Tea development account, coffee development account and rubber development account

Tea development account, coffee development account and rubber development account

Section 33AB, of Income Tax Act, 1961 states that

(1) Where an assessee carrying on business of growing and manufacturing tea or coffee or rubber in India has, before the expiry of six months from the end of the previous year or before the due date of furnishing the return of his income, whichever is earlier,—

(a) deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board or the Coffee Board or the Rubber Board; or

(b) deposited any amount in an account (hereafter in this section referred to as the Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be (hereafter in this section referred to as the deposit scheme), with the previous approval of the Central Government,

the assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of—

(a)  a sum equal to the amount or the aggregate of the amounts so deposited; or

(b)  a sum equal to forty per cent of the profits of such business (computed under the head “Profits and gains of business or profession” before making any deduction under this section),

whichever is less :

Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the case may be, any member of such firm, association of persons or body of individuals :

Provided further that where any deduction, in respect of any amount deposited in the special account, or in the Deposit Account, has been allowed under this sub-section in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 28[before the specified date referred to in section 44AB and the assessee furnishes by that date] the report of such audit in the prescribed form29 duly signed and verified by such accountant :

Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.

(3) Any amount standing to the credit of the assessee in the special account or the Deposit Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the case may be, in the deposit scheme or in the circumstances specified below :—

(a)  closure of business ;

(b)  death of an assessee ;

(c)  partition of a Hindu undivided family ;

(d)  dissolution of a firm ;

(e)  liquidation of a company.

(4) Notwithstanding anything contained in sub-section (3), where any amount standing to the credit of the assessee in the special account or in the Deposit Account is released during any previous year by the National Bank or withdrawn by the assessee from the Deposit Account, and such amount is utilised for the purchase of—

(a)  any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house;

(b)  any office appliances (not being computers);

(c)  any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;

(d) any new machinery or plant to be installed in an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule,

the whole of such amount so utilised shall be deemed to be the profits and gains of business of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year.

(5) Where any amount, standing to the credit of the assessee in the special account or in the Deposit Account, is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (3), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved.

(6) Where any amount standing to the credit of the assessee in the special account or in the Deposit Account is utilised by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme or the deposit scheme, such expenditure shall not be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.

(7) Where any amount, standing to the credit of the assessee in the special account or in the Deposit Account, which is released during any previous year by the National Bank or which is withdrawn by the assessee from the Deposit Account for being utilised by the assessee for the purposes of such business in accordance with the scheme or the deposit scheme is not so utilised, either wholly or in part, within that previous year, the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be profits and gains of business and accordingly chargeable to income-tax as the income of that previous year :

Provided that this sub-section shall not apply in a case where such amount is released during any previous year at the closure of the account in circumstances specified in clauses (b), (c) and (e) of sub-section (3).

(8) Where any asset acquired in accordance with the scheme or the deposit scheme is sold or otherwise transferred in any previous year by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year :

Provided that nothing in this sub-section shall apply—

(i)  where the asset is sold or otherwise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company as defined in section 61730 of the Companies Act, 1956 (1 of 1956) ; or

(ii)  where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme or the deposit scheme continues to apply to the company in the manner applicable to the firm.

Explanation.—The provisions of clause (ii) of the proviso shall apply only where—

 (i)  all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company ;

(ii)  all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company ; and

(iii) all the shareholders of the company were partners of the firm immediately before the succession.

(9) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed after such date as may be specified therein.

Explanation.—In this section,—

(a)  “Coffee Board” means the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942);

(aa) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);

(ab) “Rubber Board” means the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Act, 1947 (24 of 1947);

(b)  “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953).

section 32AB of Income Tax Act, 1961

Are you looking to understand about Tea development account, coffee development account and rubber development account ? 

This detailed article will tell you all about Tea development account, coffee development account and rubber development account.

Hi, my name is Shruti Goyal, I have been working in the field of Income Tax since 2011. I have a vast experience of filing income tax returns, accounting, tax advisory, tax consultancy, income tax provisions and tax planning.

Section 32AB of the Income Tax Act of 1961 provides for the establishment of three separate development accounts aimed at fostering the expansion and enhancement of the tea, coffee, and rubber industries in India. This article will delve into the essential features of each development account.

Tea Development Account:

The Tea Development Account is a specific provision under Section 32AB of the Income Tax Act, which enables tea firms engaged in tea production and processing in India to deposit a fixed percentage of their profits into a distinct account dedicated to the development of the tea industry in India. The funds deposited in this account can be utilized for various purposes related to the growth and development of the tea industry, including research, development, and marketing.

All tea companies operating in India can leverage the Tea Development Account. These firms can deposit up to 40% of their profits from tea sales in the previous year into this account. The account can be maintained for a maximum of ten years, after which the balance is transferred to the company’s Profit and Loss account.

Coffee Development Account:

The Coffee Development Account is akin to the Tea Development Account, with a focus on promoting the development of the coffee industry in India. The Coffee Development Account allows coffee companies engaged in coffee production and processing in India to deposit a specific percentage of their profits into a dedicated account intended for the development of the coffee industry. The funds deposited in this account can be used for various activities related to the growth and development of the coffee industry, including research, development, and marketing.

All coffee companies operating in India can establish a Coffee Development Account. Companies can deposit up to 25% of their profits from coffee sales in the preceding year into this account. This account can be maintained for a maximum of seven years, after which the balance is credited to the company’s Profit and Loss account.

Rubber Development Account:

The Rubber Development Account is another development account that aims to promote the growth and development of the rubber industry in India. This account allows rubber companies involved in the production and processing of rubber in India to deposit a fixed percentage of their profits into a separate account intended for the development of the rubber industry. The funds deposited in this account can be used for various activities related to the growth and development of the rubber industry, including research, development, and marketing.

All rubber companies operating in India can establish a Rubber Development Account. Companies can deposit up to 25% of their profits from rubber sales in the previous year into this account. This account can be maintained for a maximum of ten years, after which the balance is credited to the company’s Profit and Loss account.

Conclusion:

The Tea Development Account, Coffee Development Account, and Rubber Development Account are crucial provisions under the Income Tax Act that aim to promote the growth and development of the tea, coffee, and rubber industries in India. These development accounts allow companies to contribute to the growth and development of their respective industries while also receiving tax benefits. By utilizing these accounts, companies can enhance the competitiveness and growth of their industries while contributing to the overall economic development of the country.