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35D amendment by 2008 Budget

Started by bhaveshformals, June 20, 2008, 10:10:33 AM

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Dear all

Section 35D has been amended by the Budget 2008 to include non-industrial undertakings also.Thus they can get the benefit from AY 2009-10.

My question is that should the expenditure be necessarily incurred in the FY 2008-09 to get this benefit. Suppose an assessee incurrs an expenditure in FY 2007-08. Is it possible to take a view that it will not get the 20% allowance in the AY 2008-09 but it can start getting the allowance of  20% from AY 2009-10. The Section 35D nowhere says that the expenditure should be in the prevoius year relating to the year of first allowance.

Your views would be highly appreciated.

Bhavesh Savla
Keep smiling.

ashutosh majumdar

Hi Bhavesh,

Interesting Question.

S. 35D provides that where an assessee incurs expenditure in connection with the extension etc of his undertaking, he shall be allowed a deduction in five installments beginning with the previous year in which the extension etc takes place.

The deduction (for non-industrial units) commences from AY 2009-2010 but there is no requirement that the expenditure should be incurred in that year iself. Of course, the assessee will lose out on the pro-rata deductions for the earlier years.

Accordingly, I totally agree with you that the assessee will get 20% deduction for AY 2009-2010 even though he loses out for the earlier years.



I agree with theory but in practice 2 years will have passed by time AO makes assessment. AO will ask why you have not charged interest. Is it really loan or gift in disguise? So yiou have too be careful that it is really loan with repayment, security and reason for non-interest charging etc.



Thanks Ashutosh a lot.

Can anyone find any similar issue or similar subject which took place in the past.???

Thanking you

Bhavesh Savla
Keep Smiling.