As per Section 35AD of Income Tax Act, an assessee shall be allowed a deduction towards any capital expenditure, wholly and exclusively, incurred for carrying on a specified business.
Notably, deduction under section 35AD is not available towards expenditure incurred for acquisition of any land or financial instrument or goodwill.
In case of any expenditure where such payment or aggregate of such payments is made by cash, bearer cheque or crossed cheque in a single day exceeding Rs 10,000 then no deduction is allowed.
DEDUCTION AMOUNT ALLOWED UNDER 35AD
SPECIFIED BUSINESSES UNDER SECTION 35AD
Note: with effect from 1/4/2020 deduction under this section has been made optional by Finance Act, 2020.
CONDITIONS TO BE FULFILLED
- The business shall not be formed by splitting up or reconstruction of existing business.
- Specified Business should not be set up by transfer of Plant or Machinery which was previously used for any purpose. Plant and Machinery used shall be new.
- Though, 20% of Total Plant and Machinery can be second hand or used previously.
- If Plant and Machinery imported from outside India same shall be considered as new Plant and Machinery if it has not been previously used in India and on which Depreciation has not been allowed previously.
3. In case of any asset purchased and deduction claimed on such expenditure then such asset shall be exclusively used only for specified business purpose for at least 8 years from the year of acquisition.
1 . In case of use of an asset for non-specified business within 8 years from the year of acquisition of such asset, then the amount that would have been allowable had the asset been used for Non-Specified Business from the year of acquisition shall be considered as Business Income of the assessee.