Income Tax Act, 2025
Section 4: Ins. by Act 11 of 1983, s. 11 (w.e.f. 11983).
4. Ins. by Act 11 of 1983, s. 11 (w.e.f. 11983).
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before the 1st day of April, 1987, in any industrial undertaking referred to in sub-clause (i) or
sub-clause (ii) or sub-clause (iii) of clause (b) of sub-section (2), the provisions of sub-section (1)
shall have effect in relation to such machinery or plant as if for the words “twenty-five per cent.”,
the words “thirty-five per cent..” had been substituted.]
(3) Where the total income of the assessee assessable for the assessment year relevant to the
previous year in which the ship or aircraft was acquired or the machinery or plant was installed,
or, as the case may be, the immediately succeeding previous year (the total income for this
purpose being computed after deduction of the allowances under section 33 and section 33A, but
without making any deduction under sub-section (1) of this section or any deduction under
Chapter VI-A) is nil or is less than the full amount of the investment allowance,—
(i) the sum to be allowed by way of investment allowance for that assessment year under
sub-section (1) shall be only such amount as is sufficient to reduce the said total income
to nil; and
(ii) the amount of the investment allowance, to the extent to which it has not been
allowed as aforesaid, shall be carried forward to the following assessment year, and the
investment allowance to be allowed for the following assessment year shall be such amount
as is sufficient to reduce the total income of the assessee assessable for that assessment year,
computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any,
still outstanding shall be carried forward to the following assessment year and so on, so,
however, that no portion of the investment allowance shall be carried forward for more than
eight assessment years immediately succeeding the assessment year relevant to the previous
year in which the ship or aircraft was acquired or the machinery or plant was installed or, as
the case may be, the immediately succeeding previous year.
Explanation.—Where for any assessment year, investment allowance is to be allowed in
accordance with the provisions of this sub-section in respect of any ship or aircraft acquired or
any machinery or plant installed in more than one previous year, and the total income of the
assessee assessable for that assessment year (the total income for this purpose being computed
after deduction of the allowances under section 33 and section 33A, but without making any
deduction under sub-section (1) of this section or any deduction under Chapter VI-A) is less than
the aggregate of the amounts due to be allowed in respect of the assets aforesaid for that
assessment year, the following procedure shall be followed, namely:—
(a) the allowance under clause (ii) shall be made before any allowance under clause (i) is
made; and
(b) where an allowance has to be made under clause (ii) in respect of amounts carried
forward from more than one assessment year, the amount carried forward from an earlier
assessment year shall be allowed before any amount carried forward from a later assessment
year.
(4) The deduction under sub-section (1) shall be allowed only if the following conditions are
fulfilled, namely:—
(i) the particulars prescribed in this behalf have been furnished by the assessee in respect
of the ship or aircraft or machinery or plant;
(ii) an amount equal to seventy-five per cent. of the investment allowance to be actually
allowed is debited to the profit and loss account of 1[any previous year in respect of which the
deduction is to be allowed under sub-section (3) or any earlier previous year (being a
previous year not earlier than the year in which the ship or aircraft was acquired or the
1. Subs. by Act 12 of 1990, s. 7, for “the previous year in respect of which the deduction is to be allowed” (w.e.f. 11976).
159
machinery or plant was installed or the ship, aircraft, machinery or plant was first put to use)]
and credited to a reserve account (to be called the “Investment Allowance Reserve Account”)
to be utilised—
(a) for the purposes of acquiring, before the expiry of a period of ten years next
following the previous year in which the ship or aircraft was acquired or the machinery or
plant was installed, a new ship or a new aircraft or new machinery or plant [other than
machinery or plant of the nature referred to in clauses (a), (b) and (d) of 1[the second
proviso] to sub-section (1)] for the purposes of the business of the undertaking; and
(b) until the acquisition of a new ship or a new aircraft or new machinery or plant as
aforesaid, for the purposes of the business of the undertaking 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:
Provided that this clause shall have effect in respect of a ship as if for the word
“seventy-five”, the word “fifty” had been substituted.
Explanation.—Where the amount debited to the profit and loss account and credited to the
Investment Allowance Reserve Account under this sub-section is not less than the amount
required to be so credited on the basis of the amount of deduction in respect of investment
allowance claimed in the return made by the assessee under section 139, but a higher deduction in
respect of the investment allowance is admissible on the basis of the total income as proposed to
be computed by the 2[Assessing Officer] under section 143, the 2[Assessing Officer] shall, by
notice in writing in this behalf, allow the assessee an opportunity to credit within the time
specified in the notice or within such further time as the 2[Assessing Officer] may allow, a further
amount to the Investment Allowance Reserve Account out of the profits and gains of the previous
year in which such notice is served on the assessee or of the immediately preceding previous
year, if the accounts for that year have not been made up; and, if the assessee credits any further
amount to such account within the time aforesaid, the amount so credited shall be deemed to have
been credited to the Investment Allowance Reserve Account of the previous year in which the
deduction is admissible and such amount shall not be taken into account in determining the
adequacy of the reserve required to be created by the assessee in respect of the previous year in
which such further credit is made:
Provided that such opportunity shall not be allowed by the 2[Assessing Officer] in a case
where the difference in the total income as proposed to be computed by him and the total income
as returned by the assessee arises out of the application of the proviso to sub-section (1) of
section 145 or sub-section (2) of that section or the omission by the assessee to disclose his
income fully and truly.
(5) Any allowance made under this section in respect of any ship, aircraft, machinery or
plant shall be deemed to have been wrongly made for the purposes of this Act—
(a) if the ship, aircraft, 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; or
(b) if at any time before the expiry of ten years from the end of the previous year in
which the ship or aircraft was acquired or the machinery or plant was installed, the assessee
does not utilise the amount credited to the reserve account under sub-section (4) for the
purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than
or
sub-clause
or sub-clause
of clause
of sub-section
shall have effect in relation to such machinery or plant as if for the words “twenty-five per cent.”,
the words “thirty-five per cent..” had been substituted.]
Where the total income of the assessee assessable for the assessment year relevant to the
previous year in which the ship or aircraft was acquired or the machinery or plant was installed,
or, as the case may be, the immediately succeeding previous year (the total income for this
purpose being computed after deduction of the allowances under section 33 and section 33A, but
without making any deduction under sub-section
of this section or any deduction under
Chapter VI-A) is nil or is less than the full amount of the investment allowance,—
the sum to be allowed by way of investment allowance for that assessment year under
sub-section
shall be only such amount as is sufficient to reduce the said total income
to nil; and
the amount of the investment allowance, to the extent to which it has not been
allowed as aforesaid, shall be carried forward to the following assessment year, and the
investment allowance to be allowed for the following assessment year shall be such amount
as is sufficient to reduce the total income of the assessee assessable for that assessment year,
computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any,
still outstanding shall be carried forward to the following assessment year and so on, so,
however, that no portion of the investment allowance shall be carried forward for more than
eight assessment years immediately succeeding the assessment year relevant to the previous
year in which the ship or aircraft was acquired or the machinery or plant was installed or, as
the case may be, the immediately succeeding previous year.
Explanation.—Where for any assessment year, investment allowance is to be allowed in
accordance with the provisions of this sub-section in respect of any ship or aircraft acquired or
any machinery or plant installed in more than one previous year, and the total income of the
assessee assessable for that assessment year (the total income for this purpose being computed
after deduction of the allowances under section 33 and section 33A, but without making any
deduction under sub-section
of this section or any deduction under Chapter VI-A) is less than
the aggregate of the amounts due to be allowed in respect of the assets aforesaid for that
assessment year, the following procedure shall be followed, namely:—
the allowance under clause
shall be made before any allowance under clause
is
made; and
where an allowance has to be made under clause
in respect of amounts carried
forward from more than one assessment year, the amount carried forward from an earlier
assessment year shall be allowed before any amount carried forward from a later assessment
year.
The deduction under sub-section
shall be allowed only if the following conditions are
fulfilled, namely:—
the particulars prescribed in this behalf have been furnished by the assessee in respect
of the ship or aircraft or machinery or plant;
an amount equal to seventy-five per cent. of the investment allowance to be actually
allowed is debited to the profit and loss account of 1[any previous year in respect of which the
deduction is to be allowed under sub-section
or any earlier previous year (being a
previous year not earlier than the year in which the ship or aircraft was acquired or the
1. Subs. by Act 12 of 1990, s. 7, for “the previous year in respect of which the deduction is to be allowed” (w.e.f. 11976).
159
machinery or plant was installed or the ship, aircraft, machinery or plant was first put to use)]
and credited to a reserve account (to be called the “Investment Allowance Reserve Account”)
to be utilised—
for the purposes of acquiring, before the expiry of a period of ten years next
following the previous year in which the ship or aircraft was acquired or the machinery or
plant was installed, a new ship or a new aircraft or new machinery or plant [other than
machinery or plant of the nature referred to in clauses
and
of 1[the second
proviso] to sub-section
until the acquisition of a new ship or a new aircraft or new machinery or plant as
aforesaid, for the purposes of the business of the undertaking 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:
Provided that this clause shall have effect in respect of a ship as if for the word
“seventy-five”, the word “fifty” had been substituted.
Explanation.—Where the amount debited to the profit and loss account and credited to the
Investment Allowance Reserve Account under this sub-section is not less than the amount
required to be so credited on the basis of the amount of deduction in respect of investment
allowance claimed in the return made by the assessee under section 139, but a higher deduction in
respect of the investment allowance is admissible on the basis of the total income as proposed to
be computed by the 2[Assessing Officer] under section 143, the 2[Assessing Officer] shall, by
notice in writing in this behalf, allow the assessee an opportunity to credit within the time
specified in the notice or within such further time as the 2[Assessing Officer] may allow, a further
amount to the Investment Allowance Reserve Account out of the profits and gains of the previous
year in which such notice is served on the assessee or of the immediately preceding previous
year, if the accounts for that year have not been made up; and, if the assessee credits any further
amount to such account within the time aforesaid, the amount so credited shall be deemed to have
been credited to the Investment Allowance Reserve Account of the previous year in which the
deduction is admissible and such amount shall not be taken into account in determining the
adequacy of the reserve required to be created by the assessee in respect of the previous year in
which such further credit is made:
Provided that such opportunity shall not be allowed by the 2[Assessing Officer] in a case
where the difference in the total income as proposed to be computed by him and the total income
as returned by the assessee arises out of the application of the proviso to sub-section
of
section 145 or sub-section
of that section or the omission by the assessee to disclose his
income fully and truly.
Any allowance made under this section in respect of any ship, aircraft, machinery or
plant shall be deemed to have been wrongly made for the purposes of this Act—
if the ship, aircraft, 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; or
if at any time before the expiry of ten years from the end of the previous year in
which the ship or aircraft was acquired or the machinery or plant was installed, the assessee
does not utilise the amount credited to the reserve account under sub-section
for the
purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than