Disallowance of amounts paid by state governments for levies appropriated from state undertakings limits deductibility of such fees. A new sub clause (iib) to section 40 treats any amount paid as royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge that is either levied exclusively on, or appropriated, directly or indirectly, from, a State Government undertaking by the State Government as falling within the provision. The amendment also defines 'State Government undertaking' by five categories including corporations established by State law, companies majority owned by the State, entities controlled by the State through appointments or agreements, and bodies established by or owned or controlled by the State.