Amendment of section 35AD.
10. In section 35AD of the Income-tax Act,—
(a) in sub-section (2), in clause (iii), in sub-clause (c), for the words "one-third of its total pipeline capacity", the words, brackets and figures "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] shall be substituted;
(b) for sub-section (3), the following sub-section shall be substituted with effect from the 1st day of April, 2011, namely:—
'(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.';
(c) in sub-section (5), with effect from the 1st day of April, 2011,—
(i) in clause (a), the word "and", occurring at the end, shall be omitted;
(ii) after clause (a), the following clause shall be inserted, namely:—
"(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; and";
(iii) in clause (b), for the word, brackets and letter "clause (a)", the words, brackets and letters "clause (a) and clause (aa)" shall be substituted;
(d) in sub-section (8), in clause (c), after sub-clause (iii), the following sub-clause shall be inserted with effect from the 1st day of April, 2011, namely:—
"(iv) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;".
Notes on Clauses:
Clause 10 of the Bill seeks to amend section 35AD of the Income tax Act relating to deductions in respect of expenditure on specified business.
Under the existing provisions of the aforesaid section, deduction in respect of expenditure of capital nature incurred, wholly or exclusively, during the year for a specified business is allowed.
The expression "specified business" is defined in clause (c) of subsection (8) of the said section. The specified business, inter alia, includes the business of 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. The conditions to be applied to specified business are laid down in sub-section (2) of the aforesaid section. One of such conditions is that the aforesaid specified business should have made not less than one-third of its total pipeline capacity available for use on common carrier basis by any person other than the assessee or an associated person.
Sub-clause (a) proposes to amend sub-clause (c) of clause (iii) of sub-section (2) of the aforesaid section 35AD so as to provide that the proportion of the total pipeline capacity to be made available for use on common carrier basis should be as specified by regulations made by the Petroleum and Natural Gas Regulatory Board.
This amendment will take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to assessment year 2010-2011 and subsequent years.
The existing provisions contained in sub-section (3) of the aforesaid section 35AD provide that the assessee shall not be allowed any deduction in respect of the specified business under the provisions of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes".
Sub-clause (b) proposes to substitute sub-section (3) of the aforesaid section so as to provide that 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.
Sub-section (5) of the aforesaid section 35AD prescribes the conditions as regards the date of commencement of the specified business.
Sub-clause (c) proposes to amend sub-section (5) of the aforesaid section so as to insert a new clause (aa) to provide that the specified business in the nature of building and operating a new hotel of two-star or above category as classified by the Central Government should commence its operation on or after 1st April, 2010.
The existing provisions of clause (c) of sub-section (8) of the aforesaid section 35AD define the expression "specified business" to mean the business of setting up and operating a cold chain facility, a warehousing facility for storage of agricultural produce and laying and operating a cross-country natural gas or crude or petroleum oil pipeline network.
Sub-clause (d) proposes to amend clause (c) of sub-section (8) of the aforesaid section so as to bring the business relating to building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government within the purview of "specified business".
These amendments will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
