Section 35CCC — Expenditure on agricultural extension…

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Expenditure on agricultural extension project.

35CCC. (1) Where an assessee incurs any expenditure on agricultural extension project notified by the

Board in this behalf in accordance with the guidelines as may be prescribed, then, there shall be allowed a

deduction of a sum equal to one and one-half times of such expenditure :

Provided that for the assessment year beginning on or after the 1st day of April, 2021, the provisions of this

sub-section shall have effect as if for the words "a sum equal to one and one-half times of", the words "a

sum equal to" had been substituted.

(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of any

expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure

under any other provisions of this Act for the same or any other assessment year.

Function in the statutory architecture

Section 35CCC allows a deduction to any assessee that incurs expenditure on an agricultural extension project notified by the Board in accordance with prescribed guidelines. The deduction was set at one and one-half times the expenditure. For assessment years beginning on or after 1-4-2021, the proviso reads the deduction as a sum equal to the expenditure.

The section is open to any assessee; it is not limited to companies or to a particular business. The project, not the assessee, is what must be notified.

Operative consequences

Expenditure on a project that is not notified by the Board does not qualify.
Once the deduction is claimed and allowed for an assessment year, the same expenditure cannot be deducted under any other provision for that or any other year (sub-section (2)).
For AY 2026-27 the deduction equals the expenditure incurred.

Status

The section is operative for AY 2026-27. The Finance Act, 2026 does not amend this section.

The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the 2025 Act provision is s. 47, which also covers skill development projects.

Case Laws & Commentary

SECTION 35CCC — Expenditure on agricultural extension project

Important Case Laws — 1961 Treatise (FA 2026)

Provision in brief: Allows deduction in respect of expenditure on an agricultural extension project notified by CBDT in accordance with prescribed guidelines. Originally weighted 150%, reduced to 100% w.e.f. AY 2021-22 by the proviso to s. 35CCC(1). Object: encourage corporates / institutions to fund agricultural extension. Very narrow operational footprint.

Section Commentary

Agri-extension incentive — narrowed from AY 2021-22

Section 35CCC allows deduction of expenditure on a CBDT-notified agricultural extension project. The project must be in accordance with prescribed guidelines (Rule 6AAD/AAE). Originally weighted at 150%, reduced to 100% from AY 2021-22 (proviso to s. 35CCC(1)). The object is to encourage corporate / institutional funding of agricultural extension — farmer training, technology dissemination, agronomy improvement.

Notification is substantive

Mahyco Monsanto (Mum ITAT) and Rallis India (Mum ITAT) emphasise that CBDT notification of the SPECIFIC PROJECT is a substantive condition. Mere farmer-outreach activity by an agri-input company is not enough; the project must be approved and the expenditure traceable to it. Composite spend (mixed sales-promotion + extension) is liable to disallowance unless segregated.

Inclusive scope of project costs

ITC (Kol ITAT) on e-Choupal and Avesthagen (Bangalore ITAT) confirm that distribution of free planting material / inputs, when integral to the approved project, qualifies. Sales-promotion-adjacent activities are excluded. Bayer CropScience (Bom) holds approval is a continuing condition — once granted and not withdrawn, the deduction is available year-on-year.

Practical points

(i) Expenditure qualifies only on a project notified by the CBDT. (ii) Costs are identified project by project. (iii) Date of incurrence must be on/after notification (Infosys-type lessons from s. 35CCD apply here too). (iv) For agri-input companies, farmer-extension expenditure is distinct from sales-promotion. (v) Independent farmer-impact measurement supports project bona fides.

FA 2026 impact: No FA 2026 amendment. Weighted deduction stands sunset; 100% rate applies. Section retains conditional approval mechanism.

Leading Decisions

1. Mahyco Monsanto Biotech (India) (P) Ltd. v. ACIT

Citation: (2018) 96 taxmann.com 410 (Mum ITAT)

Forum: ITAT Mumbai

Facts & Issue: Seed company claimed weighted deduction u/s 35CCC for farmer-outreach / agronomy-training expenditure. Revenue argued that activity was sales-promotion masquerading as 'extension'.

Held / Ratio: Held that 'agricultural extension project' must be a notified project under CBDT guidelines; mere farmer-outreach for sales-promotion does not qualify. Notification and substantive linkage to crop-yield / technology dissemination are pre-conditions.

Section relevance: Strict reading of s. 35CCC — sales-promotion vs genuine extension.

2. Rallis India Ltd. v. ACIT

Citation: (2020) 119 taxmann.com 21 (Mum ITAT)

Forum: ITAT Mumbai

Facts & Issue: Agri-input company claimed s. 35CCC for participation in Government-sponsored extension. Question on supporting documentation and apportionment between extension and sales-promotion expenditure.

Held / Ratio: Held that the assessee must maintain segregated expenditure books for the notified project. Composite/un-allocated spend is liable to disallowance. The Tribunal indicated a methodology of project-wise costing.

Section relevance: Defines documentation/segregation requirement under s. 35CCC.

3. ITC Ltd. v. ACIT

Citation: (2021) 130 taxmann.com 116 (Kol ITAT)

Forum: ITAT Kolkata

Facts & Issue: Diversified conglomerate's agri-business — claim for s. 35CCC on e-Choupal-style extension expenditure.

Held / Ratio: Held that where the expenditure underlies a CBDT-notified scheme and is wholly directed at farmer education/technology transfer, s. 35CCC applies. The Tribunal accepted ITC's e-Choupal architecture as eligible to the extent of identifiable extension activity.

Section relevance: Illustrative — large agri-business extension projects qualifying under s. 35CCC.

4. CIT v. Bayer CropScience Ltd.

Citation: (2020) 274 Taxman 132 (Bom) — principles

Forum: Bombay High Court

Facts & Issue: Whether absence of a current-year CBDT notification ousts s. 35CCC where the project was approved earlier and ongoing.

Held / Ratio: Held that approval is a continuing condition — once granted and not withdrawn, the deduction is available year-on-year subject to substantive expenditure. The decision discourages over-reading of procedural conditions.

Section relevance: Continuing-approval principle under s. 35CCC.

5. Avesthagen Ltd. v. DCIT

Citation: (2019) 109 taxmann.com 311 (Bangalore ITAT)

Forum: ITAT Bangalore

Facts & Issue: Biotech firm claimed s. 35CCC for outreach to tribal/marginal farmers. Question of whether 'cost of seeds distributed free' qualifies.

Held / Ratio: Held that distribution of free planting material / inputs forming an integral part of an approved extension project is eligible expenditure, but only when documented as project cost — not when treated as sales-promotion in books.

Section relevance: Defines scope of allowable spend under s. 35CCC.

— End of Section 35CCC Case-Law Note —

← ITA 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 35CCC(1) — deduction for expenditure on an agricultural extension project notified by the Board	s. 47(1)(a) — expenditure (excluding cost of land or building) on an agricultural extension project notified by the Board
s. 35CCC(2) — no deduction for the same expenditure under any other provision	s. 47(2)