Schedule-22 - DEFERRED REVENUE EXPENDITURE ALLOWANCE - Direct Taxes Code, 2010

THE TWENTY-SECOND SCHEDULE [See section 37(5)314(44)(a),(64)(a)] DEFERRED REVENUE EXPENDITURE ALLOWANCE 1. The deferred revenue expenditure allowance for a financial year, in respect of an expenditure of the nature specified in column (2) of the Table given below, shall be the amount equal to the appropriate fraction of the amount of such expenditure. 2. The appropriate fraction referred to in paragraph 1 shall be the fraction, the numerator of which is one and the denominator of which is the total number of the financial years specified in column (3) of the said Table against the relevant deferred revenue expenditure. 3. The deferred revenue expenditure allowance shall be allowable for such number of consecutive financial years as specified in column (3) of the said Table against the relevant deferred revenue expenditure, the first such financial year of allowability being — (a) in case of expenditure at serial numbers 1, 2, 3 and 5, the year in which such amount is actually paid; (b) in case of expenditure at serial number 4, the year in which business reorganisation takes place; (c) in case of expenditure at serial number 6, the year in which the loss referred to therein has been incurred; (d) in case of expenditure at serial number 7, the year of commencement of the business or extension of the business or setting up of new business, as the case may be. 4. The total amount of deferred revenue expenditure allowable under clause (e) of sub-section (1) of section 37 shall be the aggregate of the amounts under this Schedule. TABLE Serial Number Nature of deferred revenue expenditure Number of number financial years for which expenditure is allowable (1) (2) (3) 1 Non-compete fee 6 2 Premium for obtaining any asset on lease or rent 6 3 Amount paid to an employee in connection with his 6 voluntary retirement in accordance with any scheme of voluntary retirement. 6 4 Expenditure incurred by an Indian company wholly and 6 exclusively for the purposes of business reorganisation 6 5 Expenditure incurred by a person resident in India wholly 10 and exclusively on any operations relating to prospecting for any mineral or the development of a mine or other natural deposit of any mineral, to such extent, as may be prescribed. 10 6 Any loss on account of forfeiture of any agreement entered 6 in the course of the business. 6 7 Any preliminary expenditure incurred (a) before the commencement of the business; or (b) in connection with the extension of the business; or (c) in connection with the setting up of new business, shall be such as may be prescribed having regand to the capital employed in the business and the cost of the project. 6 STATEMENT OF OBJECTS AND REASONS The Income-tax Act, 1961, has been subjected to numerous amendments since its passage fifty years ago. It has been considerably revised, not less than thirty-four times, by amendment Acts besides the amendments carried out through the annual Finance Acts. These amendments were necessitated by policy changes due to the changing economic environment, increasing sophistication of commerce, increase in international transactions as a result of globalisation, development of information technology, attempts to minimise tax avoidance and in order to clarify the statute in relation to judicial decisions. As a result of all these amendments, the basic structure of the Income-tax Act has been over burdened and its language has become complex. Tax administrators, accountants and tax payers have raised concerns about the complex structure of the Income-tax Act. In particular, the numerous amendments have rendered the Act difficult to decipher by the average tax payer. The Wealth-tax Act, 1957 has also witnessed amendments. The Government, therefore, decided to revise, consolidate and simplify the language and structure of the direct tax laws. A draft Direct Taxes Code along with a Discussion Paper was released in August, 2009 for public comments. It proposed to replace the Income-tax Act, 1961 and the Wealth-tax Act, 1957 by a single Act, namely the Direct Taxes Code. Public and stakeholder feedback on the proposals outlined in these documents was analysed and suggestions for amendments received from members of the public, business associations and other bodies were taken into account. Thereafter, a Revised Discussion Paper addressing the major issues was released in June, 2010. The present Bill is the outcome of this process. The Notes on clauses explain in detail the various provisions contained in the Bill. PRANAB MUKHERJEE. NEW DELHI ; The 27th August, 2010