Section 42 of ITA, 1961 : Section 42: Special Provision For Deductions In The Case Of Business For Prospecting, Etc, For Mineral Oil
ITA, 1961
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Explanation using Example
Imagine a company, Oceanic Oil Ltd., that specializes in the exploration and production of petroleum. The Central Government has entered into an agreement with Oceanic Oil Ltd. for the extraction of petroleum, and this agreement includes special allowances for the company's tax calculations, as outlined in Section 42 of The Income-tax Act, 1961.
Scenario 1: Oceanic Oil Ltd. has spent money on exploring a particular area but later found it to be non-viable and decided to surrender it before they started extracting oil (commercial production). According to the agreement and Section 42(1)(a), Oceanic Oil Ltd. can claim allowances on these 'infructuous or abortive exploration expenses' when computing their taxable profits.
Scenario 2: Af...
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