fewer than 180 days | 10% of actual cost in the acquisition year and the remaining 10% in the following year | First-use date, 180-day test and next-year carry-forward line |
Use calendar dates consistently. Show the first day of use, the year-end, the number of days counted and any disposal or interruption that affects the calculation. The next year’s schedule should identify the same asset code and the unclaimed balance rather than treating it as a new addition.
Power-business method evidence: WDV versus SLM
Power-generation, transmission and distribution taxpayers may use the written-down-value (WDV) or straight-line (SLM) method for ordinary depreciation, subject to the applicable rules and a valid method election. The AY 2026-27 deductions table limits the Section 32(1)(iia) additional-depreciation benefit to a taxpayer that is not claiming depreciation on the straight-line basis.
Documents to retain
- The depreciation-method election or notice made for the power undertaking.
- Prior-year returns, depreciation schedules and assessments showing continuity of the method.
- Board, management or tax-policy approval supporting the method used in the current computation.
- The current-year tax depreciation schedule identifying ordinary depreciation separately from additional depreciation.
- A written explanation for any change, together with the effective year and the legal basis relied upon.
When an assessment contains competing calculations, compare the method shown in the return with prior-year filings and the method actually applied in the books and tax schedule. A claim that mixes SLM ordinary depreciation with a Section 32(1)(iia) amount without addressing the statutory condition is vulnerable even if the machinery itself is new.
Asset-wise computation and reconciliation
Prepare one schedule that an officer can recalculate without reconstructing the project accounts. At minimum, include:
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| Column | Required content |
|---|---|
| Identification | Asset code, description, location, unit or project and serial number |
| Acquisition | Supplier, invoice number and invoice date |
| Cost | Gross invoice amount, additions for freight, duties, installation, erection, commissioning and qualifying borrowing costs, and reductions for subsidies, grants, reimbursements or credits |
| Use | First-use date, days used in the acquisition year and supporting document reference |
| Eligibility | New-asset confirmation, exclusion check and business-use description |
| Depreciation | Ordinary depreciation method, 20% additional-depreciation entitlement, 10% first-year amount where the 180-day test applies, and next-year balance |
| Accounting tie-out | Fixed-asset-register number, general-ledger account, return line and tax computation reference |
| Lifecycle | Disposal, transfer, subsidy adjustment and cumulative depreciation details |
Reconcile the schedule to the fixed-asset register, general ledger, return, tax depreciation computation and financial statements. Section 34 prevents aggregate depreciation deductions from exceeding actual cost. The cumulative-depreciation column should therefore be updated for ordinary depreciation, additional depreciation, the next-year balance and any disposal adjustment.
Prescribed particulars and the assessment-notice response
Section 34 states: “The deductions referred to in sub-section (1) of section 32 … shall be allowed only if the prescribed particulars have been furnished.” Include the prescribed depreciation particulars with the return and provide any additional schedule requested in the assessment notice. Use a cross-reference index that points from every claimed asset to its invoice, payment proof, cost bridge, first-use evidence, method evidence and computation line.
When responding to a notice, submit a controlled copy of the index and schedules, preserve the original documents, and explain any difference between book depreciation and tax depreciation. If the notice asks for a project-level figure, still attach the asset-wise backup so the total can be tested. Identify documents that do not exist for a particular asset and provide the closest contemporaneous record rather than creating a certificate after the fact.
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- Return and computation: filed return, tax audit material where applicable, depreciation computation and the additional-depreciation line.
- Method evidence: method election, prior-year returns, prior schedules and continuity explanation for the power undertaking.
- Fixed-asset register: asset codes, descriptions, locations, dates, costs and accumulated depreciation.
- Purchase and title: purchase orders, contracts, invoices, delivery records and ownership documents.
- Payment records: bank statements, payment vouchers, letters of credit and supplier-account reconciliation.
- Cost support: freight, duty, installation, erection, commissioning, technical-fee and borrowing-cost records.
- New-asset and exclusion file: manufacturer certificates, specifications, serial-number history and signed exclusion checks.
- Commissioning and use: trial-run, synchronization, first-generation, meter and operating logs.
- 180-day schedule: asset-wise day count, first-year 10% amount and next-year 10% balance where relevant.
- Subsidy and credit reconciliation: grant, reimbursement, subsidy and tax-credit records with the reduction to actual cost.
- Prescribed particulars: the Section 34 particulars and all schedules filed with or supplied for the assessment.
- Ledger and return tie-out: general-ledger extracts, financial-statement additions and reconciliation to the tax computation.
- Notice response: the assessment notice, submission, annexure list and acknowledgement of delivery.
Common failure points and how to correct them
One project total with no asset trail
A project cost certificate does not establish which machines were new, when each was used or whether civil and office items were included. Split the total into asset codes and attach the underlying invoices and engineering allocation.
Capitalization date used as the use date
Capitalization in the ledger may precede trial operation or follow physical use. Use contemporaneous commissioning, synchronization and generation records, then document the day count from that date.
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Gross cost claimed despite assistance
Subsidies, grants, reimbursements and credits can affect actual cost. Maintain a separate reconciliation and show the reduced tax base used for the 20% calculation.
Refurbished or transferred equipment described as new
Supplier warranty, serial-number history and manufacturer confirmation should support new status. If the history is unclear, isolate the item and do not include it until eligibility is established.
SLM and additional depreciation not reconciled
Show the power-business method, prior-year continuity and the legal reason the Section 32(1)(iia) condition is met. Keep ordinary and additional depreciation in separate columns.
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Missing prescribed particulars
Even a mathematically correct claim can fail if the required particulars were not furnished. Add the Section 34 particulars, a document index and a clear tie-out before answering the notice.
What a defensible file looks like
An officer should be able to select any amount in the additional-depreciation column, identify the machine and serial number, open the invoice and payment proof, verify the net actual cost, confirm that the machine was new and not excluded, read the commissioning or first-generation record, recalculate the 180-day treatment, check the power-business method and trace the result to the return. That continuous chain is the practical proof of the claim.
Review the file against the assessment year, the Finance Act applicable to that year and the wording of the notice. The statutory percentages and conditions described here are for the AY 2026-27 material identified above; a later amendment or a different assessment year may change the result.
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