Amendment of section 35AD
12. In section 35AD of the Income-tax Act, with effect from the 1st day of April, 2015,––
(a) in sub-section (3), after the words “no deduction shall be allowed under the provisions of”, the words, figures and letters “section 10AA and” shall be inserted;
(b) in sub-section (5),—
(i) in clause (ah), the word “and” occurring at the end, shall be omitted;
(ii) after clause (ah), the following clauses shall be inserted, namely:––
“(ai) on or after the 1st day of April, 2014, where the specified business is in the nature of laying and operating a slurry pipeline for the transportation of iron ore;
(aj) on or after the 1st day of April, 2014, where the specified business is in the nature of setting up and operating a semi-conductor wafer fabrication manufacturing unit, and which is notified by the Board in accordance with such guidelines as may be prescribed; and”;
(c) after sub-section (7), the following sub-sections shall be inserted, namely:––
‘(7A) Any asset in respect of which a deduction is claimed and allowed under this section 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.
(7B) Where any asset, in respect of which a deduction is claimed and allowed under this section, is used for a purpose other than the specified business during the period specified in sub-section
(7A), otherwise than by way of a mode referred to in clause (vii) of section 28, the total amount of deduction so claimed and allowed in one or more previous years, as reduced by the amount of depreciation allowable in accordance with the provisions of section 32, as if no deduction under this section was allowed, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used.
(7C) Nothing contained in sub-section (7B) shall apply to a company which has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 [1 of 1986], during the period specified in sub-section (7A).’;
(d) in sub-section (8), in clause (c), after sub-clause (xi), the following sub-clauses shall be inserted, namely:––
“(xii) laying and operating a slurry pipeline for the transportation of iron ore;
(xiii) setting up and operating a semi-conductor wafer fabrication manufacturing unit notified by the Board in accordance with such guidelines as may be prescribed;”.
Notes on Clauses:
Clause 12 of the Bill seeks to amend section 35AD of the Income-tax Act relating to deduction in respect of expenditure on specified business.
The existing provisions contained in section 35AD, inter alia, provide a deduction in respect of any expenditure of capital nature incurred, other than expenditure incurred on the acquisition of any land or goodwill or financial instrument, wholly and exclusively for the purposes of any specified business carried on by the assessee during the previous year in which such expenditure is incurred. The said section also provides that deduction under the provisions of Chapter VI-A under the heading “C.--Deductions in respect of certain incomes” shall not be available to any specified business which has claimed deduction under the said section.
It is proposed to amend sub-section (3) of the aforesaid section so as to provide that no deduction shall be allowed to the specified business under section 10AA for any assessment year if such specified business has claimed any deduction under section 35AD.
It is further proposed to insert new clauses (ai) and (aj) in sub-section (5) of the aforesaid section to specify that the date of commencement of operation shall be on or after the 1st April, 2014 where the specified business is in the nature of laying and operating a slurry pipeline for the transportation of iron ore or in the nature of setting up and operating a semi-conductor wafer fabrication manufacturing unit and which is notified by the Board in accordance with such guidelines as may be prescribed.
It is also proposed to insert a new sub-section (7A) in section 35AD so as to provide that any asset in respect of which a deduction is claimed and allowed under this section 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.
It is also proposed to insert a new sub-section (7B) in the aforesaid section so as to provide that where any asset, in respect of which a deduction is claimed and allowed under this section is used for a purpose other than the specified business during the period specified in sub-section (7A) otherwise than by way of a mode referred to in clause (vii) of section 28, the total amount of deduction so claimed and allowed in one or more previous years, as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction under said section 35AD was allowed, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used.
It is also proposed to insert a new sub-section (7C) in the aforesaid section so as to provide that nothing contained in sub-section (7B) shall apply to a company which has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985, during the period specified in sub-section (7A).
It is also proposed to amend sub-section (8) of section 35AD so as to include the following businesses as specified business for the purposes of deduction under this section,-
(i) laying and operating a slurry pipeline for the transportation of iron ore;
(ii) setting up and operating a semi-conductor wafer fabrication manufacturing unit notified by the Board in accordance with the prescribed guidelines.
These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.
