Income Tax 2025

Appearance

Tea development account, coffee development account and rubber development account. ​

48(1) ​

Where an assessee is carrying on business of growing and manufacturing tea or coffee or rubber in India, such assessee shall be allowed a deduction on the basis of deposits into the tea development account, coffee development account or rubber development account or any other designated account and computed as per the provisions of the Schedule IX.

48(2) ​

Any amount withdrawn or utilised or released at the time of closure or otherwise shall be charged to tax in the year in which the amount is transferred or withdrawn as per the provisions of the Schedule IX.

48(3) ​

Where any asset acquired as per the scheme or the deposit scheme is sold or otherwise transferred in any tax year by the assessee to any person at any time before the expiry of eight years from the end of the tax 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 tax year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that tax year

Explanation

Section Summary: ​

This section provides tax deductions for businesses involved in growing and manufacturing tea, coffee, or rubber in India. The deductions are based on deposits made into specific development accounts (tea, coffee, or rubber development accounts) as per Schedule IX. However, if funds are withdrawn, utilized, or if assets acquired under the scheme are sold/transferred within eight years, the related deductions will be taxed.

Key Changes: ​

  1. Introduction of Deduction for Specific Accounts: The section allows deductions for deposits made into tea, coffee, or rubber development accounts, which is a new provision aimed at promoting these industries.
  2. Taxation on Withdrawals or Transfers: Any withdrawal, utilization, or transfer of funds/assets acquired under the scheme within eight years will result in the reversal of the deduction, and the amount will be taxed as business income.

Practical Implications: ​

  1. For Tea, Coffee, and Rubber Growers/Manufacturers: Businesses in these sectors can claim deductions for deposits made into designated development accounts, reducing their taxable income.
  2. Compliance Burden: Businesses must ensure that funds deposited into these accounts are used as per the scheme's provisions. Premature withdrawal or sale of assets acquired under the scheme will trigger tax liabilities.
  3. Tax Planning: Businesses need to carefully plan their deposits and asset utilization to avoid unintended tax consequences.

Critical Concepts: ​

  1. Deduction Calculation: The deduction is computed as per Schedule IX, which outlines the specific rules for calculating the allowable deduction.
  2. Reversal of Deduction: If assets acquired under the scheme are sold or transferred within eight years, the portion of the cost related to the deduction is treated as business income and taxed accordingly.
  3. Interaction with Other Laws: This section operates independently but must be read in conjunction with Schedule IX for detailed computation rules.

Compliance Steps: ​

  1. Maintain Separate Accounts: Businesses must maintain separate accounts for tea, coffee, or rubber development deposits as per the scheme.
  2. Documentation: Keep detailed records of deposits, withdrawals, and asset acquisitions to substantiate claims and avoid tax liabilities.
  3. Reporting: Report deposits and deductions in the income tax return as per the prescribed format. Ensure compliance with Schedule IX for accurate computation.

Examples: ​

  1. Scenario 1: A tea manufacturing company deposits ₹10 lakh into a tea development account. It can claim a deduction of ₹10 lakh from its taxable income for that year, reducing its tax liability.
  2. Scenario 2: The same company withdraws ₹5 lakh from the account after three years. The ₹5 lakh will be added to its taxable income for the year of withdrawal.
  3. Scenario 3: The company acquires machinery using funds from the tea development account and sells it after five years. The portion of the machinery's cost related to the deduction will be treated as business income and taxed in the year of sale.