(i) the amount of any premium paid in respect of insurance against risk of damage or destruction of stocks or stores used for the purposes of the business or profession;
(ia) the amount of any premium paid by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society;
(ib) the amount of any premium paid by cheque by the assessee as an employer to effect or to keep in force an insurance on the health of his employees under a scheme framed in this behalf by the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 (57 of 1972) and approved by the Central Government;
Clause (ib) shall be substituted for the existing clause (ib) of sub-section (1) of Sec. 36 by the Finance Act, 2006 w.e.f. 1.4.2007 as below:
(ib) the amount of any premium paid by cheque by the assessee as an employer to effect or to keep in force an insurance on the health of his employees under a scheme framed in his behalf by:
(A) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government; or
(B) any other insurer and approved by the Insurance Regulatory and Development Authority established under subsection 1 of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).
(ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;
(iia) Omitted by the Finance Act, 1999, w.e.f. 1-4-2000.
(iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession.
Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.
Explanation: Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;
(iiia) the pro rata amount of discount on a zero coupon bond having regard to the period of life of such bond calculated in he 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 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) where any amount standing to the credit of the assessee in the special account or in the Deposit Account is released during any previous year by the National Bank or withdrawn by the assessee from the Deposit Account and such amount is utilized 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,
the whole of such amount so utilized shall be deemed to be the profits and gains of business of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year.
(5) Where any amount, standing to the credit of the assessee in the special account or in the 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 or in the Deposit Account is utilized by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme 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 or in the Deposit Account, which is released during any previous year by the National Bank or which is withdrawn by the assessee from the Deposit Account for being utilized by the assessee for the purposes of such business in accordance with the scheme or the deposit scheme is not so utilized, 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 utilized 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 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 otherwise 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 (1 of 1956); or
(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 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) ‘Coffee Board’ means the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942);
(aa) ‘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);
(ab) ‘Rubber Board’ means the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act, 1947 (24 of 1947);
(b) ‘Tea Board’ means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953).
(1) Where an assessee is carrying on business consisting of the prospecting for, or extraction or production of, petroleum or natural gas or both in India and in relation to which the Central Government has entered into an agreement with such assessee for such business, has before the end of the previous year.
a) deposited with the State Bank of India 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 Government of India in the Ministry of Petroleum and Natural Gas; or
b) deposited any amount in an account (hereafter in this section referred to as the Site Restoration Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Ministry referred to in clause (a) (hereafter in this section referred to as the deposit scheme),
the assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of
i. a sum equal to the amount or the aggregate of the amounts so deposited; or
ii. 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 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, or in the Site Restoration 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:
Provided also that any amount credited in the special account or the Site Restoration Account by way of interest shall be deemed to be a deposit.
(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 Site Restoration 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.
(4) Notwithstanding anything contained in sub-section (3), no deduction under sub-section (1) shall be allowed in respect of any amount utilized 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.
(5) Where any amount standing to the credit of the assessee in the special account or in the Site Restoration Account is withdrawn on closure of the account during any previous year by the assessee, the amount so withdrawn from the account, as reduced by the amount, if any, payable to the Central Government by way of profit or production share as provided in the agreement referred to in section 42, 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.
Explanation: Where any amount is withdrawn on closure of the account in a previous year in which the business carried on by the assessee is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.
(6) Where any amount standing to the credit of the assessee in the special account or in the Site Restoration Account is utilized by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme 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 or in the Site Restoration Account, which is released during any previous year by the State Bank of India or which is withdrawn by the assessee from the Site Restoration Account for being utilized by the assessee for the purposes of such business in accordance with the scheme or the deposit scheme is not so utilized, 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 utilized shall be deemed to be profits and gains of business and accordingly chargeable to income-tax as the income of that previous year.
(8) Where any asset acquired in accordance with the scheme 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 otherwise 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 (1 of 1956); or
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 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 may, if it considers necessary or expedient so to do, 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: For the purposes of this section,
a) ‘State Bank of India’ means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955);
b) the expression ‘amount standing to the credit of the assessee in the special account or the Site Restoration Account’ includes interest accrued to such accounts.
(1) 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 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 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 utilized in the manner laid down in sub-section (2):
Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the aggregate of the amounts of the paid-up share capital, the general reserves and amount credited to the share premium account of the assessee, no allowance under this sub-section shall be made in respect of such excess:
Provided further that for five assessment years commencing on or after the 1st day of April, 2001 and ending before the 1st day of April, 2006, the provisions of this sub-section shall have effect as if for the words ‘an amount not exceeding fifty per cent of profits’, the words ‘an amount not exceeding the profits’ had been substituted.
Provided also that no deduction shall be allowed under this section for any assessment year commencing on or after the 1st day of April, 2005.
(2) The amount credited to the reserve account under sub-section (1) shall be utilized 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 utilized; or
b) has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount not so utilized; 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 , other than in any scheme of demerger] 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.
(4) Where the ship is sold or otherwise transferred (other than in any scheme of demerger) after the expiry of the period specified in clause (c) of sub-section (3) and the sale proceeds are not utilized for the purpose of acquiring a new ship within a period of one year from the end of the previous year in which such sale or transfer took place, so much of such sale proceeds which represent the amount credited to the reserve account and utilized for the purposes mentioned in clause (c) of sub-section (3)] shall be deemed to be the profits of the assessment year immediately following the previous year in which the ship is sold or transferred.
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 of 1956) ;
(aa) ‘Government company’ shall have the meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956);
b) ‘new ship’ shall have the same meaning as in clause (ii) of sub-section.
(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section