Section 34 - Conditions for depreciation allowance and development rebate - Income-tax Act, 1961

Conditions for depreciation allowance and development rebate. 34. (1) 1 [ *** ] (2) 2 [ *** ] (3)( a ) The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent of the development rebate to be actually allowed is debited to the profit and loss account of 3 [ any previous year in respect of which the deduction is to be allowed under sub-section (2) of that section or any earlier previous year (being a previous year not earlier than the year in which the ship was acquired or the machinery or plant was installed or the ship, machinery or plant was first put to use) ] and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than- ( i ) for distribution by way of dividends or profits ; or ( ii ) for remittance outside India as profits or for the creation of any asset outside India : Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 : 5 [Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall have effect in respect of such ship as if for the words seventy-five , the word fifty had been substituted. ] Explanation. - 4 [****] ( b ) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly : Provided that this clause shall not apply- ( i ) where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 ; or ( ii ) where the ship, machinery or plant is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; or ( iii ) where the sale or transfer of the ship, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (3) or sub-section (4) of section 33. **************** NOTES:- 1. Omitted vide Section 6 of the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986 w.e.f. 01-04-1988 before it was read as, (1) The deductions referred to in sub-section (1) or sub-section (1A) of section 32 shall be allowed only if the prescribed particulars have been furnished; and the deduction referred to in section 33 shall be allowed only if the particulars prescribed for the purpose of clause (i) and clause (ii) of sub-section (1) of section 32 have been furnished by the assessee in respect of the ship or machinery or plant. Earlier , Amended vide Section 6 of the Taxation Laws (Amendment) Act, 1970 w.e.f. 01-04-1971 2. Omitted vide Section 6 of the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986 w.e.f. 01-04-1988 before it was read as, (2) For the purposes of section 32 (i) the aggregate of all deductions in respect of depreciation made under sub-section (1) or sub-section (1A) of section 32 or under the Indian Income-tax Act, 1922 or under any Act repealed by that Act or under the Indian Income-tax Act, 1886, shall, in no case, exceed the actual cost to the assessee of the buildings, machinery, plant, furniture, structure or work, as the case may be; Explanation : Where a capital asset is transferred - (i) by a holding company to its subsidiary company or by a subsidiary company to its holding company, or (ii) by a company to another company in a scheme of amalgamation, and the conditions specified in clause (iv) or clause (v), or, as the case may be, clause (vi) of section 47 are satisfied, then, in determining the aggregate of all deductions in respect of depreciation under this clause, account shall also be taken of the deductions in respect of depreciation allowed in the case of the company from which the asset has been transferred; (ii) nothing in clause (i) or clause (ii) or clause (iia) or clause (iv) or clause (v) or clause (vi) of sub-section (1) of section 32 shall be deemed to authorise the allowance for any previous year of any sum in respect of any building, machinery, plant or furniture sold, discarded, demolished or destroyed in that year. (iii) nothing in clause (i) of sub-section (1A) of section 32 shall be deemed to authorise the allowance for any previous year of any sum in respect of any structure or work in or in relation to a building referred to in that sub-section which is sold, discarded, demolished or destroyed or is surrendered as a result of the determination of the lease or other right of occupancy in respect of the building in that year. Earlier , Amended vide Section 10 of the Finance Act, 1965 w.e.f. 01-04-1965 And was Amended vide Section 12 of the Finance (No. 2) Act, 1967 w.e.f. 01-04-1967 And was Amended vide Section 6 of the Taxation Laws (Amendment) Act, 1970 w.e.f. 01-04-1971 And was Amended vide Section 4 of the Direct Taxes (Amendment) Act, 1974 w.e.f. 01-04-1975 And was Amended vide Section 35 of the Finance (No. 2) Act, 1980 w.e.f. 01-04-1981 3. Substituted vide Section 11 of the Finance Act, 1990 w.e.f. 01-04-1962 before it was read as, the relevant previous year 4. Omitted vide Section 11 of the Finance Act, 1990 w.e.f. 01-04-1962 before it was read as, Explanation.-For the removal of doubts, it is hereby declared that the deduction referred to in section 33 shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the reserve account aforesaid exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid) in accordance with the profit and loss account. Earlier , Inserted vide Section 9 of the Finance Act, 1966 w.e.f. 01-04-1962 5. Inserted vide Section 9 of the Finance Act, 1966 w.e.f. 01-04-1966