Section 35AC - Expenditure on eligible projects or schemes - Income-tax Act, 1961

1 [Expenditure on eligible projects or schemes. 35AC. (1) Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year : Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme. (2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate- (a) where the payment is to a public sector company or a local authority or an association or institution referred to in sub-section (1), from such public sector company or local authority or, as the case may be, association or institution; (b) in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288, in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed. 2 [Explanation .-The deduction, to which the assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,- (a) the approval granted to such association or institution has been withdrawn; or (b) the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn. ] (3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year. 3 [ (4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently- (i) that 6 [ the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) ] is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or (ii) such association or institution, to which approval has been granted, has not furnished to 7 [ the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) ] , after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed, 8 [ the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) ] may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw the approval: Provided that a copy of the order withdrawing the approval shall be forwarded by 9 [ the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) ] to the Assessing Officer having jurisdiction over the concerned association or institution. (5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation , and subsequently- (i) the 10 [ the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) ] is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which such project or scheme was notified; or (ii) a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed, such notification may be withdrawn in the same manner in which it was issued: Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the 11 [ the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) ] to the concerned association, institution, public sector company or local authority, as the case may be: Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority, as the case may be, carrying on such eligible project or scheme. ] 4 [ (6) Notwithstanding anything contained in any other provision of this Act, where- (i) the approval of the National Committee, granted to an association or institution, is withdrawn under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution under sub-section (5); or (ii) a company has claimed deduction under the proviso to sub-section (1) in respect of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee 12 [ or the Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption), as the case may be, ] under sub-section (5), the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub-section (2) or the deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year. ] 5 [ (7) No deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018. ] Explanation .-For the purposes of this section,- (a) National Committee means the Committee constituted by the Central Government, from amongst persons of eminence in public life, in accordance with the rules made under this Act; (b) eligible project or scheme means such project or scheme for promoting the social and economic welfare of, or the uplift of, the public as the Central Government may, by notification in the Official Gazette, specify in this behalf on the recommendations of the National Committee .] -------------------------------- Notes :- 1. Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 2. Inserted by the Taxation Laws (Amendment) Act, 2006, w.r.e.f . 1-4-2006. 3. Substituted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Prior to their substitution, sub-sections (4) and (5), as inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, read as under : (4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted, it may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw the approval. (5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation and subsequently the National Committee is satisfied that the project or the scheme is not being carried out in accordance with all or any of the conditions subject to which such project or scheme was notified, such notification may be withdrawn in the same manner in which it was issued : Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the concerned association, institution, public sector company or the local authority, as the case may be. 4 . Inserted by the Finance Act, 2002, w.e.f. 1-4-2003. 5. Inserted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017 6. Substituted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020 before it was read as Committee 7. Substituted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020 before it was read as National Committee 8. Substituted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020 before it was read as National Committee 9. Substituted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020 before it was read as National Committee 10. Substituted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020 before it was read as National Committee 11. Substituted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020 before it was read as National Committee 12. Inserted vide THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 dated 29-09-2020 w.e.f. 01-11-2020