Section 35DDA

Section 35DDA — the law in short

What the courts have decided on section 35DDA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Ambalal Sarabhai Enterprises Ltd v DCIT High CourtHelps taxpayerNo later treatment found
  The Assessing Officer has swept my gratuity and leave encashment payments into the s.35DDA five-year spread along with the VRS compensation. Must terminal benefits be amortised too?
  No. The Gujarat High Court held that gratuity and leave encashment are post-retirement benefits accruing from actual service rendered, payable whether retirement is voluntary or on superannuation, and are ancillary to — not part of — the voluntary retirement scheme. Only the VRS compensation component falls into the one-fifth spread under s.35DDA; the terminal benefits are deductible in full.
• CIT v State Bank of Mysore High CourtHelps taxpayerNo later treatment found
  My VRS does not satisfy Rule 2BA. The Commissioner says that kills my s.35DDA deduction as employer. Does it?
  No. The Karnataka High Court held that Rule 2BA is a guideline for the purposes of s.10(10C) — the exemption in the retiring employee's hands — and has nothing to do with the employer's claim under s.35DDA. s.35DDA makes no mention of any rule. The employer's deduction is nevertheless confined to one-fifth in the year of payment, with the balance spread over the four succeeding years.
• Statutory position — s.44DB: when a co-operative bank amalgamates, demerges or converts, the year's deduction under ss.32, 35D, 35DD and 35DDA is split by days, not lost CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Our co-operative bank amalgamated in October. The successor is claiming the whole year's depreciation and amortisation. Is that right, and what happens to our part of it?
  It is not right, and the section says so arithmetically. Section 44DB provides that the deduction under section 32, section 35D, section 35DD or section 35DDA shall, in a case where business reorganisation of a co-operative bank has taken place during the financial year, be allowed in accordance with that section. The predecessor co-operative bank gets A x B / C, where A is the amount of the deduction that would have been allowable had the business reorganisation not taken place, B is the number of days from the beginning of the financial year up to the day before the reorganisation, and C is the total number of days in that financial year. The successor co-operative bank, or the converted banking company, gets the same formula with B taken as the number of days from the date of the reorganisation to the end of the financial year. The section then provides for the continued application of sections 35D, 35DD and 35DDA to the successor for the remaining years. The Explanation defines 'business reorganisation' as the reorganisation of business involving the amalgamation or demerger of a co-operative bank or the conversion of a primary co-operative bank, and defines the amalgamating, amalgamated, predecessor and successor banks, 'co-operative bank' by reference to the Banking Regulation Act, 1949, 'demerger', and 'conversion' by reference to a Reserve Bank of India circular of 27 September 2018.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.