Income Tax Act, 1961
Section 80-IA- DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS, ETC., IN CERTAIN CASES.
(1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure facility or scientific and industrial research and developmentor providing telecommunication services whether basic or cellularor operating an industrial park or commercial production or refining of mineral oil in the North Eastern Regionor in any part of India on or after the 1st day of April, 1997 (such business being hereinafter referred to as the eligible business) to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6).
(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) It is not formed by splitting up, or the reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;
(ii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose;
(iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India :
Provided that the condition in this clause shall, in relation to a small-scale industrial undertaking, or an industrial undertaking referred to in sub-clause (b) of clause (iv) which begins to manufacture or produce an article or thing during the period beginning on the 1st day of April, 1993 and ending on 31st day of March, 1998 apply as if the words “not being any article or thing specified in the list in the Eleventh Schedule” had been omitted;
(iv)(a) In the case of an industrial undertaking not specified in sub-clause (b), or sub-clause (c), it begins to manufacture or produce articles or things or to operate such plant or plants, at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking;
(b) In the case of an industrial undertaking located in an industrially backward State specified in the Eighth Schedule or set up in any part of India for the generation, or generation and distribution, of power, it begins to manufacture or produce articles or things or to operate its cold storage plant or plants or to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2000.
Provided that in the case of an industrial undertaking set up in any part of India for the generation or generation and distribution, of power, the period ending shall have effect as if for the figures ‘1998’, the figures 2003 had been substituted.
(c) In the case of an industrial undertaking located in such industrially backward district as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf, as industrially backward district of Category ‘A’ or industrially backward district of Category ‘B’ and it begins to manufacture or produce articles or thing or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, 2000
(d) In the case of an industrial undertaking being a small scale industrial undertaking, not specified in sub-clause (b) or in sub-clause (c), it begins to manufacture or produce articles or things or to operate its cold storage plant at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, 2000;
(v) In a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power.
Explanation 1 : For the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) Such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India;
(b) Such machinery or plant is imported into India from any country outside India; and
(c) No deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee.
Explanation 2 : Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with.
(3) This section applies to any ship, where all the following conditions are fulfilled, namely :- (i) It is owned by an Indian company and is wholly used for the purposes of the business carried on by it;
(ii) It was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and
(iii) It is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995.
(4)This section applies to the business of any hotel – (a) Where conditions (i), (ii) and (v); and
(b) Either of the conditions (iii) or (iv); or
(c) Either of the conditions (iiia) or (iva), are fulfilled, namely :- (i) The business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose;
(ii) The business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees;
(iii) The business of the hotel, located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may having regard to the need for development of infra-structure for tourism in any place and other relevant considerations specify for the purpose of this clause, starts functioning at any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of March, 1994;
(iiia) The business of the hotel, located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify for the purpose of this clause, starts functioning at any time during the period beginning on the 1st day of April, 1998, and ending on the 31st day of March, 2001 :
Provided that nothing contained in this clause shall apply to any hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi and Mumbai;
(iv) The business of the hotel – (1) Located in any place, or
(2) Located in a place other than a place referred to in clause (iii) of this sub-section, starts functioning at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995;
(iva) The business of the hotel, located in a place other than a place referred to in clause (iiia) of this sub-section and not being located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi and Mumbai, starts functioning at any time during the period beginning on the 1st day of April, 1997, and ending on the 31st day of March, 2001;
(v) The hotel is for the time being approved by the prescribed authority
(4A) This section applies to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfills all the following conditions, namely :- (i) The enterprise is owned by a company registered in India or by a consortium of such companies;
(ii) The enterprise has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement;
(iii) The enterprise starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995 :
Provided that the provisions of this section shall apply in case of refining of mineral oil where the undertaking beings refining on or after the 1st day of October, 1998.
(4B) This section applies to any company registered in India carrying on scientific and industrial research and development which fulfills all the following conditions, namely :- (i) The company has the main object of scientific and industrial research and development;
(ii) The company is for the time being approved by the prescribed authority at any time before the 1st day of April, 1998.
(4C) This section applies to any undertaking which starts providing telecommunication services whether basic or cellular including radio paging, domestic satellite service or network of trunking and electronic data interchange services at any time on or after the 1st day of April, 1995, but before the 31st day of March, 2000.
(4D) This section applies to any undertaking which begins to operate an industrial park notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997, and ending on the 31st day of March, 2002.
(4E) This section applies to any undertaking which begins commercial production or refining of mineral oil in the North Eastern Region or in any part of India on or after the 1st day of April, 1997.
Provided that the proviso of this section shall apply in case of refining of mineral oil where the undertaking begins refining on or after the 1st day of October, 1998.
(4F) This section applies to an undertaking, engaged in developing and building housing projects approved by a local authority subject to the condition that the size of the plot of land has a minimum of one acre, and the residential unit has a built up area not exceeding one thousand square fee :
Provided that the undertaking commences development and construction of the housing project on or after the 1st day of October, 1998 and completes the same before the 31st day of March, 2001.
(5) The amount referred to in sub-section (1) shall be – (i)(a) In the case of an industrial undertaking referred to in sub-clause (a) or sub-clause (d) of clause (iv) of sub-section (2), twenty-five per cent. of the profits and gains derived from such industrial undertakings;
(b) In the case of an industrial undertaking referred to in sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2), hundred per cent. of the profits and gains derived from such industrial undertaking for the initial five assessment years and thereafter twenty-five per cent. of the profits and gains derived from such industrial undertaking :
Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words “twenty-five per cent.”, the words “thirty per cent.” had been substituted :
Provided further that in case of an industrial undertaking located in an industrially backward district of Category ‘B’, the provisions of this clause shall have effect as if for the words “five assessment years”, the words three assessment years” had been substituted;
(ia) In the case of an enterprise referred to in sub-section (4A), hundred per cent. of the profits and gains derived from such business for the initial five assessment years and thereafter, thirty per cent. of such profits and gains;
(ib) In the case of a company referred to in sub-section (4B), hundred per cent. of the profits and gains derived from such business;
(ic) In the case of an undertaking referred to in sub-section (4C), hundred per cent. of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent. of the profits
and gains derived from such business :
Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words “twenty-five per cent.”, the words “thirty per cent.” had been substituted;
(id) In the case of an industrial park referred to in sub-section (4D), hundred per cent. of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent. of the profits and gains derived from such business :
Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words “twenty-five per cent.”, the words “thirty per cent.” had been substituted;
(ii) In the case of a hotel referred to in clause (iii) of sub-section (4), fifty per cent. of the profits and gains derived from the business of such hotel :
Provided that the said hotel is approved by the prescribed authority for the purpose of this clause in accordance with the rules made under this Act :
Provided further that the said hotel approved by the prescribed authority before the 31st day of March, 1992, shall be deemed to have been approved by the prescribed authority for the purposes of this section in relation to the assessment year commencing on the 1st day of April, 1991;
(iia) In the case of a hotel referred to in clause (iiia) of sub-section (4), fifty per cent. of the profits and gains derived from the business of such hotel :
Provided that the said hotel is approved by the prescribed authority for the purposes of this clause in accordance with the rules made under this Act;
(iii) In the case of a hotel referred to in clause (iv) or clause (iva) of sub-section (4), thirty per cent. of the profits and gains derived from the business of such hotel;
(iv) In the case of a ship, thirty per cent. of the profits and gains derived from such ship.
(v) In the case of undertaking referred to in sub-section (4E) hundred per cent. of profits and gains derived from such business for the initial seven assessment years.
(vi) In the case of a housing project referred to in sub-section (4F), hundred per cent, of profits and gains derived from such business.
(6) The number of assessment years referred to in sub-section (1) shall, including the initial assessment year, be – (i) Twelve in the case of an assessee, being a co-operative society, deriving profits and gains from an industrial undertaking;
(ii) Ten in the case of any assessee, not being a co-operative society, deriving profits and gains from an industrial undertaking specified in sub-clause (a) or sub-clause (b) or sub-clause (d) of clause (iv) of sub-section (2), or located in an industrially backward district of Category ‘A’ specified in sub-clause (c) of clause (iv) of that sub-section;
(iia) Eight in the case of an assessee deriving profits and gains from an industrial undertaking located in an industrially backward district of Category ‘B’ specified in sub-clause (c) of clause (iv) of sub-section (2) and such an undertaking is not covered under clauses (i) and (ii) of this sub-section;’; 1100kg-1
(iii) Ten in the case of any other assessee deriving profits and gains, from a ship or the business of a hotel;
(iv) Any ten consecutive assessment years falling within a period of twelve assessment years beginning with the assessment year in which an assessee begins operating and maintaining infrastructure facility :
Provided that where the assessee begins operating and maintaining any infrastructure facility referred to in sub-clause (ii) of clause (ca) of sub-section (12), the provisions of this clause shall have effect as if for the word “twelve”, the word “twenty” has been substituted.’;
(v) Five in the case of an assessee, being a company referred to in sub-section (4B), deriving profits and gains from scientific and industrial research and development.
(vi) Ten in the case of an assessee, being an undertaking referred to in sub-section (4C), deriving profits and gains from telecommunication services whether basic or cellular including radio paging and domestic satellite service
(vii) Ten in the case of an assessee, being an undertaking referred to in sub-section (4D), deriving profits and gains from operating an industrial park;
(viii) Seven in the case of an assessee being an undertaking referred to in sub-section (4E) deriving profits and gains from commercial production or refining of mineral oil in the North Eastern Region and other parts of the country on or after the 1st day of April, 1997
(7) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (5) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made.
(7A) Notwithstanding anything contained in sub-section (4A), where housing or other activities are an integral part of the highway project and the profits of which are computed on such basis and manner as may be prescribed, such profit shall not be liable to tax where the profit has been transferred to a special reserve account and the same is actually utilised for the highway project excluding housing and other activities before the expiry of three years following the year in which such amount was transferred to the reserve account; and the amount remaining unutilised shall be chargeable to tax as income of the year in which transfer to reserve account took place,’;
(8) Where the assessee is a person other than a company or a co-operative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form 1100m duly signed and verified by such accountant.
(9) Where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date :
Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit.
Explanation : In this sub-section, “market value”, in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market.
(9A) Where any amount of profits and gains of an industrial undertaking or of a hotel in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading “C. – Deductions in respect of certain incomes”. and shall in no case exceed the profits and gains of the undertaking or hotel, as the case may be.
(10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom.
(11) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertakings with effect from such date as it may specify in the notification.
(12) For the purposes of this section, – (a) “Domestic satellite” means a satellite owned and operated by an Indian company for providing telecommunication service;
(aa) “Hilly area” means any area located at a height of one thousand metres or more above the sea level;
(b) “Industrial undertaking” shall have the meaning assigned to it in the Explanation to section 33B;
(c) “Initial assessment year” – (1) In the case of an industrial undertaking or cold storage plant or ship or hotel, means the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage, plant or plants or the ship is first brought into use or the business of the hotel starts functioning;
(2) In the case of an enterprise, carrying on the business of developing, operating and maintaining any infrastructure facility, means the assessment year specified by the assessee at his option to be the initial year, not falling beyond the twelfth assessment year starting from the previous year in which the enterprise begins operating and maintaining the infrastructure facility;
(3) In the case of a company carrying on scientific and industrial research and development, means the assessment year relevant to the previous year in which the company is approved by the prescribed authority for the purposes of sub-section (4B);
(4) In the case of an undertaking referred to under sub-section (4C) means the assessment year relevant to the previous year in which the undertaking starts to provide the telecommunication services whether basic or cellular including radio paging and domestic satellite service.
(5) In the case of undertaking operating an industrial park referred to under sub-section (4D) means the assessment year relevant to the previous year in which the undertaking starts operating such industrial park notified for the purposes of the said sub-section;
(6) In the case of an undertaking engaged in the business of commercial production of mineral oil referred to in sub-section (4E) means the assessment year relevant to the previous year in which the undertaking commences the commercial production of mineral oil;
(ca) “Infrastructure facility” means –
(i) A road, bridge, highway, airport, port, inland waterways and inland waterways and inland portrail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette;
(ii) A highway including housing or other activities being an integral part of the highway project; and
(iii) Water supply project, irrigation project, sanitation and sewerage system;
(d) “Place of pilgrimage” means a place where any temple, mosque, gurdwara, church or other place of public worship of renown throughout any State or States is situated;
(e) “Rural area” means any area other than – (i) An area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the preceding census of which relevant figures have been published before the first day of the previous year; or
(ii) An area within such distance not being more than fifteen kilometres from the local limits of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the stage of development of such area (including the extent of, and scope for, urbanisation of such area) and other relevant considerations specify in this behalf by notification in the Official Gazette;
(f) “Small-scale industrial undertaking” means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951);
(g) “North Eastern Region” means the region comprising of the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura
