Notification No. 54/2023, dated 01-08-2023
Section 35D provides that an Indian company or any resident person can claim a deduction under this provision in respect of preliminary expenses. The preliminary expenditures are those incurred before the business’s commencement or after the business’s commencement in connection with the extension of an undertaking or in connection with setting up a new unit.
One of the conditions for claiming a deduction of such expenses is that the work in connection with these activities should be carried out within the organization of the assessee. Where it is entrusted to an outside concern, that concern should be approved by the CBDT.
The Finance Act 2023 eased the condition for claiming amortization of such preliminary expenses. The amendment was made to make it mandatory for the assessee to furnish a statement containing the particulars of this expenditure within the prescribed period to the prescribed authority in the prescribed Form and manner.
Following this amendment, the CBDT inserted Rule 6ABBB requiring the assessee to furnish the statement in Form No. 3AF. The Form is required to be furnished one month before the due date for furnishing the return of income as specified under section 139(1). The Form must be furnished electronically under digital signatures or through an electronic verification code.
Form 3AF requires disclosures containing:
- General information (Name, Residential Status, PAN, TAN, Aadhar Number, Address etc.),
- Relevant Previous Year
- Expenditure in connection with the nature of the Activity (Preparation of feasibility report, project report, Conducting market survey or any other survey necessary for business of the assessee, Engineering services relating to the business of the assessee)
- Name, PAN and Address of the person carrying out the activity
- Amount of Expenditure (whether paid in cash or any other mode)
- Respective section or amount of tax, in case tax deducted at source
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