Expenditure incurred towards notified agricultural extension project is allowed as a deduction under section 35CCC of the Income Tax Act. Notably, the guidelines for approval of such agricultural extension project is covered under rule 6AAD of the Income Tax Rules, whereas, the conditions are prescribed under rule 6AAE.
The entire provisions relating to deduction available towards expenditure incurred on agricultural extension project is explained briefly in the present article.
An assessee incurring eligible expenditure on an agricultural extension project is available as a deduction under section 35CCC. However, the deduction is subject to the guidelines prescribed under rule 6AAD and conditions prescribed under rule 6AAE of the Income Tax Rules.
|Period||Amount of deduction|
|Till Assessment year 2020-2021||150% of the eligible expenditure|
|From Assessment year 2021-2022||100% of the eligible expenditure|
Here, eligible expenditure means as under-
Expenses (other than the cost of land/ building) incurred exclusively for project XXX
(-) Amount received from the beneficiary (XXX)
Eligible expenditure XXX
Provisions of rule 6AAD of the Income Tax Rules covers the guidelines to be followed for approval of the agricultural extension project. The same is explained hereunder-
1. Mandatory conditions to be satisfied-
a. The extension project should be undertaken for training, guidance and education of the farmers.
b. Such extension project should have prior approval of the Ministry of Agriculture.
c. An expenditure more than INR 25 Lakhs is expected to have been incurred for the notified agricultural extension project Here, any expenditure incurred towards the cost of land/ building is not covered.
2. Filing of an application form for approval under section 35CCC–
a. An assessee should make an application in Form No. 3C-O.
b. Such an application should be made before undertaking the agricultural extension project.
c. The application should be filed with Member (IT), Central Board of Direct Taxes.
d. The application in Form No. 3C-O should be accompanied by the following details/ documents-
i. A detailed note covering agricultural extension project to be undertaken.
ii. Details of all the expected expenditure to be incurred on the extension project and expected date by which the project will be completed.
iii. Project approval letter from the Ministry of Agriculture. The letter should specify the amount of expected expenditure to be incurred on the project.
3. The flow of action post filing of an application in Form No. 3C-O-
a. The Central Board of Direct Taxes will intimate the defect, if any, in the application within a period of one month from the date of receipt of the application.
b. Such defect, if any, should be removed by the applicant within a period of fifteen days.
c. In case the application is complete, the Central Board of Direct Taxes will issue a notification in Form No. 3CP in the official gazette. Such notification should be issued within a period of one month from the end of the month in which the application form is complete. The notification will be effective for a maximum period of three assessment years.
4. Other points-
a. In case the assessee needs an extension, he needs to file an extension application at least two months before the expiry of the effective period.
b. In following cases, the Central Board of Direct Taxes can pass an order for rescission of notification-
i. The assessee has ceased the activities; or
ii. The activities are not genuine; or
iii. The activities are not carried out as per provisions of section 35CCC or rule 6AAD or rule 6AAE; or
iv. The activities are not as per the conditions subject to which the notification has been issued.
Provisions of rule 6AAE cover the conditions to be satisfied by the assessee undertaking an agricultural extension project–
1. Books of accounts relating to agricultural extension project should be maintained separately.
2. Such books of accounts should be audited by the practising chartered accountant.
3. The audit report should specifically contain-
a. Comment of the auditor relating to true and fair view of the books of accounts,
b. Genuineness of the activities of an agricultural extension project,
c. Fulfilment of all the conditions specified in relevant provisions of the Act/ rules.
4. The assessee should not be receiving direct/ indirect benefit from the notified agricultural extension project.
5. The assessee cannot accept the amount exceeding the amount approved in the notification from the beneficiary.
6. Every year the following documents are to be submitted to the Commissioner of Income-tax/ Director of Income-tax-
a. An audited statement of accounts; audited report and amount of deduction claimed under section 35CCC,
b. A note relating to the agricultural extension project undertaking during the previous year; programme of agricultural extension project to be undertaken during the current year and financial allocation thereon,
c. A certificate, regarding the genuineness of the activities undertaken during the previous year, from the Ministry of Agriculture.