Section 75 of the Income-tax Act, 2025 — Cost of Acquisition of a Depreciable Asset (Straight-Line Method / Power Undertakings)

In plain language

What Section 75 says in plain English

When you sell a depreciable asset, you cannot use its original purchase price as the "cost of acquisition" for capital gains, because you have already claimed depreciation on it year after year and reduced your taxable business profit by that amount. Section 75 of the Income-tax Act, 2025 fixes the cost of acquisition for one specific category of depreciable asset — assets on which depreciation was claimed under section 33(2), i.e. on the straight-line method (SLM), which is the special depreciation route available mainly to undertakings engaged in the generation, or generation and distribution, of power.

The rule is short and mechanical: if depreciation has been obtained under section 33(2) on a capital asset in any tax year, then when that asset is transferred, the normal capital-gains machinery of sections 72 and 73 applies, but with one modification — the written down value (WDV) of that individual asset, as defined in section 41 and as adjusted, is treated as its cost of acquisition.

Section 75 vs Section 74 — do not confuse the two

• Section 74 (the successor to old Section 50) deals with the ordinary "block of assets" depreciation route under section 33(3) — the WDV method that most businesses use. There, gains/losses are computed on the whole block, and any positive figure is deemed short-term capital gain.
• Section 75 (the successor to old Section 50A) deals only with assets depreciated asset-by-asset on the straight-line method under section 33(2) — power-sector undertakings that opted for SLM instead of the block/WDV method. Here the WDV of the single asset (not a block) becomes the cost of acquisition.

Who does Section 75 apply to?

• Primarily undertakings engaged in generation or generation-and-distribution of power that elected the straight-line method of depreciation under section 33(2).
• The asset must be a capital asset on which SLM depreciation was actually obtained in one or more tax years.
• It is triggered only on transfer (sale, exchange, etc.) of such an asset.

Key conditions and how the number is built

• Cost of acquisition = adjusted WDV of the asset (section 41 definition), not the original actual cost.
• Capital gain = sale consideration − adjusted WDV − expenses on transfer.
• No indexation benefit is available on the WDV, because depreciation has already been allowed on that value.
• The character of the gain follows the general scheme applied through sections 72/73 — for depreciable assets this is effectively treated as short-term in nature, so lower long-term rates do not apply.

How it interacts with other sections

• Section 33(2) is the gateway — only assets depreciated under SLM here fall into Section 75.
• Section 41 supplies the meaning of "written down value" used as the cost.
• Sections 72 and 73 provide the mode of computation of capital gains and the meaning of cost of acquisition/improvement that Section 75 then modifies.
• Section 74 handles the parallel situation for block-of-assets (WDV method) depreciation.

Practical implications

• Power-sector companies selling old plant, turbines or machinery depreciated on SLM must compute gains against the depreciated book value under tax law, not the price they paid decades ago — usually producing a larger taxable gain.
• Because indexation is denied and the gain is short-term in character, tax planning around the timing of sale and reinvestment matters.
• Accurate maintenance of asset-wise WDV records is essential; the WDV must be "as adjusted" for any prior events affecting it.