35AD. Deduction in respect of expenditure on specified business.-
(1) An assessee shall be allowed a deduction in respect
of the whole of any expenditure of capital nature incurred,
wholly and exclusively, for the purposes of any specified
business carried on by him during the previous year in which
such expenditure is incurred by him :
Provided that the expenditure incurred, wholly and exclusively,
for the purposes of any specified business, shall be allowed
as deduction during the previous year in which he commences
operations of his specified business, if—
(a) the expenditure is incurred prior to the commencement
of its operations; and
(b) the amount is capitalised in the books of account of
the assessee on the date of commencement of its operations.
(2) This section applies to the specified business which
fulfils all the following conditions, namely :—
(i) it is not set up by splitting up, or the reconstruction,
of a business already in existence;
(ii) it is not set up by the transfer to the specified business
of machinery or plant previously used for any purpose;
(iii) where the business is of the nature referred to in
sub-clause (iii) of clause (c) of sub-section (8), such business,—
(a) is owned by a company formed and registered in India
under the Companies Act, 1956 (1 of 1956) or by a consortium
of such companies or by an authority or a board or a corporation
established or constituted under any Central or State Act;
(b) has been approved by the Petroleum and Natural Gas Regulatory
Board established under sub-section (1) of section 3 of the
Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of
2006) and notified by the Central Government in the Official
Gazette in this behalf;
(c) has made not less than such proportion of its total
pipeline capacity as specified by regulations made by the
Petroleum and Natural Gas Regulatory Board established under
sub-section (1) of section 3 of the Petroleum and Natural
Gas Regulatory Board Act, 2006 (19 of 2006) available for
use on common carrier basis by any person other than the assessee
or an associated person; and
(d) fulfils any other condition as may be prescribed.
(3) Where a deduction under this section is claimed and allowed
in respect of the specified business for any assessment year,
no deduction shall be allowed under the provisions of Chapter
VI-A under the heading “C.—Deductions in respect
of certain incomes” in relation to such specified business
for the same or any other assessment year.
(4) No deduction in respect of the expenditure referred to
in sub-section (1) shall be allowed to the assessee under
any other section in any previous year or under this section
in any other previous year.
(5) The provisions of this section shall apply to the specified
business referred to in sub-section (2) if it commences its
operations,—
(a) on or after the 1st day of April, 2007, where the specified
business is in the nature of laying and operating a cross-country
natural gas pipeline network for distribution, including storage
facilities being an integral part of such network;
(aa) on or after the 1st day of April, 2010, where the specified
business is in the nature of building and operating a new
hotel of two-star or above category as classified by the Central
Government;
(ab) on or after the 1st day of April, 2010, where the specified
business is in the nature of building and operating a new
hospital with at least one hundred beds for patients;
(ac) on or after the 1st day of April, 2010, where the specified
business is in the nature of developing and building a housing
project under a scheme for slum redevelopment or rehabilitation
framed by the Central Government or a State Government, as
the case may be, and which is notified by the Board in this
behalf in accordance with the guidelines as may be prescribed;
and
The following clauses (ad) and (ae) shall be inserted after
clause (ac) of sub-section (5) of section 35AD by the Finance
Act, 2011, w.e.f. 1-4-2012 :
(ad) on or after the 1st day of April, 2011, where the specified
business is in the nature of developing and building a housing
project under a scheme for affordable housing framed by the
Central Government or a State Government, as the case may
be, and notified by the Board in this behalf in accordance
with the guidelines as may be prescribed;
(ae) on or after the 1st day of April, 2011, in a new plant
or in a newly installed capacity in an existing plant for
production of fertilizer; and
(b) on or after the 1st day of April, 2009, in all other
cases not falling under clause (a), clause (aa), clause (ab)
and clause (ac).
(6) The assessee carrying on the business of the nature referred
to in clause (a) of sub-section (5) shall be allowed, in addition
to deduction under sub-section (1), a further deduction in
the previous year relevant to the assessment year beginning
on the 1st day of April, 2010, of an amount in respect of
expenditure of capital nature incurred during any earlier
previous year, if—
(a) the business referred to in clause (a) of sub-section
(5) has commenced its operation at any time during the period
beginning on or after the 1st day of April, 2007 and ending
on the 31st day of March, 2009; and
(b) no deduction for such amount has been allowed or is
allowable to the assessee in any earlier previous year.
(7) The provisions contained in sub-section (6) of section
80A and the provisions of sub-sections (7) and (10) of section
80-IA shall, so far as may be, apply to this section in respect
of goods or services or assets held for the purposes of the
specified business.
(8) For the purposes of this section,—
(a) an “associated person”, in relation to the
assessee, means a person,—
(i) who participates, directly or indirectly, or through
one or more intermediaries in the management or control or
capital of the assessee;
(ii) who holds, directly or indirectly, shares carrying
not less than twenty-six per cent of the voting power in the
capital of the assessee;
(iii) who appoints more than half of the Board of directors
or members of the governing board, or one or more executive
directors or executive members of the governing board of the
assessee; or
(iv) who guarantees not less than ten per cent of the total
borrowings of the assessee;
(b) “cold chain facility” means a chain of facilities
for storage or transportation of agricultural and forest produce,
meat and meat products, poultry, marine and dairy products,
products of horticulture, floriculture and apiculture and
processed food items under scientifically controlled conditions
including refrigeration and other facilities necessary for
the preservation of such produce;
(c) “specified business” means any one or more
of the following business, namely :—
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for
storage of agricultural produce;
(iii) laying and operating a cross-country natural gas or
crude or petroleum oil pipeline network for distribution,
including storage facilities being an integral part of such
network;
(iv) building and operating, anywhere in India, a hotel of
two-star or above category as classified by the Central Government;
(v) building and operating, anywhere in India, a hospital
with at least one hundred beds for patients;
(vi) developing and building a housing project under a scheme
for slum redevelopment or rehabilitation framed by the Central
Government or a State Government, as the case may be, and
notified by the Board in this behalf in accordance with the
guidelines as may be prescribed;
The following sub-clauses (vii) and (viii) shall be inserted
after sub-clause (vi) of clause (c) of sub-section (8) of
section 35AD by the Finance Act, 2011, w.e.f. 1-4-2012 :
(vii) developing and building a housing project under a
scheme for affordable housing framed by the Central Government
or a State Government, as the case may be, and notified by
the Board in this behalf in accordance with the guidelines
as may be prescribed;
(viii) production of fertilizer in India;
(d) any machinery or plant which was used outside India by
any person other than the assessee shall not be regarded as
machinery or plant previously used for any purpose, if—
(i) such machinery or plant was not, at any time prior to
the date of the installation by the assessee, used in India;
(ii) such machinery or plant is imported into India from
any country outside India; and
(iii) no deduction on account of depreciation in respect
of such machinery or plant has been allowed or is allowable
under the provisions of this Act in computing the total income
of any person for any period prior to the date of installation
of the machinery or plant by the assessee;
(e) where in the case of a specified business, any machinery
or plant or any part thereof previously used for any purpose
is transferred to the specified business and the total value
of the machinery or plant or part so transferred does not
exceed twenty per cent of the total value of the machinery
or plant used in such business, then, for the purposes of
clause (ii) of sub-section (2), the condition specified therein
shall be deemed to have been complied with;
(f) any expenditure of capital nature shall not include
any expenditure incurred on the acquisition of any land or
goodwill or financial instrument.
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