SCHEDULE IX - DEDUCTION FOR TEA DEVELOPMENT ACCOUNT, COFFEE DEVELOPMENT ACCOUNT AND RUBBER DEVELOPMENT ACCOUNT FOR COMPUTING INCOME UNDER THE HEAD "PROFITS AND GAINS OF BUSINESS OR PROFESSION".

Income-tax Act, 2025

At a Glance

The document is SCHEDULE IX (Schedule-IX) to the Income Tax Bill, 2025 (Old Version), prescribing deductions for deposits into Tea Development Account, Coffee Development Account and Rubber Development Account when computing income under the head "Profits and gains of business or profession." It matters to taxpayers engaged in growing and manufacturing tea, coffee or rubber, and to tax administrators overseeing allowable deductions and audit/compliance. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hook: Schedule IX proceeds "See section 48" (as annotated in the text). The Schedule governs quantum of deduction for amounts deposited into specified development accounts (special account or deposit account) and the conditions, withdrawal consequences, treatment on sale/transfer of assets acquired through such amounts, and interpretative definitions. Definitions provided in paragraph 6 explain terms such as Coffee Board, deposit account, deposit scheme, National Bank, Rubber Board, Special account, specified account and Tea Board. The Schedule applies to assessee carrying on the business of growing and manufacturing tea, coffee or rubber in India during the tax year.

Statutory Provision Mode

Text & Scope

The Schedule establishes a specific deduction regime for growers/manufacturers of tea, coffee and rubber. Key elements: (1) Quantum of deduction (paragraph 1); (2) conditions for claiming the deduction (paragraph 2); (3) restrictions on withdrawal from specified accounts and consequent taxability (paragraph 3); (4) non-allowance of deduction for expenditure met from account withdrawals (paragraph 4); (5) treatment on sale/transfer of assets acquired under the schemes (paragraph 5); and (6) definitions (paragraph 6).

Interpretation

Legislative intent reflected in the text: incentivise deposits into development accounts for the specific agricultural/plantation sectors while denying double tax benefits and ensuring deposits are used for sectoral purposes. The text prescribes the deduction to be the lesser of actual deposits or 40% of profits (para 1(1)(a)/(b)), and prioritises granting the deduction before set off of brought-forward losses (para 1(2) referencing section 110). The Schedule contains deeming provisions to pull back amounts into taxable income when withdrawn other than for specified purposes, when utilised for specified articles or when not utilised after release (para 3). It also contains anti-abuse rules on sale/transfer of assets within eight years (para 5).

Exceptions/Provisos

Carve-outs and conditions in the Schedule include:

• Deduction limited to 40% of business profits computed under the head before making the deduction (para 1(1)).
• Deduction allowed only if the assessee is carrying on the specified business in India and deposits funds in the specified account (para 2(1)(a)-(b)).
• Audited accounts and furnishing of an audit report are required before the specified date referred to in section 63 (para 2(1)(c)).
• Withdrawals are generally prohibited except in enumerated events (closure, death, partition of HUF, dissolution of firm, liquidation of company) (para 3(1)).
• Withdrawals in certain circumstances or utilisation for specified articles are deemed taxable immediately (para 3(2)-(4)).
• When assets acquired under the scheme are sold or transferred within eight years, the portion of cost relatable to the earlier deduction is taxed as business income (para 5(1)). Exemptions apply on sale to specified persons or on succession to a company, subject to conditions (para 5(2)).
• Deductions claimed in one tax year cannot be claimed in any other tax year for the same amount (para 2(3)).

Illustrations

• Example 1: An assessee operating a tea plantation deposits INR X into a special account during the tax year. If 40% of the assessed profits before deduction equals INR Y and X <= Y, the allowable deduction equals X; if X > Y, allowable deduction is limited to Y (para 1(1)).
• Example 2: If the assessee withdraws the entire balance on closure of business, the amount withdrawn is deemed to be the profits and gains of business of that tax year and taxed accordingly (para 3(1), (2)).
• Example 3: Asset A acquired using account funds is sold five years after acquisition; the part of asset cost attributable to earlier deduction is deemed income in the year of sale (para 5(1)).

Interplay

The Schedule refers to other statutory provisions: section 48 (heading reference), section 63 (specified date for furnishing audit report), and section 110 (set off of loss carried forward). It also invokes external statutory entities and enactments in definitions (Coffee Act, 1942; National Bank for Agriculture and Rural Development Act, 1981; Rubber Act, 1947; Tea Act, 1953; Companies Act, 2013s.2(45)). Interaction with rules, notifications or circulars beyond those citations: Not stated in the document.

Practical Implications

• Compliance and risk areas: Claimants must ensure strict compliance with deposit requirements and audit filings (para 2(1)(b), 2(1)(c)). Failure to comply or unauthorised withdrawals will trigger immediate taxability under para 3. Use of withdrawn funds to purchase "specified article or thing" also triggers income inclusion (para 3(3)).
• Record-keeping/evidence: Taxpayers need contemporaneous evidence of deposits into specified accounts, authorisation under the special/deposit scheme, audit reports filed by the date in section 63, vouchers/invoices showing utilisation for permitted purposes, and asset acquisition and disposal records to demonstrate eight-year holding or qualifying exceptions on succession/sale to specified persons (paras 2-5). The Schedule requires the report "in such form and manner as prescribed" (para 2(1)(c)), implying retention of the prescribed form and accountant verification for audit trails.

Key Takeaways

• The deduction equals the lesser of actual deposits into specified accounts or 40% of business profits (para 1(1)).
• Deduction must be supported by deposits into a special account (National Bank) or deposit account under board schemes and by an audited report furnished by the specified date (para 2).
• Withdrawals are tightly restricted; unauthorised withdrawals or release and non-utilisation/ utilisation for specified articles cause immediate taxation (para 3).
• Assets acquired using such funds attract claw-back on sale/transfer within eight years, unless transfer is to specified persons or in permitted succession to a company meeting conditions (para 5).
• Deductions once allowed in a tax year cannot be re-claimed in other years; partnerships or AOPs cannot pass the deduction to partners/members individually (para 2(3)-(4)).
• The Schedule cross-references other statutory sections and statutory bodies; specific procedural form/manner is left to prescription (section 63 timing; "as prescribed") (paras 1(2), 2(1)(c)).
• Definitions in para 6 are sector-specific and determine the scope of eligible schemes/accounts and institutional actors.

Differences from the Parallel Version and Practical Impact

Comparative differences between this Schedule (Income Tax Bill, 2025 - Old Version) and the other text presented (Schedule-IX of Income-tax Act, 2025) include the following principal divergences and their practical consequences:

• Reference for set off of loss: This Bill version references section 110 for carry-forward loss set-off (para 1(2)); the Act version references section 112.
  • Practical impact: Potential change in cross-reference may affect interpretation or alignment with other loss-carry provisions; the text here does not explain the substantive difference between s.110 and s.112. Users must check which section governs loss carry-forward in the operative Act. The document does not state transitional treatment. (Document cross-reference difference noted.)
• Timing of deposit for claiming deduction: The Bill version simply requires that the assessee "has deposited any amount in the specified account" (para 2(1)(b)). The Act version adds an express timing condition: deposit before the expiry of six months from the end of the tax year or before the due date of furnishing the return of income, whichever earlier.
  • Practical impact: The Bill version is less explicit on timing, which could lead to interpretive uncertainty about when deposits must be made to qualify. The Act version's explicit timing imposes a clear deadline beneficial for administration and certainty for taxpayers. The Bill text leaves the timing requirement ambiguous: Not stated in the document as to whether later enactments amend timing.
• Form and manner language for audit report: The Bill text states the audit report to be "in such form and manner as prescribed and verified by such accountant," whereas the Act text says "in such form and manner as may be prescribed."
  • Practical impact: Both contemplate prescription; the Bill's explicit "verified by such accountant" emphasises accountant verification. Operationally this is minor but could affect the nature of the certification required; the Bill version appears to require both statutory audit and a separate accountant's verification form when accounts are audited under another law (para 2(2)).
• Variation in wording for compliance where audit required under other law: The Bill version requires furnishing "the report of such audit along with report by an accountant," whereas the Act version requires furnishing "the report of such audit and a report by an accountant."
  • Practical impact: Substantively similar; drafting differences likely immaterial.
• Definitional and textual discrepancies: The Bill version's definition of the Rubber Act citation is "Rubber Act, 1947 (34 of 1947)" (para 6(e)), while the Act text cites "24 of 1947." Also, the Bill version lacks an explicit definition of "special scheme" (it defines "deposit scheme" and "Special account" but not "special scheme"), whereas the Act version includes "special scheme means the scheme approved in this behalf by the Tea Board or the Coffee Board or the Rubber Board."
  • Practical impact: Citation errors and missing definitional text could create confusion about the statutory provenance and the precise institutional approval process for schemes; lack of a definition for "special scheme" in the Bill text may leave uncertainty about the approval or scope of such schemes until clarified by rules or later amendments.
• Minor drafting variations in successor-company condition language: The Bill version speaks of transfer "in view of succession of business" and refers to "specified scheme or deposit scheme is applicable" (para 5(2)(b)), while the Act uses "in connection with succession" and the "provisions of special scheme or deposit scheme is applicable."
  • Practical impact: Subtle drafting differences-functionally similar but may require interpretive attention in succession cases (firms->companies) to establish continuity of scheme applicability and composition of shareholders/partners.

Action Points

• Taxpayers in tea/coffee/rubber businesses should ensure deposits are made into the prescribed accounts and maintain complete audit records and prescribed audit reports by the date in section 63 (para 2).
• Carefully review the operative Act for exact cross-references (sections 110/112) and the final wording of definitions such as "special scheme" and correct statutory citations before relying on the Bill wording for compliance planning (paras 1(2), 6).
• Maintain documentation substantiating permitted utilisation of released funds, invoices for "specified articles or thing," and holding periods for assets acquired under the scheme to avoid claw-back (paras 3-5).

Full Text:

SCHEDULE IX - DEDUCTION FOR TEA DEVELOPMENT ACCOUNT, COFFEE DEVELOPMENT ACCOUNT AND RUBBER DEVELOPMENT ACCOUNT FOR COMPUTING INCOME UNDER THE HEAD "PROFITS AND GAINS OF BUSINESS OR PROFESSION".