Income Tax Act

Official PDF pages 96–100

SOURCE PDF PAGE 96
(4) The maximum allowable deduction under this section shall not exceed 50% of
the total income as computed before allowing deduction under this section.
Amortisation of expenditure for prospecting certain minerals.
51.   (1) An assessee, being an Indian company or a person (other than a company)
who is resident in India, who is engaged in any operations relating to pros -
pecting for, or extraction or production of, any mineral, shall be allowed a deduc -
tion of an amount equal to one-tenth of the amount of expenditure referred to in
sub-section (2), in each of the relevant tax years.
(2) The expenditure referred to in sub-section (1) is the expenditure incurred by
the assessee at any time during the year of commercial production and any one or
more of the four tax years immediately preceding that year, wholly and exclusively
on any operations relating to prospecting for any mineral or group of associated
minerals specified in Part A or Part B, respectively, of the Schedule XII or on the
development of a mine or other natural deposit of any such mineral or group of
associated minerals.
(3) The expenditure under sub-section (2) shall be reduced by such expenditure
which is met directly or indirectly by any other person or authority and any sale,
salvage, compensation or insurance moneys realised by the assessee in respect of
any property or rights brought into existence as a result of the expenditure.
(4) The following expenditure shall be excluded from the expenditure referred to
in sub-section (2):—
( a )   any expenditure on the acquisition of the site of the source of any mineral
or group of associated minerals referred to in the said sub-section or of
any rights in or over such site; or
( b )   any expenditure on the acquisition of the deposits of such mineral or
group of associated minerals or of any rights in or over such deposits;
or
( c )   any expenditure of a capital nature in respect of any building, machinery,
plant or furniture for which allowance by way of depreciation is admis -
sible under section 33.
(5) The deduction to be allowed under sub-section (1) for any relevant tax year
shall be—
( a )   an amount equal to one-tenth of the expenditure specified in sub-section
(2) as reduced by the expenditure mentioned in sub-sections (3) and (4)
(such one-tenth being herein referred to as the instalment); or
( b )   such amount as is sufficient to reduce to   nil   the income (as computed
before making the deduction under this section) of that tax year arising
from the commercial exploitation [whether or not such commercial
exploitation is as a result of the operations or development referred to
in sub-sections (2) and (3)] of any mine or other natural deposit of the
mineral or any one or more of the minerals in a group of associated
minerals under this section in respect of which the expenditure was
incurred,

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whichever is less.
(6) If any part of the instalment for a relevant tax year is not fully allowed, it shall
be carried forward to the subsequent tax year, becoming part of the instalment of
that tax year and such carrying forward may continue for each following tax year,
but no instalment shall be carried forward beyond the tenth tax year from the tax
year in which commercial production began.
(7) Where the assessee is a person other than a company or a co-operative society,
no deduction shall be admissible under sub-section (1) unless,—
( a )   the accounts of the assessee for the tax year or years in which the
expenditure specified in sub-section (2) are incurred have been audited
by an accountant, before the specified date referred to in section 63; and
( b )   the assessee furnishes for the first tax year in which the deduction under
this section is claimed, the report of such audit, by such date, in such form
and duly signed and verified by such accountant, as may be prescribed.
(8) If an undertaking of an Indian company, entitled for deduction under sub-
section (1), is transferred before ten years specified in the said sub-section in a
scheme of amalgamation or demerger, to another Indian company, then,—
( a )   no deduction shall be allowed to the amalgamating or demerged company
for the year in which such amalgamation or demerger takes place; and
( b )   all the provisions of this section shall continue to apply to the amalgamated
or resulting company as it would have applied to the amalgamating or
demerged company, as if the amalgamation or demerger had not taken
place.
(9) If a deduction under this section is claimed and allowed for any tax year in
respect of any expenditure referred to in sub-section (2), deduction shall not be
allowed for such expenditure under any other provision of this Act for the same or
any other tax year.
(10) For the purposes of this section,—
( a )   “operation relating to prospecting” means any operation undertaken for
the purposes of exploring, locating or proving deposits of any mineral and
includes any such operation which proves to be infructuous or abortive;
( b )   “year of commercial production” means the tax year in which as a result
of any operation relating to prospecting, commercial production of any
mineral or any one or more of the minerals in a group of associated
minerals specified in Part A or Part B, respectively, of Schedule XII,
commences;
( c )   “relevant tax years” means the ten tax years beginning with the year of
commercial production.
Amortisation of expenditure for telecommunications services, amalgamation,
demerger, scheme of voluntary retirement, etc.
52.   (1) Where an expenditure of the nature specified in column B of the Table given
below is incurred during the tax year, a deduction or part thereof shall be
allowed in equal instalments in each of the successive tax years as mentioned in
column D of the said Table, beginning from the initial tax year specified in column
C thereof.

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TABLE
Sl.
No.
Nature of expenditure   Initial tax year   Number of tax years
over which deduction of
expenditure is allowable
in equal instalments
A   B   C   D
1.   Expenditure   incurred
by an Indian company,
wholly and exclusively
for the purposes of amal -
gamation or demerger of
an undertaking.
Tax year in which such
amalgamation or
demerger takes place.
Five tax years.
2.   Amount   paid   to   an
employee in connection
with his voluntary retire -
ment as per any scheme
of voluntary retirement.
Tax year in which such
payment is made.
Five tax years.
3.   Capital   expenditure
incurred and actually
paid for acquiring any
right to use spectrum
for telecommunication
services (spectrum fee).
Tax year in which,—
( a )   the   business   to
operate   telecom
services   is   com -
menced; or
( b )   spectrum   fee   is
actually paid,
whichever is later.
Number of years com -
mencing from the initial
tax year and ending in
the tax year up to which
the spectrum for which
the fee is paid remains
in force.
4.   Capital expenditure in -
curred and actually paid
for acquiring any right
to operate telecommu -
nication services (herein
referred to as licence
fee).
Tax year in which,—
( a )   the   business   to
operate   telecom
services   is   com -
menced; or
( b )   licence fee is actu -
ally paid,
whichever is later.
Number of years com -
mencing from the initial
tax year and ending in the
tax year up to which the
licence for which the fee
is paid remains in force.
(2) Where the licence or spectrum referred to in sub-section (1) (Table: Sl. No.
3 or 4)—
( a )   is transferred, and the proceeds of the transfer (so far as they consist of
capital sums) are less than the expenditure though incurred, but 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 tax year in which the licence or spectrum is transferred;
( b )   is transferred, whether in whole or in part, and the proceeds of the
transfer (so far as they consist of capital sums) exceed the amount of the
expenditure though incurred, but remaining unallowed, so much of the
excess as does not exceed the difference between the expenditure incurred

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to obtain the licence or spectrum and the amount of such expenditure
remaining unallowed, shall be chargeable to income-tax as profits and
gains of the business in the tax year in which the licence or spectrum
has been transferred;
( c )   is transferred under clause ( b ) in a tax year in which the business is no
longer in existence, the provisions of said clause shall apply as if the
business is in existence in that tax year;
( d )   is transferred, whether in whole or in part, and the proceeds of the trans -
fer (so far as they consist of capital sums) are equal or greater than the
amount of expenditure incurred remaining unallowed, no deduction for
such expenditure shall be allowed under sub-section (1) in respect of the
tax year in which the licence or spectrum is transferred or in respect of
any subsequent tax year or years;
( e )   is sold or otherwise transferred by the amalgamating company or
demerged company, as the case may be, in a scheme of amalgamation
or demerger, to the amalgamated company or resulting company, being
an Indian company,—
( i )   the provisions of clauses ( a ), ( b ), ( c ) and ( d ) shall not apply to the
amalgamating or demerged company; and
( ii )   all the provisions of this section shall continue to apply to the
amalgamated or resulting company as it would have applied to
the amalgamating or demerged company, as if the transfer had not
taken place.
(3) Where a part of licence or spectrum referred to in sub-section (1) (Table: Sl. No.
3 or 4) is transferred in a tax year and sub-section (2)( b ) and ( c ) does not apply, the
deduction to be allowed under sub-section (1) for the expenditure though incurred
but 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 tax years which have
not expired at the beginning of the tax year during which the licence or
spectrum is transferred.
(4) No deduction shall be allowed—
( a )   for depreciation under section 33(1) to (10) in respect of expenditure
mentioned in sub-section (1) (Table: Sl. No. 3 or 4), where deduction
under this section is claimed and allowed for any tax year;
( b )   under any other provision of this Act in respect of the expenditure men -
tioned in sub-section (1) (Table: Sl. No. 1 or 2).
(5) In case any deduction has been claimed and granted in respect of an expendi -
ture referred to in sub-section (1) (Table: Sl. No. 3) in a tax year and subsequently
there is failure on part of the assessee 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, irrespective of any other provisions of this
Act, recompute the total income of the assessee for the said tax year by
making necessary rectification;

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( c )   the provisions of section 287 shall, so far as may be, apply; and
( d )   the period of four years specified in section 287(8) shall be counted from
the end of the tax year in which such failure takes place.
(6) Where a specified business reorganisation takes place before the expiry of the
period specified in sub-section (1) (Table: Sl. No. 2.D), in case of an expenditure
referred against serial number 2 thereof, then,—
( a )   the provisions of this section, as far as may be, shall continue to apply to
the successor entity as they would have applied to the predecessor entity
if such reorganisation had not taken place; and
( b )   no deduction shall be allowed to the predecessor entity under this section
for the tax year in which such reorganisation takes place.
(7) For the purposes of this section,—
( a )   “actually paid” means the actual payment of expenditure irrespective
of the tax 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 prescribed;
( b )   “equal instalments” shall be calculated by taking numerator as 1 and
denominator as the tax years mentioned in column D of the Table in
sub-section (1);
( c )   “specified business reorganisation” means—
( i )   amalgamation of an Indian company and its undertaking with
another Indian company; or
( ii )   demerger of an undertaking of an Indian company to another
company; or
( iii )   succession of a firm or proprietorship concern to a company ful -
filling conditions as laid down in section 70(1)( zd ); or
( iv )   conversion of a private company or unlisted public company to
a limited liability partnership fulfilling conditions laid down in
section 70(1)( ze ).
Full value of consideration for transfer of assets other than capital assets in
certain cases.
53.   (1) In case of transfer of an asset (other than a capital asset), being land or
building or both, if the consideration received or accrued from such transfer is
less than the stamp duty value, then such stamp duty value for computing profits
and gains from transfer of such asset shall be deemed to be the full value of con -
sideration.
(2) The provisions of sub-section (1) shall not apply if the stamp duty value does not
exceed 110% of the consideration received or accrued and in such a case, the con -
sideration received or accrued shall be deemed to be the full value of consideration.
(3) If the date of agreement fixing the value of consideration for transfer of asset
and date of registration for transfer of such asset are different, then the stamp duty
value as on date of agreement may be taken to be the full value of consideration
under sub-section (1).