Rule 37 — Procedure for approval of agricultural extension project under section 47(1)(a). Made under s.47 of the Income-tax Act, 2025.
Rule 37 gives effect to Section 47 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) sets the three conditions on which an agricultural extension project is considered for notification: it must be undertaken by an assessee for training, education and guidance of farmers; it must have prior approval of the Ministry of Agriculture and Farmers Welfare, Government of India; and expenditure exceeding Rs. 25,00,000, not being expenditure in the nature of cost of any land or building, must be expected to be incurred on it.
Sub-rule (2) requires the assessee to apply in Form No. 20 to the Member (IT), CBDT before undertaking any project. Sub-rule (3) requires the application to be accompanied by the Ministry's letter approving the project and specifying the expected expenditure, a detailed note on the project, and details of the expenditure expected to be incurred and the expected date of completion.
Sub-rules (4) to (6) run the defect cycle. Where a defect is noticed in the application or a relevant document is not attached, the Board must intimate the defect before the expiry of one month from the end of the month in which the application is received in its office. The applicant must remove the defect within one month from the end of the month in which the intimation letter is served on him. If he fails to, the Board must, within one month from that period, pass an order treating the application as invalid.
Sub-rule (7) requires the Board, where the application is complete in all respects, to issue a notification under section 47(1)(a) in Form No. 21 within two months from the end of the quarter in which it receives the application, specifying the project subject to the conditions in rule 38 or such other conditions as it may deem fit, effective for a period not exceeding three tax years.
Sub-rules (8) to (10) deal with continuation. The assessee may apply to the Board for a further period at least three months before the effective period expires. The Board must then call for a report from the Commissioner of Income-tax having jurisdiction on the activities of the project during the period of notification and on fulfilment of the conditions in rule 38 and any other conditions of the notification. On being satisfied with that report, the Board may notify the project for a further period not exceeding three tax years, within two months from the end of the quarter in which it receives the application.
Sub-rule (11) allows the Board to revoke a notification issued under sub-rule (7) or sub-rule (10), after a reasonable opportunity of being heard, where it is satisfied that the assessee has ceased its activities or its activities are not genuine, or that they are not being carried out in accordance with all or any of the relevant provisions of this rule or rule 38, or in accordance with all or any of the conditions subject to which the notification was issued. Sub-rule (12) requires a copy of the notification, approval, rejection or cancellation to be communicated to the applicant, the Ministry of Agriculture and Farmers Welfare, the Commissioner of Income-tax having jurisdiction over the applicant, the Department of Agriculture of the concerned State and the Agricultural Technology Management Agency of the concerned district.
Section 47(1)(a) attaches its consequence to an agricultural extension project notified by the Board, but does not say who notifies, on what conditions, or for how long. The rule builds that machinery end to end — eligibility, the form and the accompanying Ministry approval, the timetable for defects and disposal, a notification with a life of not more than three tax years, a renewal route with a Commissioner's report behind it, and a revocation power. The prior approval of the Ministry of Agriculture and Farmers Welfare is what keeps the Board from having to judge the agricultural merit of the project itself.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Expenditure expected to be incurred on the project | Exceeding Rs. 25,00,000 | Not being expenditure in the nature of cost of any land or building | Sub-rule (1)(c) |
| Time for the Board to intimate a defect | Before the expiry of one month | From the end of the month in which the application is received in the Board's office | Sub-rule (4) |
| Time for the applicant to remove a defect | One month | From the end of the month in which the intimation letter is served on him | Sub-rule (5) |
| Time for the Board to pass an order treating the application as invalid | One month | From the time period specified in sub-rule (5), where the deficiency is not removed | Sub-rule (6) |
| Time for the Board to issue the notification in Form No. 21 | Two months | From the end of the quarter in which the complete application is received | Sub-rule (7) |
| Effective period of the notification | Not exceeding three tax years | An outer limit; the Board may specify a shorter period | Sub-rule (7) |
| Lead time for an application for a further period | At least three months | Before the expiry of the effective period of the notification issued under sub-rule (7) | Sub-rule (8) |
| Further period for which the project may be notified | Not exceeding three tax years | On the Board being satisfied with the Commissioner's report under sub-rule (9); an outer limit | Sub-rule (10) |
| Time for the Board to notify the project for a further period | Two months | From the end of the quarter in which the application under sub-rule (8) is received | Sub-rule (10) |
The application must come before the project is undertaken — sub-rule (2) says "Before undertaking any project" — so expenditure begun in the hope of a later notification is outside the scheme. Three tax years is an outer limit and not an entitlement: the Board fixes the effective period, and continuation is a fresh application made at least three months before expiry, decided on a Commissioner's report about what the project actually did. The Rs. 25,00,000 test is on expenditure expected at the application stage and expressly excludes the cost of land or building, so a capital-heavy project with a modest programme spend will not clear it. Revocation under sub-rule (11) reaches back to conditions in rule 38 as well as those in the notification, which is why the two rules have to be read together.
A firm proposes a two-year farmer training programme with an expected spend of Rs. 40,00,000, of which Rs. 18,00,000 is a training shed. The expenditure other than the cost of the building is Rs. 22,00,000, which does not exceed Rs. 25,00,000, so the project fails sub-rule (1)(c) whatever the Ministry may have approved. Had the programme spend been Rs. 30,00,000, the firm would apply in Form No. 20 before starting, and the Board would notify the project in Form No. 21 within two months from the end of the quarter of receipt, for a period of not more than three tax years.
An assessee meets it in Form No. 20 and the Ministry approval letter that must accompany it, and later in the Form No. 21 notification and any renewal or revocation order. A farmer attending the project never meets the rule; the Commissioner of Income-tax having jurisdiction meets it when asked for a report under sub-rule (9).
an expenditure (not being expenditure in the nature of cost of any land or building) exceeding the amount of Rs. 25,00,000 is expected to be incurred for the project
Before undertaking any project, an assessee shall make an application in Form No. 20 to the Member (IT), CBDT for notification of such project under section 47(1)(a).
to be effective for such period not exceeding three tax years