Income Tax Act

Official PDF pages 61–65

SOURCE PDF PAGE 61
( c )   where it relates to an assessee to which sub-section (1) applies,—
( i )   only that amount which exceeds the credit balance in the provision
for bad and doubtful debts account made under that sub-section
shall be allowed as deduction;
( ii )   such amount shall be allowed only when the assessee has debited any
amount of bad debt or part thereof in that tax year to the provision
for bad and doubtful debts account made under that sub-section;
and
( iii )   the aforesaid account shall be only one such account under sub-sec -
tion (1) and such account shall be related to all types of advances,
including advances made by rural branches.
(3) For the purposes of sub-section (2),—
( a )   any bad debt or part of it written off as irrecoverable shall not include
any provision for bad and doubtful debt;
( b )   any amount of bad debt or part of it, which has been taken into account
in computing the income of the assessee of the tax year in which the
amount of bad debt or part of it becomes irrecoverable or of an earlier
tax year as per income computation and disclosure standards notified
under section 276(2) without recording it in the accounts, shall be
allowed as a deduction in computing the income of the assessee of the
tax year in which it becomes irrecoverable and such bad debt or part of
it shall be deemed to be written off as irrecoverable in the accounts for
the purposes of sub-section (2).
Other deductions.
32.   The following amounts shall be allowed as deduction in computing income
chargeable under section 26:—
( a )   bonus or commission paid to an employee for services rendered, but
only when such amount would not have been payable to the employee
as profits or dividend if it had not been paid as bonus or commission;
( b )   interest paid in respect of capital borrowed for the purposes of
business or profession, where—
( i )   such interest shall not include interest on capital borrowed for
acquisition of an asset, whether capitalised in the books of
account or not, for any period beginning from the date the capital
was borrowed for acquisition of the asset till the date that asset
was first put to use;
( ii )   recurring subscriptions paid periodically by shareholders or sub -
scribers in Mutual Benefit Societies fulfilling the conditions as may
be prescribed, shall be deemed to be capital borrowed;
( c )   contribution paid by a public financial institution to the credit guaran -
tee fund trust for small industries as the Central Government may, by
notification, specify;

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( d )   the   pro rata   amount of discount on a zero coupon bond having regard
to the period of life of such bond calculated in the manner, as may be
prescribed, where—
( i )   “discount” means the difference between the amount received or
receivable by the infrastructure capital company or infrastructure
capital fund or public sector company or scheduled bank issuing
the bond, and the amount payable on maturity or redemption of
such bond;
( ii )   “period of life of bond” means the period commencing from the
date of issue of the bond and ending on the date of the maturity or
redemption of such bond;
( e )   the amount carried to a special reserve created and maintained by a
specified entity, subject to the following conditions:—
( i )   such amount shall not exceed 20% of the profits derived from an
eligible business computed under the head “Profits and gains of
business or profession” before any deductions under this clause;
and
( ii )   when the aggregate of such amounts carried to such reserve account
from time to time exceeds twice the amount of paid-up share capital
and of general reserves of the specified entity, no deduction shall
be allowable on such excess,
and for the purposes of this clause,—
( A )   “specified entity” means—
( I )   a public financial institution as specified in section 2( 72 ) of
the Companies Act, 2013 (18 of 2013);
( II )   a financial corporation which is a public sector company;
( III )   a banking company;
( IV )   a co-operative bank other than a primary agricultural credit
society or a primary co-operative agricultural and rural
development bank;
( V )   a housing finance company; and
( VI )   any other financial corporation including a public com-
pany;
( B )   “eligible business” means,—
( I )   in respect of any of the specified entities referred to in clause
( e )( A )( I ) to ( IV ), the business of providing long-term finance
for—
( a )   industrial or agricultural development;
( b )   development of infrastructure facility in India; or
( c )   development of housing in India;
( II )   in respect of the specified entity referred to in clause ( e )( A )( V ),
the business of providing long-term finance for the construc -

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tion or purchase of houses in India for residential purposes;
and
( III )   in respect of the specified entity referred to in clause ( e )( A )( VI ),
the business of providing long-term finance for development
of infrastructure facility in India;
( C )   “infrastructure facility” means—
( I )   an infrastructure facility as defined in   Explanation   to section
80-IA(4)( i ) of the Income-tax Act, 1961 (43 of 1961) or any
other public facility of a similar nature as may be notified by
the Board in this behalf and which fulfils the conditions as
may be prescribed;
( II )   an undertaking referred to in section 80-IA(4)( ii ) or ( iii ) or
( iv ) or ( vi ) of the Income-tax Act, 1961 (43 of 1961); and
( III )   an undertaking referred to in section 80-IB(10) of the
Income-tax Act, 1961 (43 of 1961);
( f )   any expenditure, not being capital expenditure, incurred by a corporation
or a body corporate, by whatever name called, if,—
( i )   it is constituted or established by a Central Act or State Act or
Provincial Act;
( ii )   it is notified by the Central Government for the purposes of this
clause having regard to the objects and purposes of the Act referred
to in sub-clause ( i ); and
( iii )   the expenditure is incurred for the objects and purposes authorised
by the Act under which it is constituted or established;
( g )   the expenditure incurred by a co-operative society engaged in the business
of manufacture of sugar, on purchase of sugarcane at a price equal to or
less than the price fixed or approved by the Government;
( h )   marked to market loss or other expected loss as computed as per the
income computation and disclosure standards notified under section
276(2);
( i )   any expenditure   bona fide   incurred by a company for the purpose of pro -
moting family planning amongst its employees, subject to the following
conditions:—
( A )   if such expenditure or any part of it is of capital nature, one-fifth
of it shall be deducted for the tax year in which it was incurred and
the balance shall be deducted in equal instalments for each of the
four immediately succeeding tax years;
( B )   the provisions of sections 33(11) and 112(3) shall apply to
deduction under this clause as they apply in relation to deductions
allowable in respect of depreciation;
( C )   the provisions of sections 38(1)( c ), 39(4) (Table: Sl. No. 9), 45(6)
and (10), shall apply to an asset representing capital expenditure

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for promoting family planning, to the extent they apply to an asset
representing capital expenditure on scientific research;
( j )   the amount being difference between the actual cost of animals used
for the purposes of the business or profession otherwise than as stock-
in-trade and the amount realised from the carcasses or animals, where
such animals have died or become permanently useless; and
( k )   the amount paid as securities transaction tax or commodities trans -
action tax, if—
( i )   the taxable securities transactions or taxable commodities trans -
actions are entered into the course of the business during the tax
year; and
( ii )   the income arising from such taxable securities transactions or
taxable commodities transactions is included in the income
computed under the head “Profits and gains of business or pro -
fession”.
Deduction for depreciation.
33.   (1) A deduction in respect of depreciation of—
( a )   buildings, machinery, plant or furniture, being tangible assets;
( b )   know-how, patents, copyrights, trademarks, licences, franchises or any
other business or commercial rights of similar nature, being intangible
assets acquired on or after the 1st April, 1998, not being goodwill of a
business or profession,
owned wholly or partly by the assessee and used wholly and exclusively for the
purposes of the business or profession, shall be allowed, as per the provisions of
this section.
(2) In case of assets referred to in sub-section (1) of an undertaking engaged in
generation or generation and distribution of power, the deduction in respect of
depreciation shall be such percentage of its actual cost to the assessee, as may be
prescribed.
(3) ( a ) In case of any block of assets, deduction in respect of depreciation shall be
such percentage of its written down value, as may be prescribed;
( b ) when any building, machinery, plant or furniture is partly, or not wholly and
exclusively, used for the purposes of the business or profession, the deduction under
clause ( a ) shall be restricted to the fair proportionate part thereof as determined by
the Assessing Officer, having regard to the usage of such building, machinery, plant
or furniture for the purposes of the business or profession;
( c ) when deduction of actual cost in respect of any machinery or plant has been
allowed under section 54, no deduction under this sub-section shall be allowed.
(4) The deduction under this section shall be restricted to 50% of the prescribed
rate, if such asset, being asset referred to in sub-sections (2) and (3) is—
( a )   acquired by the assessee during the tax year; and
( b )   put to use for the purposes of business or profession for less than one
hundred and eighty days in that tax year.

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(5) The aggregate deduction in respect of depreciation allowable to the predeces -
sor and successor in cases of succession under section 70(1)( zd ) or ( ze ) or ( zf ), or
section 313, or to the amalgamating and the amalgamated company in the case of
amalgamation, or to the demerged and resulting company in the case of demerger,
as the case may be, for any tax year, shall not exceed the deduction calculated at the
prescribed rates under this section as if the succession, amalgamation or demerger
had not taken place, and such deduction shall be allowed on   pro rata   basis based
on number of days for which assets were used by the following:—
( a )   predecessor and successor, in case of such succession; or
( b )   amalgamating company and the amalgamated company in case of an
amalgamation; or
( c )   demerged company and the resulting company in case of a demerger.
(6) Where a building, not owned by the assessee, is held on lease or by any other right
of occupancy is used for the purposes of business or profession of the assessee, and
if any capital expenditure is incurred by the assessee for the purposes of business
or profession on construction of any structure or any work by way of renovation,
extension or improvement to such building, then such structure or work shall be
treated as a building owned by the assessee for the purposes of this section.
(7) The provisions of this section shall apply whether or not the assessee has claimed
deduction for depreciation in computing his total income.
(8) In addition to deduction under sub-section (3), additional deduction in respect
of depreciation for any new machinery or plant shall be allowed, when—
( a )   the assessee is engaged in the business of manufacture or production
of any article or thing or in the business of generation, transmission or
distribution of power;
( b )   the assessee acquires and installs the new machinery or plant;
( c )   the new machinery or plant is first put to use by the assessee for the
purposes of business; and
( d )   the new machinery or plant (not being a ship or an aircraft)—
( i )   was not used either within or outside India by any other person
before its installation by the assessee;
( ii )   is not installed in any office premises or any residential accommo -
dation, including accommodation in the nature of a guest house;
( iii )   is not in the nature of any office appliances or road transport
vehicle; or
( iv )   is not an asset on which the whole of the actual cost is allowed as
a deduction (whether by way of depreciation or otherwise) in com -
puting the income under the head “Profits and gains of business or
profession” of any tax year.
(9) The additional deduction in respect of depreciation referred to in sub-section
(8) shall be—
( a )   20% of the actual cost of the new machinery or plant in the tax year when
it is acquired and put to use, subject to the provisions of clause ( b ); or