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Unit 9: Income under the Head Business and Profession

5. The research and development facility is approved by the prescribed authority. Notes
6. The taxpayer gets audit of the accounts maintained for such a facility.
Amount of deduction: If all the above conditions are satisfied, then a sum equal to
one and one-half times of the expenditure so incurred shall be allowed as deduction.

5. Amortisation of preliminary expenses: Certain preliminary expenses are deductible under
section 35D.
Who can claim deduction: Deduction under section 35D is available in case of an Indian
company or a resident non-corporate assessee. A foreign company even if it is resident in
India, cannot claim any deduction under section 35D.
Time and purpose of preliminary expenses: Expenses incurred at the following two stages are
qualified for deduction under section 35D:

Table 9.4: Expenses Qualifying for Deductions under Section 35D

When expenses are incurred Why expenses are incurred
1. Before commencement of business For setting up any undertaking or business
2. After commencement of business In connection with extension of an industrial
undertaking or in connection with setting up a
new industrial unit

Did u know? Deduction under section 35D is not available in respect of expenditure incurred
after commencement of business if such expenditure is incurred in connection with extension
of (or setting up) a non-industrial undertaking.
Qualifying expenditure: The heads of qualifying expenditure are the following:
Expenditure in connection with preparation of feasibility report, preparation of
project report, conducting a market survey (or any other survey necessary for the
business of the assessee), etc.
Legal charges for drafting any agreement.
Legal charges for drafting the memorandum and articles of association.
Printing expenses of the memorandum and articles of association.

Registration fees of a company under the provisions of the Companies Act.
Expenses in connection with the public issue of shares or debentures of a company,
underwriting commission, brokerage and charges for drafting, typing, printing and
advertisement of the prospectus.

Any other expenditure, which is prescribed.
Qualifying expenditure - Maximum ceiling: The aggregate expenditure cannot exceed the
following:

Table 9.5: Maximum Ceiling on Expenditure

In the case of a corporate assessee In the case of a non-corporate assessee
a. 5 per cent of cost of project; or 5 per cent of cost of project
b. 5 per cent of capital employed, whichever
is more

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