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SECTION 35E- DEDUCTION FOR EXPENDITURE ON PROSPECTING, ETC, FOR CERTAIN MINERALS
This section provides for deduction for expenditure on prospecting, mining, etc for certain minerals specified in Part A and Part B, respectively of the Seventh Schedule.
Conditions for claiming deduction-
- Indian Company or any other person (other than company)
- Resident of India
- Engaged in operations of relating to prospecting for, extraction or production of any mineral
- Incurs expenditure after the 31st of March 1970 i.e. at any time during the year of commercial production and any one or more of the four years immediately preceding that year.
Expenditures not allowed as deduction-
Such expenditure or part thereof which is met directly or indirectly by any other person or authority and sale, salvage, compensation or insurance money realized by the assessee in respect of any property or rights brought into existence as a result of expenditure.
- Expenditure on acquisition of the site of the source of any mineral or group of minerals or any such rights in or over such site.
- Expenditure on the acquisition of the deposits of such mineral pr group of associated minerals or of any rights in or over such deposits.
- Expenditure of a capital nature in respect of building, machinery, plant or furniture for which allowance by way of depreciation is admissible u/s 32 of Income Tax Act, 1961.
Quantum of deduction-
- An amount = 1/10 of the amount of expenditure (installment)
- Such amount which is sufficient to reduce the income (computed before making the deduction under this section) arising from the commercial exploitation of any mine or other natural deposit of minerals or one or more minerals in a group associated minerals to NIL
Whichever is less.
The amount of installment which remains unallowed in the previous year shall be carried forward and added to the installment of the next following previous year. The unallowed installment cannot be carried forward for more than 10 previous years from the year of commercial production.
Asseessee is a person other than a company or a co-operative society-
Following conditions must be fulfilled for claiming deduction u/s 35E of Income Tax Act, 1961-
- Accounts of the assessee for the years in which expenditure is incurred must be audited by an accountant
- Income tax returns must be filed. Along with Income Tax return he must furnish a copy of Audit report duly signed by the accountant.
Scheme of Amalgamation-
Where an undertaking of Indian Company is entitled to deduction u/s 35E of Income tax Act, 1961 is transferred before the expiry of the period of 10 tears to another Indian Company in a scheme of amalgamation,
- No deduction shall be admissible in case of the amalgamating company for the year in which amalgamation takes place.
- Deduction will be available to the amalgamated company in the same way as it would have been available to amalgamating company if amalgamation had not taken place. (For the remaining period).
Scheme of Demerger-
Where an undertaking of Indian Company is entitled to deduction u/s 35E of Income tax Act, 1961 is transferred before the expiry of the period of 10 tears to another Indian Company in a scheme of demerger,
- No deduction shall be admissible in case of the demerged company for the year in which demerger takes place.
- Deduction will be available to the resulting company in the same way as it would have been available to the demerged company if demerger had not taken place. . (For the remaining period).