Amended and updated notes on section 34 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to conditions for depreciation allowance and development rebate.
Chapter IV (Sections 14 to 59) of the Income Tax Act 1961 deals with the provisions related to computation of total income. Section 34 of IT Act 1961-2023 provides for conditions for depreciation allowance and development rebate.
Recently, we have discussed in detail section 33B (rehabilitation allowance) of IT Act 1961. Today, we learn the provisions of section 34 of Income-tax Act 1961. The amended provision of section 34 is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 34 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-34: Conditions for Depreciation Allowance and Development Rebate
Sub-sections (1) and (2) was omitted.
Section 34(3) of Income Tax Act
(a) The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent of the development rebate to be actually allowed is debited to the profit and loss account of any previous year in respect of which the deduction is to be allowed under sub-section (2) of that section or any earlier previous year (being a previous year not earlier than the year in which the ship was acquired or the machinery or plant was installed or the ship, machinery or plant was first put to use) and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than—
- (i) for distribution by way of dividends or profits; or
- (ii) for remittance outside India as profits or for the creation of any asset outside India:
Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948), or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 :
Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall have effect in respect of such ship as if for the words “seventy-five”, the word “fifty” had been substituted.
(b) If any ship, machinery or plant 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 or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly:
Provided that this clause shall not apply—
- (i) where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958; or
- (ii) where the ship, machinery or plant 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 defined in section 617 of the Companies Act, 1956 (1 of 1956); or
- (iii) where the sale or transfer of the ship, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (3) or sub-section (4) of section 33.