Budget 2009 has taken a new initiative by introducing the concept of allowing deduction under income-tax for investment made in a new business based on investment and not based on profit earned. It has inserted section 35AD allowing deduction of investment in specified businesses under the Income-tax Act, 1961. This is in place of allowing for exemption or deduction of profit earned from a new business. This amounts to allowing depreciation upfront. With this new initiative, it seems that the Government has changed its priority from investment for indus-trialization to invest-ment made.
1. In the Budget 2009, the Finance Minister, Mr. Pranab Mukherjee, proposed a new initiative by introducing the concept of allowing deduction under income-tax for investment made in a new business based on investment and not based on profit earned. Mr. Mukherjee said in his Budget Speech,
Under the present scheme of the Income-tax Act, tax exemptions are largely profit-linked. Such incentives are inherently inefficient and liable to misuse. Therefore, it is proposed to incentivise businesses by providing investment-linked tax exemptions….. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments will be fully allowable as deduction.