EXEMPTION OF SKILL DEVELOPMENT TO COMPANY , SEC 35CCD An Analysis of Rules 6AAH, 6AAF,6AAG

[CFAShobhit SRIVASTAVA]

Most People have Question , whether this Exemption is available to skill Development company who is TP of NSDC? 

Ans. Yes because it is cover in Specified services.

Whether Any company can take skill development Initiative under 35CCD ?

Ans. Yes but it have to be Manufacturing company and do only notified project by CBDT , why CBDT because IT have to give tax exemption but project should be notified by NSDA.

Only Company can take the benefit , Non resident company cannot obtain any benefit from this section. Form No. 3CQ have to submit to NSDA and its, copy with Commissioner or Director of Income tax as per your jurisdiction approval.

After obtaining approval you can take the benefit.

Guidelines are given here under :

The National Manufacturing Policy (NMP) 2011 proposed to provide inter alia, the following direct taxes incentives to promote skill development:

“Weighted deduction of 150% of the expenditure (other than land or building) incurred in Public Private Partnership (PPP) projects for skill development in manufacturing sector in separate facilities in coordination with National Skill Development Corporation (NSDC).”

            As a follow-up of NMP, the Finance Act, 2012 inserted a new Section 35CCD in the Income-tax Act,1961(‘the Act’) which provides that for computing business income, a company shall be allowed a weighted deduction of 150% of expenses (other than land or building) incurred on skill development project notified by the Board in accordance with the guidelines as may be prescribed.

            The guidelines for approval of skill development project are prescribed in new Rules 6AAF, 6AAG and 6AAH inserted in the Income-tax Rules, 1962 by Notification No. S.O.2166 (E) dated 15^th July, 2013.  The salient features of the guidelines are as under:

• A company engaged in the business of manufacturing any article or thing (other than alcoholic spirits and tobacco products) or engaged in providing specified services, as listed under Rule 6AAH, shall be eligible for weighted deduction of the expenditure incurred on skill development.
• The project should be undertaken in separate facilities in a training institute set up by the Central or State Government or a local authority or a training institute affiliated to National Council for Vocational Training (NCVT) or State Council for Vocational Training (SCVT). Besides Government training institutes, private sector training institutes affiliated to NCVT or SCVT shall also be eligible.
• National Skill Development Agency (NSDA) shall be the nodal agency to scrutinize the applications made by eligible companies in Form No. 3CQ. The Central Board of Direct Taxes (CBDT) shall notify the skill development project based on the recommendation of NSDA in this regard.
• All expenses (not being expenditure in the nature of cost of any land or building), incurred wholly and exclusively for undertaking a notified skill development project shall be eligible for deduction under section 35CCD, except the expenditure which is reimbursed or reimbursable to the company by any person, whether directly or indirectly.
• The company undertaking skill development project shall be required to maintain separate books of account of the project notified under section 35CCD and get such books of account audited.
• It is intended that the skill development project shall provide training to potential employees or newly recruited employees. Skill development of existing employees of the company shall not be eligible for notification under section 35CCD, if the training of such employees commences after six months of their recruitment.

Discussions to this article

[Joseph Charles]

Is the list of the notified skill development projects available in public domain? As per the Rule 6AAF, the same is to published in the Official Gazette. However on a search, no skill development project is notified as per the section 35CCD and the related rules.