Income-tax Act : Development rebate 2. Indian Bare Acts :

Income-tax Act,1961

Act No : 43

Section : Development rebate 2.

33. Development rebate 2 3[(1)(a) In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in clause (b). (b) The sum refer-red to in clause (a) shall be,- (A) in the case of a ship, forty per cent of the actual cost thereof to the assessee; (B) in the case of machinery or plant,- (i) where the machinery or plant is installed for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule,- (a) thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970; (ii) where the machinery or plant is installed after the 31st day of March, 1967, by an assessee being an Indian company in premises used by it as a hotel and such hotel is for the time being approved in this behalf by the Central Government,- (a) thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970; (iii)where the machinery or plant is installed after the 31st day of March, 1967, being an asset representing expenditure of ---------------------------------------------------------------------- 1 The deduction in respect of development rebate has been discontinued in respect of ships acquired or machinery or plant installed after 31-5-1974. A special provision was made under section 16 of the Finance Act, 1974, as amended by section 30 of the Finance Act, 1975 allowing the deduction for the period 1-6-1974 to 31-5-1977 on the fulfilment of certain conditions. 3 Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Earlier, it was amended by the Income-tax (Amendment) Act, 1963, w.e.f. 1-4-1963; the Finance Act, 1965 and the Finance (No. 2) Act, 1965, both with effect from 1-4-1965. ---------------------------------------------------------------------- 1.182 a capital nature on scientific research related to the business carried on by the assessee,- (a) thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and, (b) twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970; (iv) in any other case,- (a) twenty per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) fifteen per cent of such cost, where it is installed after the 31st day of March, 1970.] 1[(1A)(a) An assessee who, after the 31st day of March, 1964, acquires any ship which before the date of acquisition by him was used by any other person shall, subject to the provisions of section 34, also be allowed as a deduction a sum by way of development rebate at such rate or rates as may be prescribed, provided that the following conditions are fulfilled, namely:- (i) such ship was not previous to the date of such acquisition owned at any time by any person resident in India; (ii) such ship is wholly used for the purposes of the business carried on by the assessee; and (iii) such other conditions as may be prescribed. (b) An assessee who installs any machinery or plant (other than office appliances or road transport vehicles) which before such installation by the assessee was used outside India by any other person shall, subject to the provisions of section 34, also be allowed as a deduction a sum by way of development rebate at such rate or rates as may be prescribed, provided that the following conditions are fulfilled, namely:- (i) such machinery or plant was not used in India at any time previous to the date of such installation by the assessee; (ii) it is imported in India by the assessee from any country outside India; (iii) no deduction on account of depreciation or development rebate in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee; (iv) such machinery or plant is wholly used for the purposes of the business carried on by the assessee; and (v) such other conditions as may be prescribed. (c) The development rebate under this sub-section shall be allowed as a deduction in respect of the previous year in which the ship was acquired ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. See rule 5B. ----------------------------------------------------------------------- 1.183 or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year.] (2) In the case of a ship acquired or machinery or plant installed after the 31st day of December, 1957, where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed or the immediately succeeding previous year, as the case may be, (the total income for this purpose being computed without making any allowance under sub-section (1) 1[or sub-section (1A)] 2[of this section or sub-section (1) of section 33A] 3[or any deduction under Chapter VI-A 4[* * *]]) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under 5[sub-section (1) or sub-section (1A), as the case may be],- (i) the sum to be allowed by way of development rebate for that assessment year under sub-section (1) 6[or sub-section (1A)] shall be only such amount as is sufficient to reduce the said total income to nil; and (ii) the amount of the development rebate, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development rebate to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall be carried forward to the following assessment year and so on, so however, that no portion of the development rebate shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed or the immediately succeeding previous year, as the case may be. Explanation.-Where for any assessment year development rebate is to be allowed in accordance with the provisions of sub-section (2) in respect of ships acquired or machinery or plant installed in more than one previous year, and the total income of the assessee assessable for that assessment year (the total income for this purpose being computed without making any allowance under sub-section (1) 7[or sub-section (1A)] 8[of this section or sub-section (1) of section 33A] 9[or any deduction under Chapter VI-A 10[* * *]]) is less than the aggregate of the amounts ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 2 Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 3 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. 4 The words "or section 280-O" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. 5 Substituted for 'that sub-section' by the Finance Act, 1964, w.e.f. 1-4-1964. 6 Inserted, ibid. 7 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 8 Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 9 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. 10 The words "or section 280-O" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. ------------------------------------------------------------------------ 1.184 due to be allowed in respect of the assets aforesaid for that assessment year, the following procedure shall be followed, namely-- (i) the allowance under clause (ii) of sub-section (2) shall be made before any allowance under clause (i) of that sub-section is made; and (ii) where an allowance has to be made under clause (ii) of sub-section (2)in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year. 1[(3) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any ship, machinery or plant in respect of which development rebate has been allowed to the amalgamating company under sub-section (1) or sub- section (1A),- (a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) of section 34 in respect of the reserve created by the amalgamating company and in respect of the period within which such ship, machinery or plant shall not be sold or otherwise transfer- red and in default of any of these conditions, the provisions of sub-section (5) of section 155 shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and (b) the balance of development rebate, if any, still outstanding to the amalgamating company in respect of such ship, machinery or plant shall be allowed to the amalgamated company in accordance with the provisions of sub-section (2), so, however, that the total period for which the balance of development rebate shall be carried for-ward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the amalgamated company shall be treated as the assessee in respect of such ship, machinery or plant for the purposes of this section and section 34.] (4) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any ship, machinery or plant, the provisions of clauses (a) and (b) of sub-section (3) shall, so far as may be, apply to the firm and the company. Explanation.-The provisions of this clause shall apply only where- (i) all the property of the firm relating to the business immediately before the succession becomes the property of the company; (ii) all the liabilities of the firm relating to the business immediately before the succession become the liabilities of the company; and (iii) all the shareholders of the company were partners of the firm immediately before the succession. ---------------------------------------------------------------------- 1 Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. Earlier, it was amended by the Finance Act, 1964, w.e.f. 1-4-1964 and the Finance Act, 1966, w.e.f. 1-4-1966. ----------------------------------------------------------------------- 1.185 1[(5) The Central Government, if it considers it necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed in respect of a ship acquired or machinery or plant installed after such date, not being earlier than three years from the date of such notification, as may be specified therein.] 2[(6) Notwithstanding anything contained in the foregoing provisions of this section, no deduction by way of development rebate shall be allowed in respect of any machinery or plant installed after the 31st day of March, 1965, in any office premises or any residential accommodation, including any accommodation in the nature of a guest house:] 3[Provided that the provisions of this sub-section shall not apply in the case of an assessee being an Indian company, in respect of any machinery or plant installed by it in premises used by it as a hotel, where the hotel is for the time being approved in this behalf by the Central Government.) 4 [33A. Development allowance 5 (1) In respect of planting of tea bushes on any land in India owned by an assessee who carries on business of growing and manufacturing tea in India, a sum by way of development allowance equivalent to- (i) where tea bushes have been planted on any land not planted at any time with tea bushes or on any land which had been previously abandoned, 6[fifty] per cent of the actual cost of planting; and (ii) where tea bushes are planted in replacement of tea bushes that have died or have become permanently useless on any land already planted , 7[thirty] per cent of the actual cost of planting, shall, subject to the provisions of this section, be allowed as a deduction 8[in the manner specified hereunder, namely- (a) the amount of the development allowance shall, in the first instance, be computed with reference to that portion of the actual cost of planting which is incurred during the previous year in which the land is prepared for planting or replanting, as the case may be, and in the previous year next following, and the amount so computed shall be allowed as a deduction in respect of such previous year next following; and (b) thereafter, the development allowance shall again be computed with reference to the actual cost of planting, and if the sum so computed exceeds the amount allowed as a deduction under clause ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 2 Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 3 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. 4 Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 5 The allowance under this section will not be available in respect of planting not completed before 1 April, 1990: see first proviso to sub-section (1). 6 Substituted for 'forty' by the Finance Act, 1966, w.e.f. 1-4- 1966. 7 Substituted for "twenty", ibid. 8 Substituted for 'in respect of the third succeeding previous year next following the previous year in which the land is prepared for planting or replanting, as the case may be', ibid. ----------------------------------------------------------------------- 1.186 (a), the amount of the excess shall be allowed as a deduction in respect of the third succeeding previous year next following the previous year in which the land has been prepared for planting or replanting, as the case may be:] 1[Provided that no deduction under clause (i) shall be allowed unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1990: Provided further that no deduction shall be allowed under clause (ii) unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1970.] (2) Where the total income of the assessee assessable for the assessment year relevant to 2[the previous year in respect of which the deduction is required to be allowed under sub-section (1)] 3[(the total income for this purpose being computed after deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A 4[* * *])] is nil or less than the full amount of the development allowance calculated at the rates 5[and in the manner] specified in sub-section (1),- (i) the sum to be allowed by way of development allowance for that assessment year under sub-section (1) shall be only such amount as is sufficient to reduce the said total income to nil; and (ii) the amount of the development allowance, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development allowance to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the development allowance, if any, still outstanding shall be carried forward to the following assessment year and so on, so, however, that no portion of the development allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year in which the deduction was first allowable. Explanation.-Where for any assessment year development allowance is to be allowed in accordance with the provisions of sub-section (2) in ---------------------------------------------------------------------- 1 Substituted by the Finance Act, 1990, w.e.f. 1-4-1990. Prior to the substitution, the proviso read as under: "Provided that no deduction under clause (i) shall be allowed unless the planting has commenced after the 31st day of March, 1965, and no deduction shall be allowed under clause (ii) unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1970." 2 Substituted for "the third succeeding previous year next following the previous year in which the land has been prepared" by the Finance Act, 1966, w,e.f. 1-4-1966. 3 Substituted for "(the total income for this purpose being computed after making the allowance under sub-section (1) or sub- section (1A) or clause (ii) of sub-section (2) of section 33 but without making any allowance under sub-section (1) of this section)" by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 4 The words "or section 280-0" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. 5 Inserted by the Finance Act, 1966, w.e.f. 1-4-1966. ----------------------------------------------------------------------- 1.187 respect of more than one previous year, and the total income of the assessee assessable for that assessment year 1[(the total income for this purpose being computed after deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A 2[* * *])] is less than the amount of the development allowance due to be made in respect of that assessment year, the following procedure shall be followed, namely- (i) the allowance under clause (ii) of sub-section (2) of this section shall be made before any allowance under clause (i) of that sub-section is made; and (ii) where an allowance has to be made under clause (ii) of sub-section (2) of this section in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year. 3(3) The deduction under sub-section (1) shall be allowed only if the following conditions are fulfilled, namely,- (i) the particulars prescribed in this behalf have been furnished by the assessee; (ii) an amount equal to seventy-five per cent of the development allowance to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during the period of eight years next following for the purposes of the business of the undertaking, other than- (a) for distribution by way of dividends or profits; or (b) for remittance outside India as profits or for the creation of any asset outside India; and (iii) such other conditions as may be prescribed. (4) If any such land is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which the deduction under sub- section (1) was allowed, any allowance under this section shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5A) of section 155 shall apply accordingly: Provided that this sub-section shall not apply- (i) where the land is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act, or a Government company as ---------------------------------------------------------------------- 1 Substituted for (the total income for this purpose being computed after making the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33 but without making any allowance under sub-section (1) of this section)" by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. 2 The words "or section 280-O" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. ---------------------------------------------------------------------- 1.188 defined in section 617 of the Companies Act, 1956 1 (1 of 1956); or (ii) where the sale or transfer of the land is made in connection with the amalgamation or succession referred to in sub-section (5) or sub-section (6). 2[(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any land in respect of which development allowance has been allowed to the amalgamating company under sub-section (1),- (a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) in respect of the reserve created by the amalgamating company and in respect of the period within which such land shall not be sold or other- wise transferred and in default of any of these conditions, the provisions of sub-section (5A) of section 155 shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and (b) the balance of development allowance, if any, still outstanding to the amalgamating company in respect of such land shall be allowed to the amalgamated company in accordance with the provisions of sub-section (2), so, however, that the total period for which the balance of development allowance shall be carried forward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the amalgamated company shall be treated as the assessee in respect of such land for the purposes of this section.] (6) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any land on which development allowance has been allowed, the provisions of clauses (a) and (b) of sub-section (5), shall, so far as may be, apply to the firm and the company. Explanation.-The provisions of this sub-section shall apply if the conditions laid down in the Explanation to sub-section (4) of section 33 are fulfilled. (7) For the purposes of this section, "actual cost of planting" means the aggregate of- (i) the cost of preparing the land; (ii) the cost of seeds, cutting and nurseries; (iii) the cost of planting and replanting; and (iv) the cost of upkeep thereof for the previous year in which the land has been prepared and the three successive previous years next following such previous year, reduced by that portion of the cost, if any, as has been met directly or indirectly by any other person or authority: ----------------------------------------------------------------------- 2 Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. ----------------------------------------------------------------------- 1.189 1[Provided that where such cost exceeds- (i) forty thousand rupees per hector in respect of land situated in a hilly area comprised in the district of Darjeeling; or (ii) thirty-five thousand rupees per hector in respect of land situated in a hilly area comprised in an area other than the district of Darjeeling; or (iii) thirty thousand rupees per hector in any other area, then, the excess shall be ignored. Explanation.-For the purposes of this proviso, "district of Darjeeling" means the district of Darjeeling as on the 28th day of February, 1981, being the date of introduction of the Finance Bill, 1981, in the House of the People.] (8) The Board may, having regard to the elevation and topography, by general or special order, declare any areas to be hilly areas for the purposes of this section' and such order shall not be questioned before any court of law or any other authority. 2[Explanation.-For the purposes of this section, an assessee having a leasehold or other right of occupancy in any land shall be deemed to own such land and where the assessee transfers such right, he shall be deemed to have sold or otherwise transferred such land.] 4 [33AB. Tea Development Account (1) Where an assessee carrying on business of growing and ----------------------------------------------------------------------- 1 Substituted by the Finance Act, 1981, w.e.f. 1-4-1982. 3 Inserted by the Finance Act, 1975, w.r.e.f. 1-4-1965. 4 Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Prior to the substitution, section 33AB, as inserted by the Finance Act, 1985, w.e.f. 1-4-1986 and amended by the Finance Act, 1987, w.e.f. 1-4-1988, read as under: "33AB. Tea development account.-(1) Where an assessee carrying on business of growing and manufacturing tea in India has, during the previous year, deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board, the assessee shall, subject to the provisions of this section, be allowed a deduction of- (a) a sum equal to the amount or the aggregate of the amounts so deposited during the previous year, or (b) a sum equal to twenty per cent of the profits of such business (computed under the head 'Profits and gains of business or profession' before making any deduction under this section), whichever is less. Explanation.-In this section,- (a) 'National Bank' means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); (b) 'Tea Board' means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953). (2) Where the amount or the aggregate of the amounts deposited by the assessee in the special account during the previous year exceeds the sum allowable as deduction under sub-section (1), the excess shall be treated, for the purposes of that sub- ---------------------------------------------------------------------- 1.190 manufacturing tea in India has, before the expiry of six months from the end of the previous year or before furnishing the return of his income, 1[whichever is earlier,- (a) deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board; or (b) deposited any amount in an account (hereafter in this section referred to as the Tea Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board (hereafter in this section referred to as the deposit scheme) with the previous approval of the Central Government, the assessee shall, subject to the provisions of this section,] be allowed a deduction (such deduction being allowed before the loss, if any, brought for-ward from earlier years is set off under section 72) of- (a) a sum equal to the amount or the aggregate of the amounts so deposited; or (b) a sum equal to twenty per cent of the profits of such business (computed under the head "Profits and gains of business or profession" before making any deduction under this section), whichever is less: Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the ---------------------------------------------------------------------- -> section, as a deposit made by the assessee in the next following previous year. (3) Where any amount standing to the credit of the assessee in the special account is utilised by the assessee for the purposes of the business referred to in sub-section (1) in accordance with the scheme,- (a) for acquiring any asset being building, machinery, plant or furniture, the actual cost of such asset as determined under clause (1) of section 43, shall for the purposes of this Act, be reduced by the amount so utilised; (b) for incurring any expenditure for the purposes of such business, such expenditure shall be reduced by the amount so utilised and the resultant sum, if any, shall be taken into account for the purposes of this Act. (4) Where any amount, standing to the credit of the assessee in the special account, which is released during any previous year by the National Bank for being utilised by the assessee for the purposes of the business referred to in sub-section (1) in accordance with the scheme is not so utilised, either wholly or in part, within that previous year, the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be profits and gains of business and accordingly chargeable to income-tax as the income of that previous year. (5) The provisions of this section shall apply in relation to the assessment years commencing on the 1st day of April, 1986 and the 1st day of April, 1987." 1 Substituted for the following by the Finance Act, 1994, w.e.f. 1- 4-1995: whichever is earlier, deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board, the assessee shall, subject to the provisions of this section," ----------------------------------------------------------------------- 1.191 case may be, any member of such firm, association of persons or body of individuals: Provided further that where any deduction, in respect of any amount deposited in the special account 1[or in the Tea Deposit Account], has been allowed under this sub-section in any previous year, no deduction shall be allowed in respect of such amount in any other previous year. 2(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income the report of such audit in the prescribed form duly signed and verified by such accountant: Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section. (3)Any amount standing to the credit of the assessee in the special account '(or the Tea Deposit Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the case may be, in the deposit scheme] or in the circumstances specified below:- (a) closure of business; (b) death of an assessee; (c) partition of a Hindu undivided family; (d) dissolution of a firm; (e) liquidation of a company. (4) Notwithstanding anything contained in sub-section (3), no deduction under sub-section (1) shall be allowed in respect of any amount utilised for the purchase of- (a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house; (b) any office appliances (not being computers); (c) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any one previous year; (d) any new machinery or plant to be installed in an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule. ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. 3 Substituted for 'shall not be allowed to be withdrawn except for the purposes specified in the scheme' by the Finance Act, 1994, w.e.f. 1-4-1995. ----------------------------------------------------------------------- 1.192 (5) Where any amount standing to the credit of the assessee in the special account 1[or in the Tea Deposit Account], is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (3), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved. (6) Where any amount standing to the credit of the assessee in the special account 2[or in the Tea Deposit Account] is utilised by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme 3[or the deposit scheme], such expenditure shall not be allowed in computing the income chargeable under the head "Profits and gains of business or profession". (7) Where any amount, standing to the credit of the assessee in the special account 4[or in the Tea Deposit Account], which is released during any previous year by the National Bank 5[or which is withdrawn by the assessee from the Tea Deposit Account] for being utilised by the assessee for the purposes of such business in accordance with the scheme 6[or the deposit scheme] is not so utilised, either wholly or in part, within that previous year, the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be profits and gains of business and accordingly chargeable to income-tax as the income of that previous year: Provided that this sub-section shall not apply in a case where such amount is released during any previous year at the closure of the account in circumstances specified in clauses (b), (c) and (e) of sub- section (3). (8) Where any asset acquired in accordance with the scheme 7[or the deposit scheme] is sold or otherwise transferred in any previous year by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year: Provided that nothing in this sub-section shall apply- (i) where the asset is sold or other-wise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 8 (1 of 1956); or ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f 1-4-1995. 2 ]bid. ------------------------------------------------------------------------ 1.193 (ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme 8[or the deposit scheme] continues to apply to the company in the manner applicable to the firm. Explanation.-The provisions of clause (ii) of the proviso shall apply only where- (i) all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company; (ii) all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company; and (iii)all the shareholders of the company were partners of the firm immediately before the succession. (9) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed after such date as may be specified therein. Explanation.-In this section,- (a.) "National Bank" means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); (b) "Tea Board" means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953). 2[33AC. Reserves for shipping business (1) 3[In the case of an assessee, being 4[a Government company or] a public company formed and registered in India with the main object of carrying on the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of' an amount, not exceeding the total income (computed before making any deduction under this section and Chapter VI-A), as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised in the manner laid down in sub- section (2):] ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995 2 Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990. 3 Being substituted by "In the case of an assessee, being a Government company or a public company formed and registered in India with the main object of carrying oil the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount not exceeding fifty per cent of profits derived from the business of operation of ships (computed under the head "Profits and gains of business or profession" and before making any deduction under this section), as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account, to be utilised in the manner laid down in subsection (2):" by the Finance Act, 1995, w.e.f. 1-4-1996. 4 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. ---------------------------------------------------------------------- 1.194 Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid-up share capital (excluding the amounts capitalised from reserves) of the assessee, no allowance under this sub-section shall be made in respect of such excess. (2) The amount credited to the reserve account under sub-section (1) shall be utilised by the assessee before the expiry of a period of eight years next following the previous year in which the amount was credited- (a) for acquiring a new ship for the purposes of the business of the assessee; and (b) until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. (3) Where any amount credited to the reserve account under sub- section (1),- (a) has been utilised for any purpose other than that referred to in clause (a) or clause (b) of sub-section (2), the amount so utilised; or (b) has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount not so utilised; or (c) has been utilised for the purpose of acquiring a new ship as specified in clause (a) of sub-section (2), but such ship is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, the amount so utilised in acquiring the ship, shall be deemed to be the profits,- (i) in a case referred to in clause (a), in the year in which the amount was so utilised; or (ii) in a case referred to in clause (b), in the year immediately following the period of eight years specified in sub-section (2); or (iii) in a case referred to in clause (c), in the year in which the sale or transfer took place, and shall be charged to tax accordingly. Explanation.-For the purposes of this section,- (a) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956 1 (1 of 1956); 2[(aa) "Government company" shall have the meaning assigned to it in section 617 of the Companies Act, 19563;] (b) "new ship" shall have the same meaning as in clause (ii) of sub-section (2) of section 32AB.] -------------------------------------------------------------------- 2 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. ---------------------------------------------------------------------- 1.195 1[33B. Rehabilitation allowance 2 Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of- (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or (ii) riot or civil disturbance; or (iii) accidental fire or explosion; or (iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so re-established, reconstructed or revived be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty per cent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged or destroyed: 3[Provided that no deduction under this section shall be allowed in relation to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year.] Explanation.-In this section, "industrial undertaking" means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.]