Budget 2023: Ease in claiming deduction on amortization of preliminary expenditure
Section 35D of the Act provides for amortization of certain preliminary expenses which are incurred prior to the commencement of business or after commencement, in connection with extension of undertaking or setting up of a new unit. This includes expenditure in connection with preparation of feasibility report, project report etc.
2. The section inter-alia provides that the work in connection with the preparation of feasibility report or the project report or the conducting of market survey or of any other survey or the engineering services would need to be carried out either by the assessee himself or by a concern which is approved by the Board.
3. In order to ease the process of claiming amortization of these preliminary expenses it is proposed to amend section 35D of the Act to remove the condition of activity in connection with these expenses to be carried out by a concern approved by the Board. Instead, the assessee shall be required to furnish a statement containing the particulars of this expenditure within prescribed period to the prescribed income-tax authority in the prescribed form and manner.
10. This amendment will take effect from 1st April, 2024 and will accordingly apply to the assessment year 2024-2025 and subsequent assessment years.
[clause 12]
Extract of relevant clause of Finance Bill 2023
Clause 12 of the Bill seeks to amend section 35D of the Income-tax Act relating to amortisation of certain preliminary expenses.
Clause (a) of sub-section (2) of the said section includes expenditure in connection with (i) preparation of feasibility report, (ii) preparation of project report, (iii) conducting marketing survey or any other survey necessary for the business of the assessee; and (iv) engineering services related to the business of the assessee: within the scope of preliminary expenses which are allowed to be amortised under sub-section (1). Proviso to the said clause requires that the works regarding reports, surveys, etc., are to be carried out by the assessee himself or by a concern which is approved in this behalf by the Board.
It is proposed to substitute the said proviso so as to provide that the assessee shall furnish a statement containing the particulars of expenditure specified in this clause within such period, to such income-tax authority, in such form and manner, as may be provided by rules.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
12. Amendment of section 35D.
In section 35D of the Income-tax Act, in sub-section (2), in clause (a), for the proviso, the following proviso shall be substituted with effect from the 1st day of April, 2024, namely:–
“Provided that the assessee shall furnish a statement containing the particulars of expenditure specified in this clause within such period, to such income-tax authority, in such form and manner, as may be prescribed.”.
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