Expenditure on prospecting of minerals
Introduction
This provision allows deduction of expenditure incurred, wholly and exclusively, on any operation relating to prospecting for the minerals or on development of a mine or other natural deposit of any such minerals. The eligible expenditure shall be allowed as deduction in 10 equal installments over a period of 10 years.
1. About
1.1. Who can claim this deduction?
An Indian Company and every resident assessee who is engaged in any operations relating to prospecting for, or extraction or production of, any mineral can claim deduction under this provision
1.2. Which expenditure can be claimed as deduction?
The assessee can claim deduction for the qualifying expenditure incurred in the year of commercial production or in any 4 years, immediately preceding the year of commercial production. The term ‘year of commercial production’ means the tax year in which commercial production of one or more of the specified mineral commences, as a result of any operation relating to prospecting.
The qualifying expenditure shall be aggregate of following expenditure:
(a) Expenditure incurred, wholly and exclusively, on any operations relating to prospecting of any mineral
(b) Expenditure on development of a mine or other natural deposit of any such mineral.
The qualifying amount of expenditure shall be reduced by any sale, salvage, compensation or insurance moneys realized by the assessee in respect of any property or rights brought into existence as a result of such expenditure.
Exceptions
Following expenditures shall not be eligible for deduction under this provision:
(a) Expenditure on acquisition of site (or any right therein) of source of any mineral
(b) Expenditure on acquisition of deposits (or any right therein) of such mineral
(c) Expenditure of a capital nature in respect of any building, machinery, plant or furniture for which deduction by way of depreciation is admissible
(d) Expenditure, though eligible for deduction, met directly or indirectly by any other person or authority.
| Particulars | Amount |
Expenditure incurred, wholly and exclusively, in respect of: 1. Prospecting of any mineral 2. Development of a mine or other natural deposit of any mineral Less: 1. Sale , salvage, compensation or insurance moneys realized in respect of any property or rights (if not reduced from expenditure) 2. Expenditure on following (if added in qualifying expenditure): a) Acquisition of site of source of any mineral b) Acquisition of deposits of such mineral c) Capital expenditure in respect of any depreciable asset, i.e., building, machinery, plant or furniture, etc. d) Expenditure met directly or indirectly by any other person or authority. |
xxx xxx (xxx) (xxx) (xxx) (xxx) (xxx) |
| Qualifying expenditure | xxx |
1.3. How much deduction can be claimed?
1.3-1. To the same assessee
The qualifying expenditure shall be allowed as deduction in 10 equal installments over a period of 10 years. Such deduction is allowed only against the profits arising from the commercial exploitation of the mineral, in respect of which the qualifying expenditure was incurred, and the profits derived from commercial production of the same mineral.
If such profits fall short of 1/10References
Including group of associated minerals
This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.