• Harmehak Kaur Anand

Section 34A of the Income Tax Act, 1961

#section34A

#incometax

#restriction

#unabsorbeddepreciation

#unabsorbedinvestmentallowance


Section 34A of the Income Tax Act, 1961 provides for restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period in case of certain domestic companies.


34A (1)

When determining a domestic company's profits and gains for the previous year related to the assessment year beginning on April 1, 1992, where the unabsorbed depreciation allowance, or unabsorbed investment allowance, or both in connection to any previous year related to the assessment year beginning on or before April 1, 1991, shall be given effect, the deduction shall be limited to two-thirds of such allowance. The balance is dealt with in the following manner:

  • Depreciation Allowance

When it comes to depreciation allowance, it should be added to the allowance for the previous year to the assessment year beginning on April 1, 1993 and considered a part of that allowance. If there is no allowance for that year, it should be considered the allowance for that year, and so on for the following previous years.

  • Investment Allowance

If it relates to an investment allowance, it will be carried forward to the assessment year beginning on April 1, 1993. Any remaining investment allowance will be carried forward to the subsequent assessment year, and if the period of eight years has ended without the portion of the balance being adjusted, the period will be extended beyond eight years until the portion of the balance is absorbed in the profit.


34A (2)

The provisions of section 32 (2) and section 32A (3) shall apply for the assessment year beginning on April 1, 1992, to the extent that they are not inconsistent with the provisions of section 32A (1).


34A (3)

In case a domestic company's unabsorbed investment allowance, unabsorbed depreciation allowance, or the aggregate amount of these allowances is less than one lakh rupees, section 34A (1) is not applicable.


34A (4)

Any shortfall in the payment of any tax due on the assessed tax or, as the case may be, returned income where such shortfall is due to limiting the amount of depreciation allowance or investment allowance under this section and the assessee has paid the amount of shortfall before furnishing the return of income under section 139 (1) will not be subject to anything contained in sections 234B and 234C.


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