The amendment to Section 35AD(3) of the Act introduced by the Finance Act, 2010, seeks to prevent a taxpayer from claiming dual deduction in respect of the same business.

It appears that if a taxpayer carrying on a specified business does not claim deduction under Section 35AD of the Act, he may opt for deduction under the relevant provisions of Chapter VI-A or Section 10AA of the Act, if the same exist for such business and it is more beneficial.


A clarification should be issued that the taxpayer may exercise an option (where available to the taxpayer) to avail tax incentive under Section 35AD or Chapter VI-A/ Section 10AA of the Act, depending upon which is more beneficial to the taxpayer.

Further, it is suggested that a clarification may also be issued that in the event the taxpayer opts for the investment linked incentive under Section 35AD of the Act and the same is denied/ rejected at  time of assessment proceedings (could be on account of nonsatisfaction of prescribed conditions), in such a case the taxpayer should be eligible to make an alternative claim under Chapter VI-A or Section 10AA of the Act, on satisfaction of the conditions provided therein, notwithstanding the requirement stipulated in Section 80A(5) or 10AA of the Act. This is because, a taxpayer who is otherwise entitled to deduction in respect of qualifying profits of the specified business would lose such deduction on account of Section 80A(5) of the Act that mandates a claim for deduction under chapter VI-A be made in its return of income. As the taxpayer would not have claimed deduction under the provisions of Chapter VI-A/ Section 10AA of the Act in its return of income since claim was made under Section 35AD, such taxpayer would be precluded from claiming deduction in view of Section 80- A(5)/ Section 10AA of the Act.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)
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June 2021