Guidelines for approval of Agricultural Extension Project
Introduction
For claiming deduction under Section 47, an assessee shall incurs expenditure on an agricultural extension project which should be notified. For such notification, the assessee is required to make an online application to the Member (IT), CBDT in Form 20. Further, it needs to fulfil certain conditions such as maintenance of books of accounts and get them audited.
1. About
The deduction under Section 47 is allowed when an assessee incurs any expenditure on a notified agricultural extension project. The deduction shall be 100% of the actual expenditure.
To get an agricultural extension project notified, an assessee is required:
(a) To make an application to the Member (IT), CBDT in accordance with the guidelines prescribed under Rule 37; and
(b) To fulfil certain conditions specified under Rule 38.
2. Application for notification [Rule 37]
2.1. When a project can be notified for deduction under Section 47?
The agricultural extension project shall be considered for notification if it fulfils all of the following conditions:
(a) The project shall be undertaken by an assessee for training, education, and guidance of farmers;
(b) The project shall have prior approval of the Ministry of Agriculture and Farmers Welfare, Government of India; and
(c) An expenditure (not being expenditure in the nature of cost of any land or building) exceeding the amount of Rs. 25 lakh is expected to be incurred for the project.
2.2. Filing of application
The assessee, before undertaking any agricultural extension project, shall furnish an online application for notification of such project, in Form 20, to the Member (IT), CBDT.
2.3. Documents to be furnished with application
Application for notification shall be accompanied by the following documents:
(a) A detailed note on the agriculture extension project to be undertaken by the assessee;
(b) Details of the expenditure expected to be incurred on the project and expected date of completion of the project; and
(c) A letter approving the project and specifying the amount of expenditure expected to be incurred on the project from the Ministry of Agriculture and Farmers Welfare, Government of India.
2.4. Intimation of defects in application
Where any defect is noticed in the application or a relevant document is not attached thereto, the CBDT shall intimate the defect to the applicant for its rectification. Such defect shall be intimated before the expiry of 1 month from the end of the month in which the application is received in its office.
The applicant shall remove the defect within one month from the end of the month in which intimation letter is served on him. If applicant fails to remove the defect within such period as allowed, the CBDT shall pass an order treating the application as invalid within one month.
However, the applicant shall be given an opportunity of being heard in the matter before invalidating the application.
2.5. Issue of notification
If the application form is complete in all respects, the CBDT shall issue a notification within 2 month from the end of the quarter in which it receives the application form complete in all respects. Such notification shall be issued in Form 21 to be published in Official Gazette specifying the agricultural extension project which shall remain effective for prescribed period subject to upper limit of 3 tax years.
2.6. Application for further period
The assessee may make an application to the CBDT for notification of such project for a further period. Such application shall be made at least 3 months before the expiry of the effective period of the notification so issued.
After receiving the said application, the CBDT shall call for a report from the jurisdictional CIT or DIT, as the case may be, regarding the activities of the agricultural extension project during the period of notification and fulfilment of conditions mentioned in rule 38 and any other conditions subject to which the agricultural extension project was notified.
The CBDT, on being satisfied with the report received, may notify the said project for a further period subject to upper limit of 3 tax years. Such notification shall be issued within a period of 2 months from the end of the quarter in which it receives the application.
A copy of the notification issued as referred to Para 2.5 and 2.6, shall be sent to the applicant, the Ministry of Agriculture and Farmers Welfare, Government of India, the CIT having jurisdiction over the applicant, the Department of Agriculture of the concerned State, and the Agricultural Technology Management Agency of the concerned District.
2.7. Withdrawal of notification
The CBDT may revoke the notification issued at any time, if it is satisfied that:
(a) The assessee has ceased its activities;
(b) Its activities are not genuine; or
(c) The activities of the agricultural extension project are not being carried out in accordance with all or any of the relevant provisions or the conditions subject to which the notification was issued.
However, the applicant shall be given an opportunity of being heard in the matter before revoking the notification. A copy of any order revoking the notification shall be sent to the applicant, the Ministry of Agriculture and Farmers Welfare, Government of India, the Department of Agriculture of the concerned State and Agricultural Technology Management Agency of the concerned district, and Jurisdictional CIT.
3. Conditions for notification [Rule 38]
3.1. Maintenance of books of account
The assessee undertaking the agricultural extension project shall maintain separate books of account of the notified agricultural extension project. It shall get such books of account audited by a Chartered Accountant.
The audit report shall include the comments of the auditor on:
(a) The true and fair view of the books of account maintained for agricultural extension project;
(b) The genuineness of the activities of the agricultural extension project; and
(c) Fulfilment of the conditions specified in the relevant provisions or the conditions mentioned in the notification.
3.2. Eligibility for notification
The assessee shall not accept an amount exceeding the amount as approved in the notification from the beneficiary under the eligible agricultural extension project for training, education, guidance or any material distributed for the purpose of such training, education or guidance.
Further, the assessee shall not derive any direct or indirect benefit from the notified agricultural extension project except the deduction of the eligible expenditure with the provisions.
3.3. Expenses eligible for deduction
All expenses (not being expenditure in the nature of cost of any land or building), as reduced by the amount received from a beneficiary, incurred wholly and exclusively for undertaking a notified agricultural extension project shall be eligible for deduction.
However, any expenditure incurred on the agricultural extension project which is reimbursed or reimbursable to the assessee by any person, whether directly or indirectly, shall not be eligible for deduction.
3.4. Furnishing of audited statement of accounts
The assessee shall, on or before the due date of furnishing the return of income under Section 263(1), furnish the following documents to the jurisdictional CIT.
(a) The audited statement of accounts of the agricultural extension project for the previous year along with the audit report and amount of deduction claimed;
(b) A note on the agricultural extension project undertaken by it during the previous year and the programme of agricultural extension project to be undertaken during the current year and the financial allocation for such programme; and
(c) A certificate from the Ministry of Agriculture and Farmers Welfare, Government of India, regarding the genuineness of the agricultural extension project undertaken by the assessee during the previous year.
3.5. Furnishing of report for rescinding notification
The CIT may furnish a report, after making appropriate enquiries, to the Board for rescinding notification if it is satisfied that:
(a) Assessee has not maintained separate books of account for the agricultural extension project or has not got such books of account audited by a Chartered Accountant;
(b) Assessee has not furnished the required documents;
(c) Assessee has ceased to carry out activities of agricultural extension project;
(d) Activities of agricultural extension project of the assessee are not genuine; or
(e) Activities of the agricultural extension project of the assessee are not being carried out in accordance with the relevant provisions or the conditions subject to which the notification was issued.
This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.