## Depreciation for Power Generation Undertakings & Adjustments on Sale
### Power generation undertakings [Rule 5(1A)]
1. SLM basis: Depreciation is a percentage of the actual cost of each asset, at rates in Appendix IA.
2. Cap: Aggregate depreciation across all assessment years cannot exceed the actual cost of the asset.
3. WDV option: A power undertaking may instead opt for the Block of Assets / WDV method (rates in Appendix I).
- The option must be exercised before the due date u/s 139(1) for the first year in which power generation begins.
- Once chosen, it is final and applies to all subsequent years.
### Terminal Depreciation vs Balancing Charge (SLM assets)
These arise when an SLM (power-undertaking) asset is sold, discarded, demolished or destroyed:
| Terminal Depreciation [Sec. 32] | Balancing Charge [Sec. 41(3)] | |
|---|---|---|
| When | Sale value < WDV | Sale value > WDV |
| Treatment | Shortfall allowed as deduction | Excess (up to actual cost) taxable as deemed PGBP |
| Excess over actual cost | — | Treated as STCG u/s 50A |
| Condition | Allowed only if the shortfall is written off in the books | Taxable even if business is not in existence in the year of receipt |