LIVE GST Audit Course by CA Sachin Jain. Register Now!!

Financial instrument??

Amit Gupta (Loosening Myself) (1508 Points)

16 March 2010

What is included in financial instrument in case of sec 35(AD) of income tax act,1961.

Thanx

Reply
Follow
Share

9 Replies

Amit Gupta (Loosening Myself) (1508 Points)
Replied 16 March 2010

Originally posted by : Amit Gupta
	Hi What is included in financial instrument in case of sec 35(AD) of income tax act,1961. Thanx

Please Guys Its URGENT...waiting..

Amir (Learner) (4016 Points)
Replied 16 March 2010

Dear Amit,

The term financial instrument has not been defined in the Act so far.

Sec 35AD says this

any expenditure of capital nature shall not include any expenditure incurred on the acquisition of any land or goodwill or financial instrument.

Examples of Financial Instrument is like Cash, Cheques, DD, Fixed deposit, Shares, Debentures, Units, Derviates, options, and swaps

2 Like

Amit Gupta (Loosening Myself) (1508 Points)
Replied 16 March 2010

Hey Amir Thanx for info.

Is PATENTS are included in finacial instrument??

Amir (Learner) (4016 Points)
Replied 16 March 2010

Dear Amit,

I dont think that Patents can be covered under Financial Instruments...

But why Bhai, Do U feel that way?

Amit Gupta (Loosening Myself) (1508 Points)
Replied 16 March 2010

Hey Bro

one of my frnd has jst attended Jain sir amendment class..there he was told that...

Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 16 March 2010

Clause No. 13 of the Finance Bill, 2009 proposes to insert section 35AD in the Income-tax Act, 1961, allowing deduction for investment in specified industries.

As per sub-section (1) of the proposed section 35AD:

An assessee shall be allowed a deduction in respect of the whole of any expenditure of capital nature incurred, wholly and exclusively, for the purposes of any specified business carried on by him during the previous year in which such expenditure is incurred by him.

5. As per sub-section (1), eligible investment is ‘whole of any expenditure of capital nature incurred, wholly and exclusively, for the purpose of any specified business carried on by him during the previous year in which such expenditure is incurred by him.’ Deduction can be claimed in respect of any capital expenditure incurred for the specified business. The investment may be in tangible assets and intangible assets. However, as per sub-section 8(f), an assessee cannot claim deduction of certain expenditure even if incurred in respect of the specified activities: ‘any expenditure of capital nature shall not include any expenditure incurred in the acquisition of any land or goodwill or financial instrument’. The section has not defined as to what is capital expenditure. Hence, all the capital expenditures (subject to a small negative list) incurred in respect of a new business are deductible, e.g.:

(a) Tangible Assets - Building, plant & machinery, electrical equipment, pollution control equipment, electrical equipment, office equipment, furniture & fixtures, vehicles, computers, etc.

(b) Intangible Assets - Technical know-how, patents, copy right, trade mark, brand value, computer software, etc.

Of all the tangible assets, only ‘land’ is kept out of the purview of deduction. This is perhaps because depreciation is not allowed on land. It is debatable whether cost of land includes land development. Of the intangible assets ‘goodwill’ is kept out of allowing deduction under the section, whether the goodwill is purchased, acquired, or generated. The section does not allow deduction of ‘expenditure incurred towards financial instruments’. However, the Act has not defined as to what is ‘expenditure for financial instruments’. By usual business parlance, it is cost incurred towards issue of debentures, bonds, etc.