Income Tax

Are you looking to understand about Expenditure on eligible projects or schemes ?  This detailed article will tell you all about Expenditure on eligible projects or schemes. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. Section 35AC of the Indian Income Tax Act, introduced in 1993, offers an opportunity for individuals and companies to claim tax deductions for the amount spent on eligible projects or schemes. The main objective of this section is to stimulate investment in initiatives that promote social and economic development and benefit the country. In this article, we will examine the provisions and eligibility criteria of Section 35AC in greater detail. Provisions of Section 35AC Section 35AC permits tax deduction for eligible projects or schemes, and this deduction is available to both individuals and companies. The expense must be incurred on approved social and economic projects or schemes, as authorized by the National Committee for the Promotion of Social and Economic Welfare (NCSEW). The tax deduction under Section 35AC can be claimed in the assessment year in which the expenditure is incurred, subject to the timely completion of the project or scheme as specified by the NCSEW. The deduction is not available for expenses incurred after the project’s completion. Eligibility criteria for claiming tax deductions To claim tax deductions under Section 35AC, the expenditure must be incurred on eligible projects or schemes that meet the following eligibility criteria: The project or scheme must be sanctioned by the NCSEW. The project or scheme must be related to social and economic development. The project or scheme must not be for the benefit of any particular caste, community, or religion. The project or scheme must be completed within the time frame specified by the NCSEW. The expenditure must be incurred on capital expenditure, excluding land, building, or furniture. The expenditure must be incurred for the purpose of implementing the project or scheme. Examples of eligible projects or schemes Some eligible projects or schemes for claiming tax deductions under Section 35AC include: Establishing and operating a hospital for underprivileged communities. Providing free education to children from disadvantaged backgrounds. Building and managing a residential facility for elderly citizens. Setting up and operating a vocational training center for people with disabilities. Creating and maintaining a public park. Conclusion Section 35AC of the Income Tax Act provides tax deductions for eligible projects or schemes that promote social and economic development in India. To claim these deductions, the projects or schemes must be authorized by the NCSEW and fulfill specific eligibility criteria. It is a valuable measure for individuals and companies who wish to invest in socially responsible initiatives while also reducing their tax liability.   section 35AC of Income Tax Act, 1961 Section 35AC, of Income Tax Act, 1961 states that (1) Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved46 by the National Committee for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year : Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme. (2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate— 47(a)  where the payment is to a public sector company or a local authority or an association or institution referred to in sub-section (1), from such public sector company or local authority or, as the case may be, association or institution; 48(b) in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288, in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed. Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,— (a)  the approval granted to such association or institution has been withdrawn; or (b)  the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn. (3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year. (4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently—  (i)  that 49[the Principal Chief Commissioner of Income-tax (Exemption) or the Chief Commissioner of Income-tax (Exemption)] is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or (ii)  such association or institution, to which approval has been granted, has not furnished to the 50[Principal Chief Commissioner of Income-tax (Exemption) or the Chief Commissioner of Income-tax (Exemption)], after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed51, the 50[Principal Chief Commissioner of Income-tax (Exemption) or the Chief Commissioner of Income-tax (Exemption)] may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw

Are you looking to understand about Expenditure for obtaining licence to operate telecommunication services ?  This detailed article will tell you all about Expenditure for obtaining licence to operate telecommunication services. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. In India, companies seeking to operate telecommunication services must first acquire a license from the Department of Telecommunications (DoT). However, in addition to the licensing process, telecom companies also need to bear expenses for spectrum acquisition, infrastructure development, and equipment purchase. These costs are necessary for starting a new telecom business and are considered as capital expenditures. The Income Tax Act, 1961, provides deductions for expenses incurred during business activities. Section 35ABB of the Income Tax Act allows deductions for expenses incurred in obtaining a license to operate telecommunication services. Under Section 35ABB, expenses incurred in acquiring a license to operate telecommunication services can be deducted in ten equal installments. The deduction is only available to companies engaged in the telecommunication services industry. The deduction is available from the year in which the license is acquired, but it cannot be claimed if the license is acquired through transfer from another person. The deduction amount allowed in a given year is limited to the income earned by the company from telecommunication services. It should be noted that the expenses incurred in obtaining a license are distinct from the costs incurred in acquiring spectrum. Expenses incurred in acquiring spectrum are classified as capital expenditures and are eligible for depreciation under Section 32 of the Income Tax Act. In summary, expenses incurred in obtaining a license to operate telecommunication services are regarded as capital expenditures and are eligible for deductions under Section 35ABB of the Income Tax Act. The deduction is allowed in ten equal installments over a period of ten years, subject to the company being engaged in the telecommunication services industry.   section 35ABB of Income Tax Act, 1961 Section 35ABB, of Income Tax Act, 1961 states that (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to operate telecommunication services either before the commencement of the business to operate telecommunication services or thereafter at any time during any previous year and for which payment has actually been made to obtain a licence, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure. Explanation.—For the purposes of this section,— (i)  “relevant previous years” means,—  (A)  in a case where the licence fee is actually paid before the commencement of the business to operate telecommunication services, the previous years beginning with the previous year in which such business commenced;  (B)  in any other case, the previous years beginning with the previous year in which the licence fee is actually paid, and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in force; (ii)  “appropriate fraction” means the fraction the numerator of which is one and the denominator of which is the total number of the relevant previous years; (iii) “payment has actually been made” means the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee. (2) Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the previous year in which the licence is transferred. (3) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred to obtain the licence and the amount of such expenditure remaining unallowed shall be chargeable to income-tax as profits and gains of the business in the previous year in which the licence has been transferred. Explanation.—Where the licence is transferred in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year. (4) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed under sub-section (1) in respect of the previous year in which the licence is transferred or in respect of any subsequent previous year or years. (5) Where a part of the licence is transferred in a previous year and sub-section (3) does not apply, the deduction to be allowed under sub-section (1) for expenditure incurred remaining unallowed shall be arrived at by— (a)  subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed; and (b)  dividing the remainder by the number of relevant previous years which have not expired at the beginning of the previous year during which the licence is transferred. (6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the licence to the amalgamated company (being an Indian company),—  (i)  the provisions of sub-sections (2), (3) and (4) shall not apply in the case of the amalgamating company; and (ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating

Are you looking to understand about Expenditure for obtaining right to use spectrum for telecommunication services ?  This detailed article will tell you all about Expenditure for obtaining right to use spectrum for telecommunication services. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. Telecommunications services are an integral part of modern society, enabling individuals to connect across vast distances and businesses to operate seamlessly across borders. However, to provide these services, telecommunications firms require access to a limited resource known as the electromagnetic spectrum. The right to use this spectrum is granted by the government, and companies must pay for it, which can result in significant expenses for telecommunications companies. In India, Section 35ABA of the Income Tax Act provides a deduction for expenditures incurred by telecommunication companies in obtaining the right to use the spectrum for telecommunication services. This section was introduced in the Finance Act of 2016 and has been applicable since the assessment year 2017-18. Under Section 35ABA, companies can claim a deduction equal to the expenses incurred in obtaining the right to use the spectrum for telecommunication services. The deduction can be claimed over a period of ten years, in ten equal installments starting from the year the right to use the spectrum was obtained. For instance, if a company paid INR 100 crores to obtain the right to use the spectrum, it could claim a deduction of INR 10 crores per year for the next ten years. It’s essential to note that the deduction only applies to expenses incurred in obtaining the right to use the spectrum for telecommunication services. Any other expenses related to the operation of telecommunication services, such as network infrastructure or marketing expenses, are not eligible for the deduction. To claim the deduction under Section 35ABA, telecommunication companies must maintain separate books of accounts for the expenses incurred in obtaining the right to use the spectrum. These books of accounts must be audited by a chartered accountant, and the auditor must submit a report to the income tax authorities verifying the amount of expenditure incurred. Lastly, it should be noted that the deduction under Section 35ABA is only available to companies engaged in the business of providing telecommunication services. Companies engaged in other businesses, even if they have obtained the right to use the spectrum for their operations, are not eligible. Overall, Section 35ABA of the Income Tax Act provides much-needed relief to telecommunication companies, enabling them to spread the significant expenses associated with obtaining the right to use the spectrum over ten years. By doing so, the Indian government has given a crucial boost to the telecommunications industry, which is a crucial enabler of economic growth.   section 35ABA of Income Tax Act, 1961 Section 35ABA, of Income Tax Act, 1961 states that (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to use spectrum for telecommunication services either before the commencement of the business or thereafter at any time during any previous year and for which payment has actually been made to obtain a right to use spectrum, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure. (2) The provisions contained in sub-sections (2) to (8) of section 35ABB, shall apply as if for the word “licence”, the word “spectrum” had been substituted. (3) Where, in a previous year, any deduction has been claimed and granted to the assessee under sub-section (1), and, subsequently, there is failure to comply with any of the provisions of this section, then,— (a)  the deduction shall be deemed to have been wrongly allowed; (b)  the Assessing Officer may, notwithstanding anything contained in this Act, re-compute the total income of the assessee for the said previous year and make the necessary rectification; (c)  the provisions of section 154 shall, so far as may be, apply and the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the failure to comply with the provisions of this section takes place. Explanation.—For the purposes of this section,—  (i)  “relevant previous years” means,— (A)  in a case where the spectrum fee is actually paid before the commencement of the business to operate telecommunication services, the previous years beginning with the previous year in which such business commenced; (B)  in any other case, the previous years beginning with the previous year in which the spectrum fee is actually paid, and the subsequent previous year or years during which the spectrum, for which the fee is paid, shall be in force; (ii)  “appropriate fraction” means the fraction, the numerator of which is one and the denominator of which is the total number of the relevant previous years; (iii) “payment has actually been made” means the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee or payable in such manner as may be prescribed44.

Section 35AB, of Income Tax Act, 1961 states that (1) Subject to the provisions of sub-section (2), where the assessee has paid in any previous year relevant to the assessment year commencing on or before the 1st day of April, 1998 any lump sum consideration for acquiring any know-how for use for the purposes of his business, one-sixth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance amount shall be deducted in equal instalments for each of the five immediately succeeding previous years. (2) Where the know-how referred to in sub-section (1) is developed in a laboratory, university or institution referred to in sub-section (2B) of section 32A, one-third of the said lump sum consideration paid in the previous year by the assessee shall be deducted in computing the profits and gains of the business for that year, and the balance amount shall be deducted in equal instalments for each of the two immediately succeeding previous years. (3) Where there is a transfer of an undertaking under a scheme of amalgamation or demerger and the amalgamating or the demerged company is entitled to a deduction under this section, then, the amalgamated company or the resulting company, as the case may be, shall be entitled to claim deduction under this section in respect of such undertaking to the same extent and in respect of the residual period as it would have been allowable to the amalgamating company or the demerged company, as the case may be, had such amalgamation or demerger not taken place. Explanation.—For the purposes of this section, “know-how” means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto). section 35AB of Income Tax Act, 1961 Are you looking to understand about Expenditure on know-how ?  This detailed article will tell you all about Expenditure on know-how. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. Section 35AB of the Indian Income Tax Act grants taxpayers a deduction for expenses incurred in obtaining specialized knowledge related to their business or profession. Such know-how is defined as technical expertise or experience that is not publicly available and can be acquired through research and development or by collaborating with industry experts. While investing in this kind of knowledge can be expensive, it can provide significant long-term benefits such as increased efficiency and profitability. Expenses eligible for deduction under section 35AB include payments for the purchase, acquisition, or use of patents, inventions, designs, trade secrets, and other similar property rights. Furthermore, expenses related to the use of industrial, commercial, or scientific equipment, technical information, or assistance can also be included. It is crucial to note that the expenses must be incurred wholly and exclusively for acquiring know-how relevant to the taxpayer’s business or profession, and must be recognized as an asset in their accounting records. To claim a deduction under section 35AB, the taxpayer must furnish a report from a chartered accountant verifying that the expenses were incurred for the purpose of obtaining know-how related to their business or profession. Moreover, the know-how acquired must be used for the purpose of the business or profession. The deduction is equal to the expenses incurred, but it is limited to 25% of the taxpayer’s total income for the previous year. Any unutilized deduction amount can be carried forward and claimed in subsequent years. In conclusion, section 35AB provides a valuable incentive for businesses to invest in cutting-edge technologies, processes, and expertise by allowing a deduction for expenses incurred in acquiring specialized knowledge. However, it is critical to ensure that the expenses are wholly and exclusively incurred for obtaining relevant know-how and that the acquired knowledge is used for the business or profession’s purpose. Failure to comply with these requirements may result in the disallowance of the deduction and additional tax liabilities.  

Section 35A, of Income Tax Act, 1961 states that (1) In respect of any expenditure of a capital nature incurred after the 28th day of February, 1966 but before the 1st day of April, 1998, on the acquisition of patent rights or copyrights (hereafter, in this section, referred to as rights) used for the purposes of the business, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure. Explanation.—For the purposes of this section,— (i)  “relevant previous years” means the fourteen previous years beginning with the previous year in which such expenditure is incurred or, where such expenditure is incurred before the commencement of the business, the fourteen previous years beginning with the previous year in which the business commenced : Provided that where the rights commenced, that is to say, became effective, in any year prior to the previous year in which expenditure on the acquisition thereof was incurred by the assessee, this clause shall have effect with the substitution for the reference to fourteen years of a reference to fourteen years less the number of complete years which, when the rights are acquired by the assessee, have elapsed since the commencement thereof, and if fourteen years have elapsed as aforesaid, of a reference to one year; (ii)  “appropriate fraction” means the fraction the numerator of which is one and the denominator of which is the number of the relevant previous years. (2) Where the rights come to an end without being subsequently revived or where the whole or any part of the rights is sold and the proceeds of the sale (so far as they consist of capital sums) are not less than the cost of acquisition thereof remaining unallowed, no deduction under sub-section (1) shall be allowed in respect of the previous year in which the rights come to an end or, as the case may be, the whole or any part of the rights is sold or in respect of any subsequent previous year. (3) Where the rights either come to an end without being subsequently revived or are sold in their entirety and the proceeds of the sale (so far as they consist of capital sums) are less than the cost of acquisition thereof remaining unallowed, a deduction equal to such cost remaining unallowed or, as the case may be, such cost remaining unallowed as reduced by the proceeds of the sale, shall be allowed in respect of the previous year in which the rights come to an end, or, as the case may be, are sold. (4) Where the whole or any part of the rights is sold and the proceeds of the sale (so far as they consist of capital sums) exceed the amount of the cost of acquisition thereof remaining unallowed, so much of the excess as does not exceed the difference between the cost of acquisition of the rights and the amount of such cost remaining unallowed shall be chargeable to income-tax as income of the business of the previous year in which the whole or any part of the rights is sold. Explanation.—Where the whole or any part of the rights is sold in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year. (5) Where a part of the rights is sold and sub-section (4) does not apply, the amount of the deduction to be allowed under sub-section (1) shall be arrived at by— (a)  subtracting the proceeds of the sale (so far as they consist of capital sums) from the amount of the cost of acquisition of the rights remaining unallowed; and (b)  dividing the remainder by the number of relevant previous years which have not expired at the beginning of the previous year during which the rights are sold. (6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the rights to the amalgamated company (being an Indian company),—  (i)  the provisions of sub-sections (3) and (4) shall not apply in the case of the amalgamating company; and (ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the rights. (7) Where in a scheme of demerger, the demerged company sells or otherwise transfers the rights to the resulting company (being an Indian company),—  (i)  the provisions of sub-sections (3) and (4) shall not apply in the case of the demerged company; and (ii)  the provisions of this section shall, as far as may be, apply to the resulting company as they would have applied to the demerged company, if the latter had not sold or otherwise transferred the rights. section 35A of Income Tax Act, 1961 Are you looking to understand about Expenditure on acquisition of patent rights or copyrights ?  This detailed article will tell you all about Expenditure on acquisition of patent rights or copyrights. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. Section 35A of the Indian Income Tax Act, 1961 allows for a deduction of the expenses incurred in acquiring patent rights, copyrights, or rights to know-how by the taxpayers. The deduction, equivalent to one-sixth of the expenses incurred, can be claimed for the previous year. Taxpayers can claim the deduction by meeting certain conditions. Firstly, the expenses must be related to obtaining patent rights, copyrights, or rights to know-how. Secondly, the acquired assets must be used for business or professional purposes. Thirdly, a certificate from the relevant authority confirming the expenses incurred must be obtained.

Section 35, of Income Tax Act, 1961 states that (1) In respect of expenditure on scientific research, the following deductions shall be allowed—  (i)  any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business. Explanation.—Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary [as defined in Explanation 2 below sub-section (5) of section 40A] to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced ; (ii) an amount equal to one and one half times of any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research : Provided that such association, university, college or other institution for the purposes of this clause—  (A)  is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and  (B)  such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government : Provided further that where any sum is paid to such association, university, college or other institution in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the sum so paid; (iia) any sum paid to a company to be used by it for scientific research: Provided that such company— (A)  is registered in India, (B)  has as its main object the scientific research and development, (C)  is, for the purposes of this clause, for the time being approved by the prescribed authority in the prescribed manner, and (D)  fulfils such other conditions as may be prescribed; (iii) any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research : Provided that such association, university, college or other institution for the purposes of this clause—  (A)  is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B)  such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government. Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution 38[to which clause (ii) or clause (iii) or to a company to which clause (iia)] applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in 39[clause (ii) or clause (iii) or to a company referred to in clause (iia)] has been withdrawn; (iv) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub-section (2) : Provided that the research association, university, college or other institution referred to in clause (ii) or clause (iii) shall make an application in the prescribed form and manner to the Central Government for the purpose of grant of approval, or continuance thereof, under clause (ii) or, as the case may be, clause (iii) : Provided further that the Central Government may, before granting approval under clause (ii) or clause (iii), call for such documents (including audited annual accounts) or information from the research association, university, college or other institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the research association, university, college or other institution and that Government may also make such inquiries as it may deem necessary in this behalf : Provided also that any notification issued, by the Central Government under clause (ii) or clause (iii), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification: Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, every notification under clause (ii) or clause (iii) shall be issued or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received by the Central Government: 40[Provided also that every notification under clause (ii) or clause (iii) in respect of the research association, university, college or other institution or under clause (iia) in respect of the company issued on or before the date on which this proviso has come into force, shall be deemed to have been withdrawn unless such research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) makes an intimation in such form and manner, as may be prescribed, to the prescribed income-tax authority within three months from the date on which this proviso has come into force, and subject to such intimation the

Section 34A, of Income Tax Act, 1961 states that (1) In computing the profits and gains of the business of a domestic company in relation to the previous year relevant to the assessment year commencing on the 1st day of April, 1992, where effect is to be given to the unabsorbed depreciation allowance or unabsorbed investment allowance or both in relation to any previous year relevant to the assessment year commencing on or before the 1st day of April, 1991, the deduction shall be restricted to two-third of such allowance or allowances and the balance,— (a)  where it relates to depreciation allowance, be added to the depreciation allowance for the previous year relevant to the assessment year commencing on the 1st day of April, 1993 and be deemed to be part of that allowance or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year and so on for the succeeding previous years ; (b)  where it relates to investment allowance, be carried forward to the assessment year commencing on the 1st day of April, 1993 and the balance of the investment allowance, if any, still outstanding shall be carried forward to the following assessment year and where the period of eight years has expired before the portion of such balance is adjusted, the said period shall be extended beyond eight years till such time the portion of the said balance is absorbed in the profits and gains of the business of the domestic company. (2) For the assessment year commencing on the 1st day of April, 1992, the provisions of sub-section (2) of section 32 and sub-section (3) of section 32A shall apply to the extent such provisions are not inconsistent with the provisions of sub-section (1) of this section. (3) Nothing contained in sub-section (1) shall apply where the amount of unabsorbed depreciation allowance or of the unabsorbed investment allowance, as the case may be, or the aggregate amount of such allowances in the case of a domestic company is less than one lakh rupees. (4) Nothing contained in sections 234B and 234C shall apply to any shortfall in the payment of any tax due on the assessed tax or, as the case may be, returned income where such shortfall is on account of restricting the amount of depreciation allowance or investment allowance under this section and the assessee has paid the amount of shortfall before furnishing the return of income under sub-section (1) of section 139. section 34A of Income Tax Act, 1961 Are you looking to understand about Restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period in case of certain domestic companies ?  This detailed article will tell you all about Restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period in case of certain domestic companies. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. The Income Tax Act of 1961 bestows upon domestic companies certain provisions for depreciation and investment allowance. Nonetheless, specific companies may find themselves unable to utilize these allowances to their fullest extent due to limitations. As a solution to this issue, the government introduced Section 34A in the ITA, which imposes restrictions on unabsorbed depreciation and investment allowance for a particular category of domestic companies for a limited period. Section 34A was incorporated into the ITA in 2017 and applies to companies engaged in power generation or distribution, or operating in the development, maintenance, or operation of a special economic zone (SEZ), and that have claimed depreciation or investment allowance in the previous year relevant to the assessment year commencing on or after April 1, 2017. The section limits the amount of unabsorbed depreciation and investment allowance that can be carried forward for a maximum of eight years from the year in which the allowance was initially claimed. Additionally, the section restricts the amount of unabsorbed depreciation and investment allowance that can be set off against the income of any subsequent year to 40% of the profits of such a year before allowing for such set off and depreciation. If the company amalgamates with another company, the unabsorbed allowances of the amalgamating company will lapse, and the amalgamated company will not be allowed to carry forward such unabsorbed amounts. If the company is reconstituted or restructured, the unabsorbed allowances of the predecessor company will be deemed to be the unabsorbed amounts of the successor company. These limitations are applicable for a limited period and will only be enforced for the assessment years beginning on or after April 1, 2017. It is imperative for companies involved in power generation or distribution or SEZ development that have claimed depreciation or investment allowance to be aware of the constraints imposed by Section 34A of the Income Tax Act of 1961 to comply with the legislation.  

Section 34, of Income Tax Act, 1961 states that (1) [***] (2) [***] (3)(a) The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent of the development rebate to be actually allowed is debited to the profit and loss account of any previous year in respect of which the deduction is to be allowed under sub-section (2) of that section or any earlier previous year (being a previous year not earlier than the year in which the ship was acquired or the machinery or plant was installed or the ship, machinery or plant was first put to use) and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than—  (i)  for distribution by way of dividends or profits ; or (ii)  for remittance outside India as profits or for the creation of any asset outside India : Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 : Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall have effect in respect of such ship as if for the words “seventy-five”, the word “fifty” had been substituted. Explanation.—[Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1962. Earlier, it was inserted by the Finance Act, 1966, w.r.e.f. 1-4-1962.] (b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly : Provided that this clause shall not apply—  (i)  where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 ; or (ii)  where the ship, machinery or plant is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act or a 36Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; or (iii) where the sale or transfer of the ship, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (3) or sub-section (4) of section 33. section 34 of Income Tax Act, 1961 Are you looking to understand about Conditions for depreciation allowance and development rebate ?  This detailed article will tell you all about Conditions for depreciation allowance and development rebate. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. Depreciation allowance and development rebate are two vital components of the Income Tax Section 34 that grant taxpayers relief for investing in fixed assets. The primary aim of these incentives is to motivate businesses to make capital expenditures and enhance their equipment and infrastructure. In this blog, we will delineate the conditions for claiming depreciation allowance and development rebate. Depreciation allowance is a deduction that businesses can avail for the wear and tear of their fixed assets over time. This deduction enables businesses to recover the cost of their assets and reduce their taxable income. The following are the eligibility requirements for claiming depreciation allowance: Possession: The asset must be owned by the taxpayer, regardless of whether it is an individual, company, or firm. Assets held on lease or rent are not eligible for depreciation. Usage: The asset must be employed for business or professional purposes. If the asset is utilized for personal purposes, it is not eligible for depreciation. Asset categorization: The asset must belong to one of the specified categories of assets under the Income Tax Act. These categories include buildings, plant and machinery, furniture, and vehicles. Asset life: The asset must have a determinable useful life, which is the estimated time that the asset will be in use. Different classes of assets have varying useful lives, which are prescribed by the Income Tax Act. Asset condition: The asset must be in use and in good condition. Depreciation cannot be claimed for assets that are not in use. Development rebate is a tax incentive offered to businesses for investing in new machinery and equipment. The development rebate reduces the cost of new assets and encourages businesses to modernize and upgrade their equipment. The following are the conditions for claiming development rebate: Investment: The taxpayer must invest in new machinery or equipment for the purpose of the business or profession. Usage: The new machinery or equipment must be used for business or professional purposes. Eligible assets: The new machinery or equipment must fall under the specified categories of eligible assets. These categories include plant and machinery, ships, and aircraft. Asset condition: The new machinery or equipment must be in use and in good condition. Claiming the rebate: The taxpayer can claim the development rebate in the year in which the asset is put to use. The amount of the rebate is calculated as a percentage of the cost of the asset, which is prescribed by the Income Tax Act. In conclusion, depreciation allowance and development rebate are crucial tax incentives that encourage businesses to invest in fixed assets. These incentives are available to businesses that meet the specified conditions, which include possession, usage, asset categorization, asset life,

Section 33B, of Income Tax Act, 1961 states that Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of—  (i)  flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature ; or (ii)  riot or civil disturbance ; or (iii) accidental fire or explosion ; or (iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty per cent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged or destroyed : Provided that no deduction under this section shall be allowed in relation to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year. Explanation.—In this section, “industrial undertaking” means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. section 33B of Income Tax Act, 1961 Are you looking to understand about Rehabilitation allowance ?  This detailed article will tell you all about Rehabilitation allowance. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. The allowance for rehabilitation is a benefit accessible to Indian companies through Section 33B of the Income Tax Act, 1961. This benefit is designed to aid companies in restoring and revitalizing their business by providing financial support. This benefit is particularly useful for companies that face obstacles as a result of unforeseen events, economic slumps, or technological advancements. The purpose of this benefit is to help companies recover and make contributions to the growth of the economy. To be eligible for the rehabilitation allowance, companies must fulfill specific criteria as stated in Section 33B. Firstly, the company must be engaged in the production or manufacturing of goods. Secondly, the company must have incurred expenses related to rehabilitating their business. Finally, the company must have acquired the necessary authorizations and approvals from the relevant authorities for the rehabilitation project. Companies can claim up to 30% of the expenses incurred for rehabilitating their business. Expenses that qualify for this allowance include the acquisition of new plant and machinery, installation of new technology, renovation of buildings, and any other costs directly related to the rehabilitation of the business. It is important to note that only companies can apply for the rehabilitation allowance, and it is not available to individuals or partnerships. Furthermore, the allowance cannot be claimed for any expenses that are capital in nature. There are also certain conditions and limitations that apply to this allowance, and companies must comply with them to avoid disqualification of the claim. In summary, the rehabilitation allowance is a valuable provision that helps struggling companies and encourages them to invest in the rehabilitation of their business. It provides a tax benefit to companies and promotes economic growth. Companies must adhere to all the conditions outlined in Section 33B to claim the rehabilitation allowance.  

Section 33AC, of Income Tax Act, 1961 states that (1) In the case of an assessee, being a Government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount not exceeding fifty per cent of profits derived from the business of operation of ships (computed under the head “Profits and gains of business or profession” and before making any deduction under this section), as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account, to be utilised in the manner laid down in sub-section (2) : Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the aggregate of the amounts of the paid-up share capital, the general reserves and amount credited to the share premium account of the assessee, no allowance under this sub-section shall be made in respect of such excess : Provided further that for five assessment years commencing on or after the 1st day of April, 2001 and ending before the 1st day of April, 2006, the provisions of this sub-section shall have effect as if for the words “an amount not exceeding fifty per cent of profits”, the words “an amount not exceeding the profits” had been substituted: Provided also that no deduction shall be allowed under this section for any assessment year commencing on or after the 1st day of April, 2005. (2) The amount credited to the reserve account under sub-section (1) shall be utilised by the assessee before the expiry of a period of eight years next following the previous year in which the amount was credited— (a)  for acquiring a new ship for the purposes of the business of the assessee ; and (b)  until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. (3) Where any amount credited to the reserve account under sub-section (1),— (a)  has been utilised for any purpose other than that referred to in clause (a) or clause (b) of sub-section (2), the amount so utilised ; or (b)  has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount not so utilised ; or (c)  has been utilised for the purpose of acquiring a new ship as specified in clause (a) of sub-section (2), but such ship is sold or otherwise transferred, other than in any scheme of demerger by the assessee to any person at any time before the expiry of three years from the end of the previous year in which it was acquired, the amount so utilised in acquiring the ship, shall be deemed to be the profits,—  (i)  in a case referred to in clause (a), in the year in which the amount was so utilised ; or (ii)  in a case referred to in clause (b), in the year immediately following the period of eight years specified in sub-section (2) ; or (iii) in a case referred to in clause (c), in the year in which the sale or transfer took place, and shall be charged to tax accordingly. (4) Where the ship is sold or otherwise transferred (other than in any scheme of demerger) after the expiry of the period specified in clause (c) of sub-section (3) and the sale proceeds are not utilised for the purpose of acquiring a new ship within a period of one year from the end of the previous year in which such sale or transfer took place, so much of such sale proceeds which represent the amount credited to the reserve account and utilised for the purposes mentioned in clause (c) of sub-section (3) shall be deemed to be the profits of the assessment year immediately following the previous year in which the ship is sold or transferred. section 33AC of Income Tax Act, 1961 Are you looking to understand about Reserves for shipping business?  This detailed article will tell you all about Reserves for shipping business. Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning. Shipping is an integral component of global trade, contributing significantly to the world’s economy. The Indian shipping industry is a vital driver of the country’s economic growth. It’s essential to comprehend the concept of Reserves for Shipping Business under Section 33AC of the Income Tax Act. Section 33AC permits individuals or entities engaged in shipbuilding, repairing, or operating businesses to claim a deduction of a specified amount from their taxable income. This provision was introduced in the Finance Act of 2007 and subsequently amended in the Finance Act of 2017. The Reserves for Shipping Business are the funds that shipping companies set aside for repairing, maintaining, and replacing their ships. This reserve fund is critical to meeting financial obligations in unforeseen events, such as accidents, damage to ships, or emergencies. Under Section 33AC, shipping companies can claim a deduction of 20% of the amount deposited in the reserve fund for a period of ten years. The deduction is available to companies involved in operating, repairing, or building ships. To claim the deduction under Section 33AC, the shipping company must satisfy the following conditions: The company must be involved in the shipbuilding, repairing, or operating business. The reserve fund must be created to repair, maintain, or replace the ships. The reserve funds should not be used for any other purpose. The deduction is available for ten years. The company must file its income