Section 33B: Rehabilitation Allowance | The Income Tax Act 1961

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Explanation using Example

Imagine a company, 'XYZ Power Generators Pvt. Ltd.', which is engaged in the generation and distribution of electricity. In the financial year 1982-83, their power plant located in a coastal region of India is severely damaged due to a cyclone. This natural disaster leads to the destruction of key machinery and buildings, causing the business to discontinue operations.

XYZ Power Generators decides to rebuild the plant and replace the damaged machinery. By the financial year 1984-85, they manage to re-establish and revive their business operations. In this scenario, under Section 33B of the Income-tax Act, 1961, the company is eligible for a 'rehabilitation allowance'. This allowance amounts to sixty percent of the depreciation they would have claimed on the damaged or destroyed assets under Section 32(1)(iii) for the year they resume operations.

However, the provision clearly states that this allowance is not applicable for the assessment year starting on April 1, 1985, or any subsequent year. Therefore, if XYZ Power Generators Pvt. Ltd. had revived their business after this cut-off date, they would not have been eligible for the rehabilitation allowance under this section.