Based Investment Deduction
Kameswara Rao Challa
Budget 2009 is a new initiative to introduce the concept of deduction, taken according to income tax for investments in new business "investment" and "nonprofit" is based. It has allowed section 35AD inserted net investments in certain companies under the Income Tax Act 1961. This is in lieu of allowing the exemption or deduction the benefits of a new business. These amounts allow the amortization of advance. This new initiative, it seems that the government has its priorities, "the investment The Indo-industrialization changed "to" investment measure ".
First in the 2009 budget, the Minister of Finance Mr. Pranab Mukherjee, a proposal for a new initiative with the introduction of the concept allows tax deductions made pursuant to invest in a new business "The investments, based on" and "nonprofit" is based. Mukherjee said that the budget speech
Under the current system of target = "_blank" Title = "income tax act"> Act, Income Tax, exceptions are tax benefits associated with greatly. These incentives are inefficient and susceptible to abuse. Therefore, it is proposed that the company ..... providing linked to the investment tax incentives under this method, all investments, except for spending on agriculture, business, goodwill and financial instruments in its entirety by the allowable deductions.
None Clause 13 of the Finance Act 2009 proposes Insert section 35AD of the Act of 1961 Income Tax allows a deduction for investments in certain sectors. Here is an attempt to analyze this budget initiative.
The second proposed scheme is an initiative for the withdrawal of investments in a new company income of the assessee. It is proposed to deduct investments in a particular business to give. The proposed section is not part of "Chapter III: Revenues, that are not part of the total income or Chapter VI-A: In computing the deduction shall be the total income. "It's part of" Chapter IV: The calculation of total income "under the" Part-D: benefits and gains of business or profession. "Paragraph 3 expressly prohibits double deduction pursuant to § 35AD, and under Chapter VI-A of the Act. The proposed section is a start in the prescribed income-based exemptions and deductions into oblivion.
According to paragraph (a) of the proposed section 35AD:
An assessee is allowed a deduction for all expenditure of capital nature are incurred wholly and exclusively for the purpose of an activity one by him during the previous year, resulting in expenditures by him.
The proposed section allow investment expenditures for certain activities as business expenses.
According to paragraph (4) of section 35AD:
No deduction of the expenditure referred to in paragraph (a) if the assessee acceptable elsewhere.
It allows the deduction under Section 35AD, the assessee will not be depreciation able to claim under § 32 of the law. This is also the fact that 13 As obvious explanation inserted under § 43 (a), the concept of block assets Respect for property, the deduction under section 35AD allowed to pass. By this statement, "The real cost of investment approved in the deduction is allowable or the assessee in accordance with § 35AD to be considered "treatment does not apply." Therefore proposes a new section allowing Upfront depreciation, rather than on the distribution of different years. This is identical to the deduction of capital expenditure on scientific research under paragraph (a) (iv) together with paragraph (2) of § 35 of the Act.
For the third time in a deduction under § 35AD, The following three activities is limited in accordance with paragraph 8 (c):
(I) the establishment and operation of a chain plant cold.
(Ii) Develop and use a storage facility for the storage of agricultural products.
(Iii) installation and operation of a cross-country natural gas or crude oil or petroleum pipeline network for distribution, including storage, an integral part of the network. "
The above activities are for capital as an incentive for industry and development of infrastructure facilities.
It is interesting to note that the business of laying pipelines for oil and natural gas not only in the context of section 35AD strategy was detailed, but also according to § 80-IA of the law. However, the deduction is not in the two sections are available. Therefore, double deduction is in respect of the same activities in the two sections.
The deduction is for an assessee to start operations with effect from 1 April 2009 available. However, in connection with an exercise assessee of pipelines for oil and natural gas is deductible, retroactive available, even if the operation starts from April 1, 2007.
Interestingly, the fourth section specifies the type of people who are entitled to deduction under the section.
(A) Ski pipelines for petroleum products, etc - deduction can be claimed only by companies engaged in activities and the consortium companies. The section does not apply to other types of people ie a limited liability company, companies, firms, partnerships, associations of persons, Hindu undivided families or individuals. It is true that this activity takes place mainly by the company to Assess. For the first time, the Law on income tax recognized consortium of business in respect of deduction under the section.
(B) The agricultural warehouse and storage facilities cold - namely, the deduction can be claimed by one person., Individually, Hindu undivided family, company, limited liability company, an association of persons, body of persons or companies. For these activities, the consortium of companies that are not recognized assessee.
Under paragraph fifth (with the right investments) "is nothing of the cost of capital nature incurred wholly and exclusively for the purpose of a particular activity by him during the previous year in which such expenses are incurred by him. "The trigger can be invoked in relation to investments for the business specified made. Investment in fixed assets and intangibles can. 8 However, according to subsection (f), an assessee can not claim the deduction of certain expenses, if well in relation to certain activities causes are "all expenses of the nature of capital does not include the cost of land acquisition or goodwill or an instrument Financial created. The section is not defined as capital expenditure. Therefore, all capital expenditure (subject to a small negative list) are formed in relation to a new model of business are deductible, such as:
(A tangible assets) - buildings, equipment and machinery, equipment electrical equipment, pollution control, electrical equipment, office equipment, furniture and fixtures, vehicles, computers, etc.
(B) Intangible assets - technical knowledge, patents, copyrights, trademarks, brand recognition, software, etc.
Of all material goods only "land" from competition pending withdrawal. This is perhaps because the depreciation is not allowed in the country. It is doubtful that the cost of land includes land development. Intangible assets "Good Will" will be held in allowing the deduction under the heading of good will if purchased, acquired or created. The section does not deduct the cost of financial instruments. "However, the law is not what the costs for certain financial instruments." In normal times the language is costs more than issuing bonds, etc.
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