Income Tax Act

Official PDF pages 66–70

SOURCE PDF PAGE 66
( b )   10% of the actual cost, if the new machinery or plant is acquired and
put to use for less than one hundred and eighty days in the relevant tax
year, and 10% of the actual cost shall be allowed in the immediately
succeeding tax year.
(10) The difference between the written down value and the moneys payable
including the scrap value, if any, for any tangible asset in respect of which
depreciation is claimed and allowed under sub-section (2), shall be allowed as
deduction when—
( a )   such asset is sold, discarded, demolished or destroyed in the tax year not
being the tax year in which it is first put into use;
( b )   the moneys payable including the scrap value, if any, is less than its
written down value; and
( c )   such deficiency is actually written off in the books of account of the
assessee.
(11) ( a ) Where the profits and gains chargeable for the tax year before allowing
the deduction under sub-sections (1) to (10) is less than such allowable deduction,
then—
( i )   if such profits and gains is not a loss, the deduction under sub-sections
(1) to (10) shall be allowed to the extent of the available profits and gains;
( ii )   if such profits and gains is a loss, no deduction under sub-sections (1)
to (10) shall be allowed;
( b ) the amount of deduction which has not been allowed under clause ( a ) shall be
added to the allowable deduction under this section, whether available or not, for
the succeeding tax year and the total amount shall be deemed to be eligible for
deduction in that year, and so on for the succeeding tax years; and
( c ) the provisions of this sub-section shall be subject to the provisions of sections
112(3) and 113(4).
(12) For the purposes of this section,—
( a )   “assets” mean—
( i )   tangible assets, being buildings, machinery, plant or furniture;
( ii )   intangible assets being—
( A )   know-how; or
( B )   patents; or
( C )   copyrights; or
( D )   trademarks; or
( E )   licences; or
( F )   franchises; or
( G )   any other similar business or commercial rights, but not being
goodwill of a business or profession;
( b )   “know-how” means any industrial information or technique likely to
assist in the manufacture or processing of goods or in the working of a

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mine, oil-well or other sources of mineral deposits (including searching
for discovery or testing of deposits for the winning of access thereto);
( c )   “sold” includes a transfer by way of exchange or a compulsory acquisition
under any law for the time being in force but does not include a transfer,
in a scheme of amalgamation, of any asset by the amalgamating company
to the amalgamated company where the amalgamated company is an
Indian company or in a scheme of amalgamation of a banking company,
as referred to in section 5( c ) of the Banking Regulation Act, 1949 (10 of
1949) with a banking institution as referred to in section 45(15) of the
said Act, sanctioned and brought into force by the Central Government
under section 45(7) of that Act, of any asset by the banking company to
the banking institution;
( d )   “written down value of the block of assets” shall have the same meaning
as in section 41(1)( c ).
General conditions for allowable deductions.
34.   (1) Any expenditure (not being an expenditure of the nature specified in
sections 28 to 33, 44 to 49, 51 and 52 and not being in the nature of capital
expenditure or personal expenses of the assessee), laid out or expended wholly
and exclusively for the purposes of the business or profession shall be allowed in
computing the income chargeable under the head “Profits and gains of business or
profession”.
(2) For the purposes of sub-section (1), an expenditure laid out or expended wholly
and exclusively for business or profession by the assessee shall not include any of
the following:—
( a )   an expenditure incurred for any purpose which is an offence or is pro -
hibited by law; or
( b )   an expenditure incurred on the activities relating to corporate social
responsibility referred to in section 135 of the Companies Act, 2013
(18 of 2013); or
( c )   an expenditure incurred on advertisement in any souvenir, brochure,
tract, pamphlet or the like, published by a political party.
(3) The expenditure mentioned in sub-section (2)( a ) shall include expenditure
incurred for—
( a )   any purpose which is an offence under, or is prohibited by, any law in
force in or outside India; or
( b )   providing a benefit or perquisite in any form to a person, who may or
may not be carrying on a business or exercising a profession, when its
acceptance by the person is in violation of any law or rule or regulation
or guideline governing the conduct of that person; or
( c )   compounding an offence under any law in force in or outside India; or
( d )   settling proceedings initiated in relation to contravention under any law
notified by the Central Government in this behalf.

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Amounts not deductible in certain circumstances.
35.   Irrespective of any other provision of Chapter IV-D, the following amounts
shall not be allowed as deduction in computing the income chargeable under
the head “Profits and gains of business or profession”:—
( a )   any amount on account of—
( i )   tax paid on income; or
( ii )   tax paid by employer referred to in Schedule III (Table: Sl. No. 10);
or
( iii )   tax paid in any other country for which relief is eligible under
section 159 or 160,
and shall include any surcharge or cess on such tax, by whatever name
called;
( b )   ( i )   30% of any sum payable to a resident, on which tax is deductible
at source under Chapter XIX-B and during the tax year, such tax
has not been deducted or, after deduction, has not been paid up to
the due date specified in section 263(1), so, however, that—
( A )   where in respect of any such sum, tax is deducted in any
subsequent year, or is deducted during the tax year but paid
after the due date specified in section 263(1), 30% of such sum
shall be allowed as a deduction in computing the income of
the tax year, in which such tax has been paid;
( B )   where the assessee is required to and fails to deduct whole or
any part of the tax under Chapter XIX-B on any such sum but
he is not deemed to be an assessee in default under section
398(2), then for the purposes of this sub-clause, the assessee
shall be deemed to have deducted and paid the tax on such
sum on the date on which the return has been filed by the
payee referred to in section 398(2);
( ii )   any interest, royalty, fees for technical services or other sum charge -
able under this Act which is payable—
( A )   outside India; or
( B )   in India to a non-resident (which is not a company) or to a
foreign company,
on which tax is deductible at source under Chapter XIX-B and
during the tax year, such tax, has not been deducted or after
deduction, has not been paid up to the due date specified in section
263(1), so, however, that —
( I )   where in respect of any such sum, tax is deducted in any sub-
sequent year, or is deducted during the tax year but paid after
the due date specified in section 263(1), such sum shall be
allowed as a deduction in computing the income of the tax
year, in which such tax has been paid;

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( II )   where the assessee is required to and fails to deduct whole or
any part of the tax under Chapter XIX-B on any such sum but
he is not deemed to be an assessee in default under section
398(2), then for the purposes of this sub-clause the assessee
shall be deemed to have deducted and paid the tax on such
sum on the date on which the return has been filed by the
payee as referred to in section 398(2);
( iii )   any payment to a provident or other fund established for the benefit
of employees of the assessee, unless the assessee has made effective
arrangements to secure that tax shall be deducted at source under
Chapter XIX-B from any payments made from the fund which are
chargeable to tax under the head “Salaries”;
( c )   any payment chargeable under the head “Salaries”, payable outside India
or to a non-resident on which tax is deductible at source under Chapter
XIX-B and such tax has not been deducted or, after deduction, has not
been paid;
( d )   any amount—
( i )   paid by way of royalty, licence fee, service fee, privilege fee, service
charge or any other fee or charge, by whatever name called, which
is levied exclusively on; or
( ii )   which is appropriated, directly or indirectly, from,
a State Government undertaking by the State Government;
( e )   the expenditure incurred by a firm, assessable as such—
( i )   in the nature of salary, bonus, commission or remuneration,
by whatever name called (herein referred as remuneration) to a
partner, who is not a working partner; or
( ii )   on the remuneration to a working partner, and interest to any
partner, if it is—
( A )   not authorised by the partnership deed applicable for the
period for which such remuneration or interest is paid; or
( B )   authorised by and is as per the terms of partnership deed but
relates to the period prior to the date of such partnership deed,
or which was not authorised by the earlier partnership deed;
or
( iii )   on the aggregate remuneration to all working partners as author -
ised by the partnership deed, exceeding the amount computed as
under:—
( A )   on the first   `   600000 of the book profit or in case of a loss,
`   300000 or at the rate of 90% of the book profit, whichever
is higher;
( B )   on the balance of the book profit, at the rate of 60%; or

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( iv )   on interest to any partner as authorised by the partnership deed,
exceeding 12% simple interest per annum, so, however, that—
( A )   where an individual is a partner in a firm, on behalf, or for
the benefit, of any other person (such partner and the other
person being herein referred to as “partner in a representative
capacity” and “person so represented”, respectively),—
( I )   interest paid by the firm to such individual otherwise
than as partner in a representative capacity, shall not be
taken into account for the purposes of this clause;
( II )   interest paid by the firm to such individual as partner in
a representative capacity and interest paid by the firm
to the person so represented shall be taken into account
for the purposes of this clause;
( B )   where an individual is a partner in a firm otherwise than as
partner in a representative capacity, interest paid by the firm
to such individual shall not be taken into account for the
purposes of this clause, if such interest is received by him on
behalf, or for the benefit, of any other person;
( v )   in this clause—
( A )   “book profit” means the net profit, as shown in the profit
and loss account for the relevant tax year, computed as per
Chapter IV-D as increased by the aggregate amount of the
remuneration to all the partners of the firm, if such amount
has been deducted while computing the net profit;
( B )   “working partner” means an individual who is actively engaged
in conducting the affairs of the business or profession of the
firm of which he is a partner;
( f )   the expenditure incurred by an association of persons or a body of
individuals (other than a company, or a co-operative society or society
registered under the Societies Registration Act, 1860 (21 of 1860), or
under any law corresponding to that Act in force in any part of India) in
the nature of interest, salary, bonus, commission or remuneration, by
whatever name called, made to a member of such association or body,
provided that—
( i )   where the interest has been paid by the association or the body to
its member and such member has also paid interest to the associ -
ation or the body, then only such excess interest, if any, paid by the
association or body shall not be allowed under this clause;
( ii )   where an individual is a member of an association or a body on
behalf, or for benefit of any other person, such member and any
other person shall be referred as “representative member” and
“person so represented”, respectively, then, the provisions of this
clause—