295. Effect of withdrawal of tax concession under section 35C in a case where expenditure has been incurred by sugar factory on cane development programmes and same was found eligible for deduction under section 37(1)
Circular No. 578 was issued by the Central Board of Direct Taxes on 12 September 1990. Its subject is 295. Effect of withdrawal of tax concession under section 35C in a case where expenditure has been incurred by sugar factory on cane development programmes and same was found eligible for deduction under section 37(1).
Keeps cane development expenditure deductible after section 35C went. Section 35C had allowed a company or co-operative society using or processing agricultural, animal husbandry, dairy or poultry produce a deduction for the cost of providing agricultural inputs and extension services to the growers, directly or through an approved body, and the Finance Act, 1984 withdrew it for expenditure incurred on or after 1 March 1984. The Board says that a sugar factory's expenditure on cane development programmes is still deductible in computing business profits if the Assessing Officer is satisfied on the facts that the conditions of section 37(1) are met, and that the withdrawal of the section 35C concession does not affect that position.
After the withdrawal of section 35C, doubt arose whether expenditure of the kind it used to cover could still be allowed at all.
| Under the 1961 Act | Now |
|---|---|
| s.35C | no counterpart recorded |
| s.37 | s.34 |
295. Effect of withdrawal of tax concession under section 35C in a case where expenditure has been incurred by sugar factory on cane development programmes and same was found eligible for deduction under section 37(1)
1. Under the provisions of section 35C of the Income-tax Act, 1961, a company or a co-operative society, which uses any product of agriculture, animal husbandry or dairy or poultry farming as raw material or processes such products, was eligible for a deduction of the amount of expenditure incurred, whether directly or through an approved association or body, for the provision of agricultural inputs and extension services to cultivators, growers or producers of such products.
2. This deduction was withdrawn by the Finance Act, 1984, in respect of expenditure incurred on or after 1-3-1984.
3. Section 37(1) of the Income-tax Act, 1961, however, provides that any expenditure, not being in the nature of capital expenditure or personal expenses of the taxpayers, laid out or expended wholly and exclusively for the purposes of his business, is to be allowed as deduction in computing the income chargeable under the head "Profits and gains of business or profession". Hence, any expenditure incurred by a sugar factory on cane development programmes would be eligible for deduction in computing the taxable profits if, having regard to the facts and circumstances of the case, the Assessing Officer is satisfied that the conditions laid down in section 37(1) of the Act are fulfilled. The withdrawal of the tax concession under section 35C would not affect this position.
Circular : No. 578, dated 12-9-1990.
In a scrutiny assessment of a sugar mill where cane development expenditure is proposed to be disallowed, and in the appeal that follows.
Source: the Income Tax Department’s own published text — its page for this instrument.