Section 35DDA- Amortization of Expenditure Incurred Under Voluntary Retirement Scheme

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The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.

According to Section 35DDA,

(1) The expenditure incurred by the assessee in any previous year by way of payment of any sum to an employee in connection with his voluntary retirement in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid will be deducted in computing the profits and gains of the business for that previous year, and the balance will be deducted in equal installments for each of the four immediately succeeding previous years.

(2) An Indian company also known as the assessee, is entitled to the deduction under sub-section (1), and the undertaking of such Indian company will be entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another Indian company in a scheme of amalgamation, the provisions of this section will, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had not taken place.

(3) If the undertaking of an Indian company is entitled to the deduction under sub-section (1) is transferred before the expiry of the period specified to another company in a demerging process, the provisions of this section will, as far as may be, apply to the resulting company, as they would have applied to the demerged company if the demerger had not taken place.

(4) Where there has been a reorganization of business, whereby a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, the provisions of this section shall, as far as may be, apply to the successor company, as they would have applied to the firm or the proprietary concern if the reorganization of business had not taken place.

(4a) Where there has been a reorganization of business, whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, the provisions of this section shall, as far as may be, apply to the successor limited liability partnership, as they would have applied to the said company if the reorganization of business had not taken place.

(5) No deduction will be allowed in respect of the expenditure mentioned in sub-section (1) in the case of the amalgamating company referred to in sub-section (2), in the case of the demerged company referred to in sub-section (3), in the case of a firm or proprietary concern referred to in sub-section (4) and in the case of a company referred to in sub-section (4A) of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place. (6) No deduction will be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act.