State Government undertaking fee disallowance applies to royalty, licence fee and similar charges paid to the State Government.

Amounts paid by a State Government undertaking to the State Government by way of royalty, licence fee, service fee, privilege fee, service charge or any similar charge are disallowed in computing business income when the levy is imposed exclusively on the undertaking. The corresponding rule under the earlier provision applies where such amounts are levied exclusively on, or appropriated from, a State Government undertaking by the State Government. A State Government undertaking includes State-controlled corporations, companies, authorities, boards, institutions, and bodies meeting the stated ownership or control tests.

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