Deduction in Respect of Capital Exp.


Deduction in Respect of Capital Exp.

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Income Tax
Deduction in respect of capital expenditure on specified business [Section 35AD]

 Deduction in respect of capital expenditure on specified business [Section 35AD] [W.e.f. A.Y. 2015- 16]

 

       (A Deduction extended to two new businesses: Under the existing provisions of section 35AD, investment-linked tax incentive is provided by way, of allowing a deduction in respect of the whole of any expenditure of capital nature (other than expenditure on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the "specified business" during the previous year in which such expenditure is incurred.

 

Currently, "eleven specified businesses" are eligible for availing the investment-linked deduction under section 35AD.

The Finance (No. 2) Act, 2014 has included the following two new businesses as "specified business" for the purposes of the investment-linked deduction under section 35AD:

(a)    laying and operating a slurry pipeline for the transportation of iron ore;

(b setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines.

Further, the date of commencement of operations for availing investment linked deduction in respect of the two new specified businesses shall be on or after 01-04-2014.

 

         (B)   Asset for which deduction has been claimed u/s 35AD to used only for specified business [Section 35AD(7A) and (7B)]: The existing provisions of section 35AD do not provide for a specific time period for which capital assets on which the deduction has been claimed and allowed, are to be used for the specified business.

With a view to ensure that the capital asset on which investment linked deduction has been claimed is used for the purposes of the specified business, the Finance (No. 2) Act, 2014 has inserted section 35AD(7Ato provide that any asset in respect of which a deduction is claimed and allowed under section 35AD, shall be used only for the specified business for a period of eight years beginning with the previous year in which such asset is acquired or constructed.

Further, the Act has inserted section 35AD(7B) to provide that if such asset is used for any purpose other than the specified business during the period of 8 years specified in section 35AD(7A), otherwise then by way

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