(3)Where the aggregate amount of the expenditure referred to in sub-section (2) exceeds an amount calculated at two and one-half per cent.-(a)of the cost of the project, or(b)where the assessee is an Indian company, at the option of the company, of the capital employed in the business of the company, the excess shall be ignored for the purpose of computing the deduction allowable under sub-section (1):][Provided that where the aggregate amount of expenditure referred to in sub-section (2) is incurred after the 31st day of March, 1998, the provisions of this sub-section shall have effect as if for the words "two and one-half per cent.", the words "five per cent." had been substituted. ] [Inserted by Act 21 of 1998, Section 14 (w.e.f. 1.4.1999).][Explanation. - In this sub-section,-(a)"cost of the project" means-(i)in a case referred to in clause (i) of sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences;(ii)in a case referred to in clause (ii) of sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the extension of the] [undertaking] [ Substituted by Act 18 of 2008, Section 8, for " industrial undertaking" (w.e.f. 1.4.2009).][is completed or, as the case may be, the new unit commences production or operation, in so far as such fixed assets have been acquired or developed in connection with the extension of the ] [Inserted by Act 42 of 1970, Section 8 (w.e.f. 1.4.1971).] [undertaking] [ Substituted by Act 18 of 2008, Section 8, for " industrial undertaking" (w.e.f. 1.4.2009).][or the setting up of the new unit of the assessee; [Inserted by Act 42 of 1970, Section 8 (w.e.f. 1.4.1971).](b)"capital employed in the business of the company" means-(i)in a case referred to in clause (i) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the business of the company commences;(ii)in a case referred to in clause (ii) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the extension of the ] [undertaking] [ Substituted by Act 18 of 2008, Section 8, for " industrial undertaking" (w.e.f. 1.4.2009).] [is completed, or, as the case may be, the new ] [Inserted by Act 42 of 1970, Section 8 (w.e.f. 1.4.1971).][unit] [ Substituted by Act 18 of 2008, Section 8, for " industrial unit" (w.e.f. 1.4.2009).][commences production or operation, in so far as such capital, debentures and long-term borrowings have been issued or obtained in connection with the extension of the ] [Inserted by Act 42 of 1970, Section 8 (w.e.f. 1.4.1971).][undertaking] [ Substituted by Act 18 of 2008, Section 8, for " industrial undertaking" (w.e.f. 1.4.2009).] or the setting up of the new [unit] [ Substituted by Act 18 of 2008, Section 8, for " industrial unit" (w.e.f. 1.4.2009).] [of the company; [Inserted by Act 42 of 1970, Section 8 (w.e.f. 1.4.1971).](c)"long-term borrowings" means-(i)any moneys borrowed by the company from the Government or the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India or any other financial institution ][which is eligible for deduction under clause (viii) of sub-section (1) of section 36] [ Substituted by Act 10 of 2000, Section 17, for " which is for the time being approved by the Central Government for the purposes of clause (viii) of sub-Section 36" (w.e.f. 1.4.2000).] [or any banking institution (not being a financial institution referred to above), or [Inserted by Act 42 of 1970, Section 8 (w.e.f. 1.4.1971).](ii)any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase outside India of capital plant and machinery, where the terms under which such moneys are borrowed or the debt is incurred provide for the repayment thereof during a period of not less than seven years.
