Dear ILAM Students,
In the recent budget announced by Finanace minister last week, Government of India ( GOI) has given fresh incentives for setting up cold chain and food warehouse facilities in the country so as to strengthen cold chain distribution system and much needed supply chain infrastructure of food items in India . The 35 AD Income tax provisions below are for your reference in this direction.
I am confident that this will open up new opportunities for employment of MBA/BBA students of Logistics and Supply Chain for fullfilling the lack of trained manpower in the Logistics Domain.
Regards
Prof. Akhil Chandra
In the recent budget announced by Finanace minister last week, Government of India ( GOI) has given fresh incentives for setting up cold chain and food warehouse facilities in the country so as to strengthen cold chain distribution system and much needed supply chain infrastructure of food items in India . The 35 AD Income tax provisions below are for your reference in this direction.
I am confident that this will open up new opportunities for employment of MBA/BBA students of Logistics and Supply Chain for fullfilling the lack of trained manpower in the Logistics Domain.
(A) Regarding the business of setting up and operating a cold chain facility:
The business of setting up and operating a cold chain facility is considered as a “specified business” for the purposes of section 35AD by virtue of provisions contained in sub-clause (i) of clause (c) of sub-section (8) of the section and so, the expenditure of capital nature incurred, wholly and exclusively, for the purpose of such business is allowable as a deduction. Specified percentage of profits of an undertaking engaged in the case of a business of setting up and operating a cold chain facility for agricultural produce is exempt under sub-section (11) of section 80-IB of the Act if the undertaking begins to operate on or after 1st day of April 1999 but before the 1st day of April, 2004. The period of exemption varies according to the status of the assessee. Thus, in respect of the aforesaid business, investment-linked deduction is available to an assessee under section 35AD and profit-linked deduction is available under section 80-IB.
As stated above, an assessee cannot claim dual benefits under the aforesaid two sections as per the proposed amendment to sub-section (3) of section 35AD. It is also clear that profit-linked deduction under section 80-IB is available to those undertakings who began to operate before 1st day of April, 2004 and so, new entrants to this business are not entitled to claim deduction under section 80-IB. But as the deduction under this section is available for ten consecutive years (or twelve consecutive years in case of a co-operative society), those assessees who commenced such business on or after 1st April, 2001 (or 1st April, 1999 in case of co-operative societies) may have remaining few years for which they are entitled to such deduction. But they also cannot switch over to claim benefits under section 35AD as the proposed amendments to Section 80A contain necessary restrictive provisions.
To conclude, an assessee carrying on the “business of setting up and operating a cold chain facility” does not have any choice either to claim deductions under section 35AD or under section 80-IB.
(B) Regarding the business of setting up and operating a warehousing facility for storage of agricultural produce:
The business of setting up and operating a warehousing facility for storage of agricultural produce is considered as a “specified business” for the purposes of section 35AD by virtue of provisions contained in sub-clause (ii) of clause (c) of sub-section (8) of the section and so, the expenditure of capital nature incurred, wholly and exclusively, for the purpose of such business is allowable as a deduction. Specified percentage of profits of an undertaking engaged in the case of a business of setting up and operating a cold storage plant is exempt under sub-section under clause (iii) of sub-section (2) of section 80-IB of the Act if the undertaking begins to operate such a plant at any time during the period beginning from 1st day of April 1991 and ending on the 31st day of March, 2005. Although the two activities of “warehousing” and that of a “cold storage plant” are not identical and overlap each other in some respects, in respect of the aforesaid business, investment-linked deduction may be claimed by an assessee under section 35AD and profit-linked deduction under section 80-IB.
As stated hereinabove, an assessee cannot claim dual benefits under the aforesaid two sections as per the proposed amendment to sub-section (3) of section 35AD. It is also clear that profit-linked deduction under section 80-IB is available to those undertakings who began to operate before 31st day of March, 2005 and so, new entrants to this business are not entitled to claim deduction under section 80-IB. But as the deduction under this section is available for ten consecutive years (or twelve consecutive years in case of a co-operative society), those assessees who commenced such business on or after 1st April, 2002 (or 1st April, 2000 in case of co-operative societies) may have remaining few years for which they are entitled to such deduction. But they also cannot switch over to claim benefits under section 35AD as the proposed amendments to Section 80A contain necessary restrictive provisions.
To conclude, an assessee carrying on the “business of setting up and operating a warehousing facility for storage of agricultural produce” does not have any choice either to claim deductions under section 35AD or under section 80-IB.
Prof. Akhil Chandra
