capex provison in it act

7/29/2019 capex provison in it act

1/16

SPECIAL DEDUCTIONS UNDER SECTIONS 35 TO 35E

Section Nature of expenditure Quantum ofdeduction

QualifyingAssessee

Other provisions

35(1)(i) Any expenditure (notbeing capital in nature)laid out or expended forscientific research relatedto assessees business

The amountactuallyexpended

Allassessee

Where anyexpenditure is laidout or spent beforethecommencement ofbusiness onpayment of

salaries to anemployee engaged

in such scientificresearch or on

purchase ofmaterial used insuch research, theaggregate of suchexpenses soexpended withinthree preceding

previous yearsshall, to the extentcertified by

prescribedauthority (ReferRule 6) shall bedeemed to havebeen expended inthe year in whichactual business iscommenced.

35(1)(ii) Payment to anotified/approvedresearch

association/university/college or other institution tobe used for such scientificresearch.

one andthree-fourthtimes of the

sum paid)(W.e.f. A.Y.2011-12 )

One and One-

fourth timesof the sumpaid.

(Upto A.Y.2010-11)

Allassessee

Such association,university, college,or other institution

is approvedaccording to theprescribedguidelines and is

notified in theOfficial Gazette byCentralGovernment (referRules 5C, 5D and5E)

Note :

(Deduction underthis section shall


2/16

not be denied forsuch paymentsmade on theground thatsubsequent to suchpayment, approvalgranted to such

association,university, college,etc. has been

withdrawn.

35(1)(iia)

Payment to a approvedcompany registered inIndia, with the object of

scientific research anddevelopment

One and One-fourth timesof the sum

paid

Allassessee

The companyshould beapproved by

prescribedauthority and fulfils

prescribedconditions (ReferRule 5F).

In case where thecompany is

approved underthis clause, nodeduction shall beallowed u/s

35(2AB) (w.e.f. 1-4-2008)

35(1)(iii

)

Payment made to a

research associationhaving its object ofundertaking research insocial science orstatistical research or toany university, college, orother institution to be

used for research in socialscience or statisticalresearch

One and One-

fourth timesof the sumpaid

All

assessee

Such association,

university, college,or other institutionis notified in theofficial gazette bycentral Govt. andis approvedaccording to the

prescribedguidelines (ReferRules 5C, 5D and

5E)

(Deduction underthis section shallnot be denied forsuch payments

made on theground thatsubsequent to suchpayment, approvalgranted to suchuniversity, college,etc. has been

withdrawn.


3/16


4/16

onwards.

One and One-fourth timesof the sum

paid upto A.

Y. 2010-11.

head of Nationallaboratory,university, or IITand in case ofspecified person,the principalscientific advisor to

the Govt. of India.

Where deduction isallowed under thissection no other

deduction would beallowed under anyother provisions of

the Act.

(Deduction underthis section shallnot be denied for

such paymentsmade on theground thatsubsequent to suchpayment, approvalgranted to suchLaboratory,

university, etc. hasbeen withdrawn orsuch laboratory,university having

withdrawn theprogrammeundertaken.

35(2AB) Any expenditure incurredby a company, onscientific research (notbeing in nature of cost ofland and building) on in-house scientific researchand development facilities

as approved by theprescribedauthorities (Refer Rule 6).

Two times ofsuchexpensesincurred forA.Y. 2011-12

One and One-half time ofsuchexpensesupto A. Y.2010-11.

Company,engaged inanybusiness ofmanufacture andproduction

of anyarticle orthing,other than

thosespecifiedin the listofEleventhSchedule.

No other deductionin respect of suchexpenses wouldfurther be allowed,(No deduction isallowed under thissection for

companiesmentioned insection 35(1)(iia)

Company should

enter into anagreement withthe prescribedauthority for co-

operation in suchresearch anddevelopment andaudit of accounts

maintained for


5/16

such facilities.

Expenses underthis clause wouldbe allowed only up

to 31-3-2012.

Expenditure onscientific researchin relation to DrugandPharmaceuticalsshall includeexpenses incurredon clinical trials,obtainingapprovals from

authorities and forfiling an applicationfor patent.

In case of

amalgamation ofthe company theprovisions of this

section wouldapply toamalgamatedcompany as theywould have appliedto amalgamating

company

35ABB Capital expenses incurredfor acquiring right tooperatetelecommunication

services either before orafter the commencementof such business tooperate such services

In case wherethe amount ispaid prior tocommenceme

nt ofbusiness, thedeductionwould beallowed inequalinstallmentsbeginningfrom theprevious year

in which thebusinesscommencesand ending in

the year inwhich thelicenceexpires.

In other case

Allassessee

The deduction isallowable on thepayment actuallymade, irrespective

of the previousyear for which theliability for suchexpenditure wasincurred as per themethod ofaccountingregularly followed.

Where thededuction isallowed under this

clause nodepreciation wouldbe allowed.

Where the license

is transferred andif the amountrealized in so far

as it relates to


6/16

the amountwill beallowed inequalinstallmentsfrom theprevious year

in which suchexpenditureis incurred till

the previousyear in whichthe licenceexpires.

capital sum, is lessthan the amountremained to beallowed then, theamount remainedto be allowed asreduced by

proceeds receivedwould be allowedas deduction in the

year in which thesame istransferred.

Whereas if the

amount so realizedon transfer ofwhole or part of

the licence is morethan the amountremained to beallowed then thedifference between

amount receivedon transfer and theamount remained

to be allowedwould bechargeable to taxin the year of such

transfer and nofurther deductionshall be allowed in

the year of transferor in succeedingyears.

Where a part of

the licence istransferred and theamount realized isnot more then the

amount remained

tobe allowed thenthe difference

between theamount remainedto be allowed andthe amount

received ontransfer shall bedivided by thenumber of

unexpired yearsfrom the previous

year in which suchtransfer takes


7/16

place and would beallowed in equalinstallmentaccordingly.

In case of

amalgamation ordemerger of thecompany theprovisions of thissection wouldapply to

amalgamated orresulting companyas they would have

applied toamalgamating ordemerged

company

35AC Payment to public sectorcompany or a localauthority or to an

approvedassociation/institution forcarrying out any notifiedeligible project or

scheme. (Payment underthis Section would includein case of a Company the

payment made as aboveor expenses incurreddirectly on eligibleprojects or scheme)

The amountactually paidor incurred

directly asthe case maybe.

Allassessee

Theassociation/institution should be

approved by theNationalCommittee forPromotion of Social

and EconomicWelfare or publicupliftment and the

assessee furnishesalong with thereturn of incomecertificate eitherfrom suchinstitution or fromaccountants(specified in

section 288 of theAct), in theprescribed

form (Refer Rule

11-O).

Where anydeduction is

allowed under thissection no furtherdeduction would beallowed under anyother provisions ofthe Act.

(Deduction underthis section shall

not be denied forsuch payments


8/16

made on theground thatsubsequent to suchpayment, approvalgranted to suchPublic SectorCompany or Local

Authority, etc. hasbeen withdrawn orsuch Public Sector

Company or LocalAuthority havingwithdrawn theeligible projects or

Schemeundertaken.)However in suchcase the company

or, such approvedinstitution as thecase may be. shall

be liable to pay thetax at maximummarginal rate forthe payment so

received by themin the respectiveprevious year.

35AD

Expenditure of capitalnature (other thanexpenditure incurred onacquisition of any land,

goodwill or financialinstruments) incurred,wholly and exclusively,

for the purposes of anyspecified business carriedon by the assessee viz.

Setting up and

operating a cold chain

facility (commencingbusiness on or after 1-4-2009).

(Cold chain facilitieswould mean a chain offacilities for storage ortransportation ofagricultural and forestproduce, meat and meatproducts, poultry, marine

and dairy products,products of horticulture,floriculture andapiculture, and processed

The whole ofthe amountof expensesincurred

during theprevious year

And

Expenditureincurred priorto thecommenceme

nt ofoperationwould beallowed as

deductionduring year inwhich suchbusinesscommence itsoperation ifsuch

expenses areincurredwholly andexclusively

AllAssesseesExcept:

i) In caseof layingandoperatingcrosscountrynatural

gas, crudeorpetroleumoil pipeline

networkfordistribution andincludeintegralstorage

facilities

TheCompany

The specifiedbusiness shouldnot be set up bysplitting up, or the

reconstruction, ofthe businessalready in

existence or it isnot set up by thetransfer ofmachinery or

plants previouslyused for anypurpose.

(However any

machinery or plantused out of India isimported in India

shall not beconsidered asmachinery or plantused for any

purpose as above,provided such

plant andmachinery was not


9/16

food items underscientifically controlledconditions includingrefrigeration and otherfacilities necessary for thepreservation of suchproduce.)

Setting up and

operating a warehousingfacility for agricultureproduce for business

commencing on or after01-04-2009.

Laying and operating

cross country natural gas,

crude or petroleum oilpipeline network fordistribution and includes

storages facilities beingintegral part of suchnetwork provided suchbusiness is approved bythe petroleum and naturalgas regulatory board andis notified by the Central

Government in theOfficialGazette commencesoperations after 1.4.2007(Deductions available

from A.Y. 2010-11)

Building and operating

anywhere in India a newhotel of two star and

above commencesbusiness on or after1.4.2010 as classified byCentral Government

Building and operating

anywhere in India a newhospital with at least onehundred beds for patientscommences operations onor after 1.4.2010

Developing and building

a housing project under ascheme for slumredevelopment orrehabilitation framed by

Central Government or aState Government and asnotified by board in

accordance withguidelines prescribed and

for thepurpose ofspecifiedbusiness andsuch amountis capitalizedin the books

of account onthe date ofsuch

commencement ofoperation

Further In

case ofBusiness oflaying

pipeline foroil, naturalgas, etc.where thebusiness has

commencedon or after 1-4-2007 but

ending before31-3-2009the amountof expenses

incurred inany previousyear shall be

allowed asfurtherdeduction inthe

assessmentyearbeginning on1-4-2010

provided theassessee hasnot beenalloweddeduction ofsuchexpenses in

any earlierprevious year

registeredunder theCompanies

Act, 1956or aconsortiumof such

companiesor anauthority

or a Boardor acorporation

established underanyCentral or

State Act.

at any time prior tosuch installationwere used in Indiaor no deduction onaccount ofdepreciation inrespect of such

machinery or planthas been allowedor was allowable to

any person for anyperiod prior to thedate of installationof machinery or

plant by theassessee.)

(Also where the

value of plant andmachinery or anypart thereofpreviously used forany purpose is

transferred to suchspecified businessand the total value

of such plant andmachinery or partso transferred doesnot exceed 20% of

the value of thetotal machinery orplant used in such

business, then, thededuction underthis section wouldnot be denied)

In case of businessof laying of pipeline for natural gasand crude and

petroleum oil, the

eligible assesseeshould make

available suchpercentage of itstotal pipe linecapacity as

specified bypetroleum andnatural gasregulatory Board

for use on commoncarrier basis for

any person otherthan such assessee


10/16

commences operation onor after 1.4.2010

Developing and buildinga housing project under a

scheme for affordable

Housing framed byCentral Government or aState Government and asnotified by board inaccordance withguidelines prescribed and

commences operation onor after 01.04.2011

Capital Expenditureincurred in a new plant or

in new installed capacityin existing plant for

production of fertilizers

commencing operation onor after 1.4.2011

or its associatedpersons and that itshould also fulfilany otherconditions as maybe prescribed. Forthe purpose of this

clause associatedperson means

(a) The one whoparticipates

directly orindirectly orthrough one or

moreintermediaries inthe management

or control orcapital of theassessee

(b) The one whoholds directly orindirectly sharescarrying not lessthan 26% of the

voting power in thecapital of theassessee

(c) The one whoappoints morethan half of theBoard of directorsor members of the

governing board orone or moreexecutive directorsor executivemembers of thegoverning board ofthe assessee.

(d) The one whoguarantees notless than 10% ofthe total

borrowings of theassessee.

No furtherdeduction would be

allowed where thededuction isclaimed under this

provisions eitherunder Chapter VI-


11/16

A under theheading C or w.e.f.1-4-2011 underany other sectionin any previousyear or under thissection for any

other previousyear.

Provisionscontained in

80A(6) and sub-sections (7) and(10) of section 80-

IA shall so far asmay be, apply tothis provision in

respect of goods orservices or assetsheld for thepurpose of suchbusiness.

Note : Any sumreceived in cash orkind on account of

demolition,destroy, discardingor transfer of suchassets where

deduction underthis clause hasbeen allowed as awhole under thisclause, the sum soreceived shall bechargeable to tax

under the headbusiness income(section 28(vii)).

35D Specified expenditureincurred either before thecommencement ofbusiness or after the

commencement ofbusiness in connectionwith the extension ofindustrial undertaking orsetting up of newindustrial unit

One-fifth ofsuchexpenditurefor a period

of five years.Beginningwith the yearin which thebusiness iscommencedor extension

of theundertakingis completedas the case

IndianCompaniesor anyperson

resident inIndia

The deduction isrestricted to 5% ofthe cost of theproject or where

the assessee is anIndian company, atthe option of thecompany, of thecapital employed inthe business of thecompany.

In case of non

corporate assesseeor a co-operative


12/16


13/16

demergertakes place.

35DDA Expenditure incurred byway of payment to an

employee under anyscheme in connectionwith his voluntaryretirement

One-fifth ofsuch

expenditurefor a periodof five yearsbeginningwith the yearin which such

expenditureis incurred.

All Assessees The expenditureshould be incurred

in accordance withany scheme ofvoluntaryretirement.

In case ofamalgamation or

demerger of thecompany thededuction would beallowed to the

amalgamated orresulting companyas if the deductionwere allowed to

amalgamating ordemergedcompany as the

case may be.

Whereas in case ofpartnership firm orproprietary

concern issucceeded by the

company inreorganization of

business thededuction would beallowed to suchsucceededcompany providedconditions laiddown in provisionsof section 47(xiii)or section 47(xiv)as applicable are

adhered to. And nofurther deductionwould be allowedto the partnership

firm or proprietaryconcern as thecase may be.

Whereas in case of

a private limitedcompany orunlisted publiccompany under

reorganization ofbusiness is


14/16

succeeded by alimited liabilitypartnershipfulfilling theconditions laiddown in proviso toclause (xiiib) of

section 47, thenthe deduction shallbe allowed to the

successor limitedliability partnershipand no furtherdeduction would be

allowed to privatelimited company orunlisted publiccompany as the

case may be.(applicable fromA.Y. 2011-12)

Once the deduction

under this sectionallowed the sameshall not be

allowed under anyother provisions ofthe Act.

35E Expenditure in respect ofoperations relating toprospecting for orextracting or productionof any mineral or group ofassociated minerals or fordevelopment of mine orother natural deposit of

such mineral or group ofassociated minerals.

One-tenth ofsuchexpenditurefor a periodof ten yearsbeginningfrom the yearin which

commercialproductionstarts Or the

expenditure

as issufficient toreduce the

income to Nilas computedbefore

allowingdeductionunder thisclause

whichever islesser

(subjecthowever

Indiancompaniesor anypersonresident inIndia.

Suchminerals/group ofassociatedminerals should bespecified in PartA/B of SeventhSchedule of theIncome-tax Act,

1961.

Deduction isallowed in respect

of expenditureincurred in theyear in which theproduction

commences, orany expensesincurred in anyfour yearspreceding suchyear.

For the purpose ofthis clause

expenditure metby any other


15/16

portion ofexpenditurenot allowed inany previousyear shall becarriedforward and

added to theinstallment ofsucceeding

previous yearup to lastyear of suchdeduction)

persons,authorities or salesor salvage orinsurance claimreceived in respectof any property orrights brought into

existence shall beexcluded fromsuch expenditure.

Similarly

expenditureincurred foracquisition of any

sites, or depositsof minerals, orcapital expenditure

on acquisition ofplant andmachineries,building, furniture,etc. on which

depreciation isallowable shall alsobe excluded from

such expenditure

In case of noncorporate assesseeor a co-operative

society, thededuction wouldnot be allowedunless theaccounts of theassessee areaudited and a

report inprescribed form isfurnished alongwith the return of

income for the first

year in which suchdeduction is

claimed. See Form3AE, Rule 6AB.

In case ofamalgamation ordemerger of thecompany thededuction would beallowed to

amalgamated orresulting companyand in such caseno further


16/16

deduction would beallowed toamalgamating ordemergedcompany.

Once the deductionunder this sectionallowed the sameshall not beallowed under anyother provisions of

the Act.

capex provison in it act

Documents

Transcript of capex provison in it act