Section 46 — Capital expenditure of specified business

(1) An assessee, at his option, shall be allowed a deduction of the whole of
the capital expenditure incurred, wholly and exclusively, for the purposes of any
specified business carried on by him during the tax year in which such expenditure
is incurred.
(2) Where the expenditure referred to in sub-section (1) is incurred prior to the
commencement of its operations and such expenditure is capitalised in the books
of account as on the date of commencement of its operations, it shall be allowed
during the tax year in which such business is commenced.
(3) This section shall apply to the specified business fulfilling all of the following
conditions:—
( a) it is not set up by splitting up, or the reconstruction, of an already existing
business;
( b) it is not set up by the transfer of machinery or plant previously used for
any purpose to the specified business;
( c) if the business is of the nature referred to in sub-section (11)( d)(iii)
and such business—
( i) is owned by a company formed and registered in India under the
Companies Act, 2013 (18 of 2013) or by a consortium of such com-
panies or by an authority or a board or a corporation established
or constituted under any Central Act or State Act;
( ii) has been approved by the Petroleum and Natural Gas Regulatory
Board established under section 3(1) of the Petroleum and Natural
Gas Regulatory Board Act, 2006 (19 of 2006) and notified by the
Central Government in this behalf;
( iii) has made not less than such proportion of its total pipeline capacity
as specified by regulations made by the Petroleum and Natural Gas
Regulatory Board established under section 3(1) of the Petroleum
and Natural Gas Regulatory Board Act, 2006 (19 of 2006) availa -
ble for use on common carrier basis by any person other than the
assessee or an associated person; and
( iv) fulfils any other condition as may be prescribed;
( d) if the business is of the nature referred to in sub-section (11)( d)(xiv),
such business,—
( i) is owned by a company registered in India or by a consortium of
such companies or by an authority or a board or corporation or
any other body established or constituted under any Central Act
or State Act;
( ii) entity referred to in sub-clause ( i) has entered into an agreement
with the Central Government or a State Government or a local
authority or any other statutory body for developing or operating
and maintaining or developing, operating and maintaining a new
infrastructure facility.
(4) No deduction shall be allowed under the provisions of Chapter VIII-C in relation
to such specified business for the same or any other tax year, if a deduction under
sub-section (1) is claimed and allowed.
(5) No deduction in respect of the expenditure referred to in sub-section (1) shall
be allowed to the assessee under any other section in any tax year or under this
section in any other tax year, if the deduction has been claimed and allowed to him
under this section.
(6) The provisions of this section shall apply to the specified business referred to in
column B of the Table below if it commences its operations as specified in column
C thereof.
TABLE
Sl.
No.
Nature of specified business Date of commencement of
operations being on or after
A B C
1. Laying and operating a cross-country natural
gas pipeline network for distribution, including
storage facilities being an integral part of such
network.
1st April, 2007.
2. Building and operating a new hotel of two star
or above category as classified by the Central
Government.
1st April, 2010.
3. Building and operating a new hospital with
at least 100 beds for patients.
1st April, 2010.
4. Developing and building a housing project
under a scheme for slum redevelopment
or rehabilitation framed by the Central
Government or a State Government, and
which is notified by the Board in this behalf
in accordance with the guidelines as may be
prescribed.
1st April, 2010.
5. Developing and building a housing project
under a scheme for affordable housing
framed by the Central Government or a State
Government, and which is notified by the
Board in this behalf in accordance with the
guidelines as may be prescribed.
1st April, 2011.
6. A new plant or a newly installed capacity in
an existing plant for production of fertilizer.
1st April, 2011.
7. Setting up and operating an inland container
depot or a container freight station notified
or approved under the Customs Act, 1962 (52
of 1962).
1st April, 2012.
8. Bee-keeping and production of honey and
beeswax.
1st April, 2012.
9. Setting up and operating a warehousing
facility for storage of sugar.
1st April, 2012.
10. Laying and operating a slurry pipeline for the
transportation of iron ore.
1st April, 2014.
11. Setting up and operating a semi-conductor
wafer fabrication manufacturing unit, and
which is notified by the Board in this behalf
in accordance with the guidelines as may be
prescribed.
1st April, 2014.
Sl.
No.
Nature of specified business Date of commencement of
operations being on or after
A B C
12. Developing, or operating and maintaining, or
developing, operating and maintaining, any
infrastructure facility.
1st April, 2017.
13. In all other cases. 1st April, 2009.
(7) Where the assessee builds a hotel of two star or above category as classified by
the Central Government and subsequently, transfers the hotel operation thereof to
another person while retaining its ownership, the assessee shall be deemed to be
carrying on the specified business referred to in sub-section (11)(d)(iv).
(8) The provisions contained in sections 122(6) and 140(8) and (13) shall, so far as
may be, apply to this section in respect of goods or services or assets held for the
purposes of the specified business.
(9) Any asset for which a deduction is claimed and allowed under this section—
( a) shall be used only for the specified business for a period of eight
years beginning with the tax year in which such asset is acquired or
constructed;
( b) is used for the purpose other than specified business during the period
referred to in clause (a), and is not chargeable to tax under section 26(2)
(k), then the total amount of deduction so claimed and allowed in one
or more tax years, as reduced by the amount of depreciation allowable
under section 33, as if no deduction under this section was allowed, shall
be deemed to be the income chargeable under the head “Profits and gains
of business or profession” of the tax year in which the asset is so used.
(10) The provisions of sub-section (9)( b) shall not apply to a company which has
become a sick industrial company under section 17(1) of the Sick Industrial Com-
panies (Special Provisions) Act, 1985 (1 of 1986), as it stood before its repeal by the
Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of 2004) during
the period specified in sub-section (9)(a).
(11) For the purposes of this section,—
( a) “associated person”, in relation to the assessee, means a person,—
( i) who participates, directly or indirectly, or through one or more
intermediaries in the management or control or capital of the
assessee;
( ii) who holds, directly or indirectly, shares carrying at least 26% of the
voting power in the capital of the assessee;
( iii) who appoints more than half of the board of directors or mem -
bers of the governing board, or one or more executive directors or
executive members of the governing board of the assessee; or
( iv) who guarantees at least 10% of the total borrowings of the assessee;
( b) “cold chain facility” means a chain of facilities for storage or trans -
portation of agricultural and forest produce, meat and meat products,
poultry, marine and dairy products, products of horticulture, floriculture
and apiculture and processed food items under scientifically controlled
conditions including refrigeration and other facilities necessary for the
preservation of such produce;
( c) “infrastructure facility” means—
( i) a road including toll road, a bridge or a rail system;
( ii) a highway project including housing or other activities being an
integral part of the highway project;
( iii) a water supply project, water treatment system, irrigation pro -
ject, sanitation and sewerage system or solid waste management
system;
( iv) a port, airport, inland waterway, inland port or navigational channel
in the sea;
( d) “specified business” means any one or more of the following businesses:—
( i) setting up and operating a cold chain facility;
( ii) setting up and operating a warehousing facility for storage of
agricultural produce;
( iii) laying and operating a cross-country natural gas or crude or
petroleum oil pipeline network for distribution, including storage
facilities being an integral part of such network;
( iv) building and operating, anywhere in India, a hotel of two star or
above category as classified by the Central Government;
( v) building and operating, anywhere in India, a hospital with at least
100 beds for patients;
( vi) developing and building a housing project under a scheme for slum
redevelopment or rehabilitation framed by the Central Government
or a State Government and which is notified by the Board in this
behalf in accordance with the guidelines as may be prescribed;
( vii) developing and building a housing project under a scheme for
affordable housing framed by the Central Government or a State
Government and which is notified by the Board in this behalf in
accordance with the guidelines as may be prescribed;
( viii) production of fertilizer in India;
( ix) setting up and operating an inland container depot or a container
freight station notified or approved under the Customs Act, 1962
(52 of 1962);
( x) bee-keeping and production of honey and beeswax;
( xi) setting up and operating a warehousing facility for storage of sugar;
( xii) laying and operating a slurry pipeline for the transportation of iron
ore;
( xiii) setting up and operating a semi-conductor wafer fabrication man-
ufacturing unit which is notified by the Board in this behalf in
accordance with the guidelines as may be prescribed;
( xiv) developing, or maintaining and operating, or developing, maintain-
ing and operating, a new infrastructure facility;
( e) any machinery or plant which was used outside India by any person other
than the assessee shall not be regarded as machinery or plant previously
used for any purpose, if—
( i) such machinery or plant was not, at any time before the date of the
installation by the assessee, used in India;
( ii) such machinery or plant is imported into India; and
( iii) no deduction of depreciation for such machinery or plant has been
allowed or is allowable under the provisions of this Act in comput-
ing the total income of any person for any period before the date
of installation of the machinery or plant by the assessee;
( f) if any machinery or plant or its part previously used for any purpose is
transferred to the specified business and its total value does not exceed
20% of the total value of the machinery or plant used in such business,
then the conditions specified in sub-section (3)(b) shall be deemed to be
complied with;
( g) any expenditure of capital nature shall not include any expenditure—
( i) for which the payment or aggregate of payments made to a person
in a day, is not through specified banking or online mode, exceeds
` 10000; or
( ii) incurred on the acquisition of any land or goodwill or financial
instrument.