329.  Civil defence measures – Expenditure thereon whether allowable as business deduction only during emergency

1. Attention is invited to Board’s Circular Letter No. 10/22/65-IT(A-I), dated 24-5-1965 [Annex] on the subject, wherein it was conveyed that expenditure on certain specified civil defence measures incurred by business concerns during emergency should be treated as revenue expenditure and allowed.

2. It has been represented now that benefit of deduction, etc., allowed in the above circular should not be confined to expenditure on civil defence measures incurred during emergency only as even where there is no emergency, it is necessary to plan and implement the said civil defence measures so that they are available in an emergency.

3. In view of the position explained above, it has been decided that expenditure incurred by business concerns on civil defence measures as specified in the Board’s circular referred to above, even when there is no emergency, would be allowable to the extent found reasonable, in the manner indicated in the said circular.

Circular : No. 316 [F. No. 201/62/78-IT (A-II)], dated 30-9-1981.

ANNEX – LETTER DATED 24-5-1965 REFERRED TO IN CLARIFICATION

1. I am directed to say that during the course of emergency, business concerns are required to take the following civil defence measures as part of the civil defence plan in respect of their property :

1. Raise, train the following civil defence services at the scale laid down in the Home Ministry’s hand books: Messenger service, casualty service, rescue service, etc.

2. Purchase of civil defence equipment, stirrup pump, helmets, sirens, etc., as per prescribed scale.

3. (a) Fire-fighting system is to be brought to the required standard to cope up with likely effect of air raids.

(b) A warning system is to be laid to receive air raid warning from the nearest civil defence control centre and disseminate the same to the workers.

4. In addition, some special civil defence measures relating to water supply system, piping system, concealment from glow, etc., are also to be adopted.

2. The question relating to the treatment to be accorded to expenditure incurred on these civil defence measures by the business concerns for the purpose of income-tax has been under consideration for quite some time.  It has been now decided that all expenses on civil defence measures may be allowed as revenue expenditure unless any portion thereof is of an enduring nature whose usefulness may be extended beyond the period of emergency in which case depreciation admissible as per rules can be allowed.

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