DEDUCTIONS AVAILABLE TO NON RESIDENTS

0 0 RAJ KUMARI Saturday, September 22, 2018 Edit this post

The Chapter VI of the Income tax Act 1961, provides for deduction from gross total income. The deductions available to non-resident are stated in this topic.

General Principles

Section 80A provides certain general principles, for the purpose of deductions to be allowed, while computing the total income.

Section 80A(2) limits the aggregate of deduction under section 80C to 80U to the amount of the gross total income of the assessee.

If the gross total income of the assessee is determined as ‘nil ’, then there is no question of any deduction being allowed under Chapter VI-A in computing the total income. The gross total income must be determined, by setting off against the income, the business losses of earlier years, before allowing deduction under Chapter VI-A and if the resultant income was ‘nil ’, then the assessee could not claim deduction under Chapter VI-A. [Synco Industries Ltd. v. AO [2008] 299 ITR 444 (SC)]

Section 80A(3) provides that where, in computing the total income of an association of persons or body of individuals any deduction is admissible in either of sections, viz, 80G, 80GGA, 80GGC, 80HH, 80HHA, 80HHB, 80HHC, 80HHD, 80I, 80-IA, 80-IB, 80IC, 80ID, 80IE, 80-J or 80JJ, no deduction under the same section shall be made in computing the total income of a member of the association of persons or body of individuals in relation to the share of such member in the income of the association of persons or body of individuals.

Section 80A(4) puts rider on allowability of deduction under this section. It provides that notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such

assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be.

Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C. — Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder.[Section 80A(5)]

Section 80A(6) provides that the price of transfer of goods or services from one undertaking or unit to another undertaking or unit of the assessee is to be taken at arm’s length. That is, notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading "C—Deductions in respect of certain incomes",

where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee, or

where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer,then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date.

The expression "market value" means,—

in relation to any goods or services sold or supplied, the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any;

in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any.

in relation to any goods or services sold, supplied or acquired means the arm's length price as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transaction referred to in section 92BA.

80A(7) debars the allowability of deduction under section 35AD if a deduction under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes" is claimed and allowed in respect of profits of any of the specified business referred to in section 35AD(8)(c)

The deductions are to be allowed only if the assessee claims and establishes the circumstances warranting such deduction. [Stumpp Schuele & Somappa P. Ltd. [1977] 106 ITR 399 (Karnataka HC)].

Section 80AB states that the deduction in respect of certain income in respect of any income of the nature specified in that section which is included in the ‘gross total income’ of the assessee, then notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of the nature as computed in accordance with the provisions of the Act before making any deduction under this chapter, shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.

Deduction not to be allowed unless return furnished [Sec 80AC]

In respect of previous year beginning April 1, 2006 but upto March 31, 2018 and thereafter, where any deduction is admissible under section 80- IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139. [DCIT v. Siroya Developers [2017] 162 ITD 718 (Mumbai Tribunal)]Similarly, for Assessment years beginning on or after April 1, 2018, no deduction under part C of Chapter VIA viz. section 80HH, 80HHA, 80HHB, 80HHBA, 80HHC, 80HHD, 80HHE and 80HHF, etc. shall be allowed unless the return of income is furnished on or before the due date specified under section 139(1) of the Act.

Section 80B defines “Gross Total Income” to mean the total income computed in accordance with the provisions of this Act, before making any deductions under this chapter.

It was held by the Supreme Court in the case of Synco Industries Ltd. v. AO [2008] 299 ITR 444 that the effect of clause (5) of section 80B is that gross total income will be arrived at after making the computation as follows:—

making deductions under the appropriate computation provisions;
including the incomes, if any, under sections 60 to 64 in the total income of the individual;
adjusting intra-head and/or inter-head losses; and
setting off brought forward unabsorbed losses and unabsorbed depreciation, etc.

Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures etc [Section 80C]

Deduction under this section is available to residents as well as non- resident assesses being individual or HUF. The maximum permissible deduction is Rs.1,50,000/-

The payments towards life insurance, deferred annuity, provident fund, Superannuation fund, ULIPS, Pension fund, repayment of Housing loan installment, tuition fee of children, investment in equity linked schemes etc are eligible for deduction.

The assessee in order to claim exemption under section 80C must, at least, establish that sums in question have quality of entering the field of taxation, apart from exemptions and exclusions. Thus, if the foreign income of non-resident assessee does not enter his total income, sums paid for life insurance by him out of his foreign income which was not assessable to tax in India, could not be deducted in computing his income assessable to tax in India. [S. Inder Singh Gill v. CIT [1963] 47 ITR 284 (Bombay HC)]

Deduction in respect of pension fund [Section 80CCC]

Section 80CCC provides that, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax, to effect or keep in force a contract for any annuity plan of LIC of India or any other insurer for receiving pension from fund set up by the said corporation as approved by the Controller of Insurance, be allowed a deduction in respect of whole of the amount paid or deposited but not exceeding Rs.1,50,000/-.

Where the assessee or his nominee surrenders the annuity before maturity date of such annuity, the surrender value shall be taxable in the hands of the assessee or his nominees, as the case may be, in the year of receipt.

The amount received by the assessee or his nominee as pension will be taxable, in the hands of the assessee or nominee, as the case may be, in the year of receipt.

No rebate under section 88 to person to whom deduction under this section has been allowed for any assessment year before April 1, 2006.

No deduction is allowed u/s 80C on the amount on which deduction u/s 80CCC has been allowed for any assessment year beginning on or after April 1, 2006.

Deduction in respect of contribution to pension scheme of central government [Section 80CCD]

(1)Deduction under this section is available to all individual assesses resident or non-resident. The deduction is available on fulfillment of following conditions:

An assessee, being an individual is employed by the Central Government on or after January 1, 2004, or any other employer,
Any other assessee, being an individual has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government;

he shall be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed,—

in the case of an employee, ten per cent of his salary in the previous year; and
in other case, twenty per cent of his gross total income in the previous year.

(1B) An assessee referred to in sub-section (1), shall be allowed a deduction in computation of his total income, whether or not any deductions is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees.

However, no deduction under this sub -section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1).

The amount contributed by the Central Government as an employer or any other employer, to assessee employee’s pension scheme account, the assessee employee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government or any other employer as does not exceed ten per cent of his salary in the previous year.

Where any amount standing to the credit of the assessee in his account referred to in sub-section (1) or (1B), in respect of which a deduction has been allowed under those sub-sections or sub-section (2), together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any previous year,—

on account of closure or his opting out of the pension scheme referred to in sub-section (1) or (1B); or
as pension received from the annuity plan purchased or taken on such closure or opting out,
the whole of the amount referred in (a) or (b) shall become taxable in the previous year in which such amount is received.

However, the amount received by the nominee, on the death of the assesee, under the circumstances referred to in clause (a) above, shall not be deemed to be the income of the assessee.

Where deduction is allowed under sub-section (1) or (1B):

no rebate for such amount shall be allowed under section 88 for any assessment year ending before April 1, 2006;
no deduction with reference to such amount shall be allowed under section 80C for any assessment year beginning on or after April 1, 2006;

The amount is deemed not to have received for the purposes of this section, if such amount is used for purchasing an annuity plan in the same previous year.

Limit on deductions under section 80C, 80CCC and 80CCD [Section 80CCE]

The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD(1) shall not, in any case, exceed Rs. 1,50,000.

Deduction in respect of medical insurance premia [Section 80D]

Section 80D provides that, if an individual or a HUF has paid by cheque in the previous year out of his/its income chargeable to tax, any sum to effect or to keep in force an insurance on the health of or any contribution made to the Central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf or any payment made on account of preventive health check-up of the assessee or wife or husband or dependent parents or dependent children or any member of the family, then a deduction to the extent of amount deposited or Rs.25,000/- whichever is lower.

Where the assessee or his wife or her husband or dependant parents or any member of the family is a senior citizen or a very senior citizen i.e. who is resident in India and has attained60 or 80 years of age respectively at any time during the year and insurance premium is paid to effect or keep in force an insurance on the health or any contribution made to the Central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf or any payment made on account of preventive health check-up, then, the aforesaid limit of Rs. 25,000/- would be increased to Rs. 50,000/-.

Where the amounts are paid on account of preventive health check-up, the deduction for such amounts shall be allowed to the extent, it does not exceed in the aggregate Rs. 5,000/-.

Further, Sub-section (4A) has been inserted w.e.f. April 1, 2019 to provide a fractional deduction for amounts paid in lump sum for more than one previous year.

Deduction in respect of interest on loan taken for higher education [Section 80E]

The deduction is available to all individual assessees

Quantum of deduction is amount paid in the previous year out of income chargeable to tax, by way of interest on loan taken by individual assessee from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his relative.

The deduction is available in 8 assessment years beginning the year in which assessee starts paying interest or until the interest is paid in full whichever is earlier.

“Higher education" means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so;

"relative", in relation to an individual, means the spouse and children of that individual or the student for whom the individual is the legal guardian.

For claiming deduction under section 80E, there is no condition that higher education should be in India only. [Nitin Shantilal Muthiyan v. DCIT [2015] 154 ITD 543 (Pune Tribunal)]

Deduction in respect of interest on loan taken for residential house property [Section 80EE]

The deduction is available to all individual assesses in respect of interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential property.

The deduction shall not exceed Rs. 50,000 and shall be allowed in computing the total income of the individual for the assessment year 2017-18 and onwards.

The deduction shall be subject to the following conditions:

the loan has been sanctioned by the financial institution during the period beginning on between April 1, 2016 and March 31, 2017;
the amount of loan sanctioned for acquisition of the residential house property does not exceed Rs. 35,00,000;
the value of residential house property does not exceed Rs. 50,00,000;
the assessee does not own any residential house property on the date of loan sanction .

Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.

Deduction in respect of donations to certain funds charitable institutions etc. [Section 80G]

Under section 80G of the Act, in computing the total income of an assessee an amount equal to the 100% of the sum is entitled for deduction as donation irrespective of limit of 10% of the gross total income.

the National Defence Fund set up by the Central Government, or
the Prime Minister’s National Relief Fund; or
the Prime Minister’s Armenia Earthquake Relief Fund; or
the Africa (Public contributions India) Fund; or
the National Children’s Fund; or
the National Foundation for Communal Harmony; or
a University or any educational institution of national eminence as may be approved by the prescribed authority in this behalf; or
the Maharashtra Chief Minister’s Relief Fund during the period beginning on October 1, 1993 and ending on October 6, 1993 or to the Chief Minister’s Earthquake Relief Fund, Maharashtra; or
any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat, or
any Zila Saksharta Samiti constituted in any district under the chairmanship of the collector of that district for the purposes of improvement of primary education in villages and towns in such district and for literacy and post literacy activities. For this clause ‘town’ means a town which has a population not exceeding one lakh according to the last preceding census of which the relevant figure have been published before the first day of the previous year; or
the National Blood Transfusion Council or to any State Blood Transfusion Council which has its sole object the control, supervision, regulation or encouragement in India of the services related to operation and requirements of blood banks. For this purposes, “National Blood Transfusion Council” means a society registered under the Societies Registration Act, 1860 and has an officer not below the rank of an Additional Secretary to the Government of India dealing with the AID Control Project as its chairman by whatever named called; and “State Blood Transfusion Council” means a society registered in consultation with the National Blood Transfusion Council, under the Societies Registration Act, 1860 or under any law corresponding to that Act in force in any part of India and has secretary to the Government of that state dealing with the Department of Health, as its chairman, by whatever named called; or
any fund set up a State Government to provide medical relief to the poor; or
the Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund established by the armed forces of the union for the welfare of the past and present members of such forces, as their dependents; or
the Andhra Pradesh Chief Minister’s Cyclone Relief Fund 1996; or
the National illness Assistance Fund, or
the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any state or union territory, as the case may be; provided that such fund is –

the only fund of its kind established in the state or the union territory as the case may be;
under the overall control of the Chief Secretary or the Department of Finance of the State of the Union territory, as the case may be;
administered in such manner as may be specified by the State Government or the lieutenant Governor as the case may be ; or

the National Sports Fund to be set up by the Central Government; or
the National Cultural Fund set up by the Central Government; or
the fund for Technology Development and Application set up by the Central Government; or
the National Trust for welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities constituted under section 3(1) of the National Trust for welfare of Persons with Autism Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999; or
the Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013; or
the Clean Ganga Fund, set up by the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013; or
the National Fund for Control of Drug Abuse constituted under section 7A of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or
any sums paid by the assessee, during the period beginning on January 26, 2001 and ending on September 30, 2001, to any trust, institution or fund to which this section applies for providing relief to the victims of earthquake in Gujarat.

Under section 80G, in computing the total income deduction to the extent of 50% of donation made of the following amounts irrespective of limit of 10% of gross total income.

The Jawaharlal Nehru Memorial Fund referred to in the Deed of Declaration of Trust adopted by the National committee at its meeting held on August 17, 1964; or
the Prime Minister’s Drought Relief Fund; or
the Indira Gandhi Memorial Trust, the deed of declaration in respect whereof was registered at New Delhi on February 21, 1985; or
the Rajiv Gandhi Foundation, the deed of declaration in respect of whereof was registered at New Delhi on June 21, 1991; or

Under section 80G, in computing the total income of an assessee an amount equal to 100% of the sum is entitled for deduction as donation subject to limit 10% of gross total income as reduced by deductions permissible under other provisions of chapter VIA:

the Government or to any such local authority, institution or association as may be approved in this behalf by the Central Government to be utilized for the purpose of promoting family planning; or
any sums paid by the assessee being a company, in the previous year as donation to the Indian Olympic Association or to any other association or institution established in India, as the Central Government may having regard to the prescribed guidelines, by notification in Official Gazette specify, specify in this behalf for:-

the development of infrastructure for sports and games in India, or;
The sponsorship of sports and games in India.

Under section 80G in computing the total income of an assessee an amount equal to 50% of the sums in entitled for deduction as donation, subject to limit of 10% of gross total income as reduced by deduction permissible under the provisions of chapter VIA.

Any other final or any institution to which this section applies; or
the Government or any local authority, to be utilized for any charitable purpose other than the purpose of promoting family planning; or
an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need
for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both.
any sums paid by the assessee in the previous year as donations for the renovation or repair of any such temple, mosque, gurdware, church or other place as notified by the Central Government in the Official Gazette to be of historic, archeological or artistic importance or to be place of public worship of renown though out any state or states.
any corporation referred to in clause (26BB) of section 10

As per Explanation 5 to section 80G, only donation in form of money and not in kind will qualify for deduction.

As per section 80G(5A) where deduction in respect of donations is claimed and allowed under this section for any assessment year, deduction in relation to such sum shall not be allowed under any other provision of the Act for the same or any other assessment year.

Any other fund or institution referred to in D(i) above should comply the following conditions:

where the institution or fund derives any income such income would not be liable to inclusion of its total income under the provisions of section 11 and 12 or section 10(23AA) or section 10(23C).

Provided that where an institution or fund derives any income being profits and gains of business, the conditions that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if -

the institution or fund maintains separate books of account in respect of such business;
the donations made to the institution or fund are not used by it, directly or indirectly, for the purpose of such business; and
the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;
the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contains any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
the institution or fund maintains regular accounts of its receipts and expenditure;
the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 or is a University established by law, or is any other educational institution recognized by the Government or by a university established by law, or affiliated to any university established by law, or is an institution financed wholly or in part by the Government or a local authority and in relation to donations made after March 31,1992 the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf.

No deduction shall be allowed under this section in respect of any donation in excess of Rs. 2,000 unless the payment is made by any mode other than cash.

Deductions in respect of rents paid [Section 80GG]

The assessee, being an employee who is entitled to house rent allowance from the employer is eligible for exemption under section 10(13A) of the Act, but however, no such deduction is available in all other cases.

Therefore, under section 80GG, self-employed person and/or a salaried employee who is not in receipt of any house rent allowance from his employer at to any time during the previous year; is entitled to claim deduction out of his total income, in respect of an expenditure towards payment of rent for any furnished or unfurnished accommodation occupied by him for the purpose of his own residence.

However, he or his spouse or minor child or a Hindu undivided family of which he is a member, should not own any residential accommodation at the

place where the tax payer ordinarily resides or performs the duties of his office or employment or carries on his business or profession.

If taxpayer owns any residential accommodation at any other place and the concession in respect of self occupied house property is claimed by him in respect of such accommodation under section 23(2)(a) or 23(4)(a), no deduction would be allowed under this section.

The amount of deduction would be least of the following amounts:

Rs. 5,000/- per month
25% of total income before allowing deduction for any expenditure under this section or
the excess of actual rent paid over 10% of total income before allowing deduction for any expenditure under this section.

The deduction under section 80GG cannot be allowed where there were no facts on record to show that assessee had satisfied all conditions for allowance of deduction. [Surinder Singh v. AO [2003] 1 SOT 96 (Delhi Tribunal)]

Deduction in respect of certain donations for scientific research or rural development [Section 80GGA]

Under section 80GGA of the Act, in computing the total income of an assessee, there shall be deducted, the following amounts:

any sum paid to a research association having object of scientific research or a university college or other institution to be used for scientific research which has been approved by the prescribed authority for the purpose of section 35(i)(ii);

The deduction shall not be denied merely on the ground that subsequent to the payment of such sum by the assesee the approval to such association, university, college or other institution has been withdrawn;

any sum paid by the assessee in the previous year to a research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research provided that such association, university, college or institution is approved for the purposes of section 35(1)(iii);

any sum paid to an association or institution which has its object the undertaking of any programme of rural development to be used for carrying out any programme of rural development approved for the purposes of section 35CCA or to an association or institution which has its object the training of persons for implementing programmes of rural development, provided the assessee furnishes the certificate referred to in section 35CCA(2) or section 35CCA(2A), as per case may be;

any sum paid to a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme, provided the assessee furnishes a certificate referred to in section 35AC(2)(a);

The deduction shall not be denied merely on the ground that subsequent to the payment of such sum by the assesee the approval to such association or institution has been withdrawn;

ᜀ any sum paid to a rural development fund set up and notified by the Central Government for the purpose of section 35CCA(1)(c);

ᜀ any sum paid to the National Urban Poverty Eradication Fund set up and notified by the Central Government for the purposes section 35CCA(1)(d);

No deduction shall be allowed under this section in respect of any sum exceeding Rs. 10,000 unless such sum is paid by any mode other than cash; No deduction under this section to an assessee whose gross total income includes income which is chargeable under the head “Profit and gains of business or profession”;

Where assessee has incurred business loss which is included in its gross total income, deduction under section 80GGA will not be allowable [K. Anji Reddy v. DCIT [2013] 59 SOT 92 (Hyderabad Tribunal)(URO)].

If a deduction under this section is claimed and allowed for any assessment year in respect of payments referred above, no deduction shall be allowed in respect of such payments under any other provision of this act, for the same or any other assessment year.

Contributions to political parties [Section 80GGC]

In computing the total income of any person, other than local authority or every artificial juridical person wholly or partly funded by the Government, there shall be deducted any contribution made by him to political party or to an electoral trust under section 80GGC of the Act.

No deduction shall be allowed under this section in respect of any sum contributed by way of cash.

For this section, ‘political party’ means a political party registered under section 29A of the Representation of the People Act, 1951.

Deduction in respect of certain incomes

Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc. [Section 80-IA]

Section 80-IA provides for deduction in respect of profits and gains of the following undertakings.

Infrastructure facility
Telecommunication services
Industrial Park and power generation, transmission and distribution.
Reconstruction or revival of power generating plant (available only to Indian Company).

Infrastructure facility

An enterprise must carry on the business of (a) developing or (b) maintaining and operating or (c) developing maintaining and operating any infrastructure facility.

The term “infrastructure facility” means –

a road including toll road, a bridge or a rail system;

a highway project including housing or other activities being an integral part of the highway project;

a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;

a port, airport, inland waterway or inland port or navigational channel in sea.

An undertaking is owned by a company registered in India or by consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;

It has entered into an agreement with the Central Government or a state government, a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.

It has started or starts operating and maintaining the infrastructure facility on or after April 1, 1995. However, where an infrastructure facility is transferred on or after April 1, 1999 by an enterprise which developed such infrastructure facility to another enterprises for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, Local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period.

Nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after April 1, 2017.

100% profit is deductible for 10 consecutive assessment years, falling within a period of twenty assessment years beginning with the assessment year in which an assessee begins development, operating and maintaining infrastructure facility (applicable w.r.t clause a), b), and c) above).

By virtue of section 80IA(6), the profit of housing or other activities, which are integral part of a highway project, shall be computed on the basis and manner specified in rule 18BBE, then, such profit shall not be liable to tax if the profit is transferred to special reserve account and utilized for the highway project (excluding housing and other activities) before the expiry of the three years, following the year in which such amount was transferred to the reserve account. The amount not so utilized shall be chargeable to tax as income of the year in which such transfer to reserve account was made.

Telecommunication Services

Any undertaking which has started or starts providing telecommunication services whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broad band net work and internet services on or after April 1,1995 but on or before March 31,2005 shall be entitled for deduction to the extent of 100% of profits and gains of such business for the first five assessment years and thereafter 30% of such profits and gains for further five assessment years, commencing from the initial assessment year. Initial assessment year means the assessment year specified by the assessee at his option to be the initial year not falling beyond the fifteenth assessment year starting from the previous year in which the undertaking begins providing telecommunication services.

“Domestic Satellite” for this purpose, means a satellite owned and operated by an Indian company for providing telecommunication services.

Industrial Park:

Any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified for this purpose in accordance with any scheme framed and notified by the Central Government starts operating from April 1, 1997 but before March 31,2006, shall be entitled for deduction @ 100% of profit for ten years commencing from initial assessment year.

However, if an undertaking develops an industrial park on or after April 1, 1999 or a SEZ on or after April 1,2001 and transfers the operation and maintenance of such industrial park or such special park or such special economic zone, as the case may be to another undertaking (i.e. transferee undertaking), the deduction shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking.

In case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall apply to schemes framed and notified by central government and which starts operating from April 1, 1997 but before March 31, 2011

Power generation transmission and distribution

An undertaking is set up in any part of India for the generation or generation and distribution of power, if it begins to generate power at any time during April 1, 1993 and March 31, 2017 or it starts transmission or distribution by laying a network of new transmission or distribution line at any time between April 1, 1999 and March 31, 2017 shall be entitled for deduction @ 100% of profit for ten consecutive years, commencing from initial assessment year.

An undertaking which undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on April 1, 2004 and ending on March 31, 2017.

Substantial renovation and modernization means an increase in the plant and machinery in the network of transmission or distribution of lines by at least 50% of the book value of such plant and machinery as on April 1, 2004

In case transmission or distribution by laying a network of new transmission or distribution lines, the deduction shall be allowed only in relation to the profits derived from such activities.

However the undertaking set up for the generation or generation and distribution or transmission or distribution or substantial renovation and modernization of the existing network of transmission or distribution lines of power has to comply with following conditions:

It is not formed by splitting up or the reconstruction of a business already in existence. This condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as a result of (a) flood, typhoon, hurricane, cyclone, earth quake or other convulsion of the nature, or (b) riot or civil disturbance, or (c) accidental fire or explosion, or (d) action by any enemy or action taken in combating an enemy.

In T. Satish U. Pai v. CIT [1979] 119 ITR 877, the Karnataka High Court held that in order to hold that an industrial undertaking was formed by splitting up of a business already in existence, there must be some material to hold that either some asset of the existing business is divided and another business is set up from such splitting up of assets. Where there is no tangible evidence of transfer of any asset from an earlier business to the new business, a conclusion cannot be reached that the new business is formed by the splitting up of the business already in existence.

The aforesaid view has been accrued by the Supreme Court in Textile Machinery Corporation Ltd. [1977] 107 ITR 195. The Court observed that a new industrially recognizable unit of an assessee cannot be said to be re-construction of his old business where there is no transfer of any assets of old business to the new undertaking, which takes place when there is re-construction of old business. If, the new industrial undertaking is separate and independent production unit in the sense that the commodities produced or the result achieved are commercial tangible products and the undertaking carried on separately without complete absorption and loosing its identity in the old business, it is not to be treated as being formed by reconstruction of the old business.

It is not formed by the transfer of a new business to machinery or plant previously used for any purpose.

For this purposes, 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, viz.

such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India;

such machinery out plant is imported into India from any country outside India; and

no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of the Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the assessee.

Further, 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 20% of the total value of the machinery or plant used in the business, then, the condition specified hereinabove shall be deemed to have been complied with.

This condition of not formed by transfer to a new business of machinery or plant previously used for any purpose shall not apply also in case where machinery or plant has been previously used by State Electricity Board referred to in section 2(7) of Electricity Act 2003 whether or not such transfer is in pursuance of splitting up or reconstruction or reorganization of the board under Part XIII of that Act

Section 80-IA(5) provides that, notwithstanding anything contained in any other provisions of this Act, for the purpose of determining the quantum of deduction under section 80IA for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, the profits and gains from the eligible business shall 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 upto and including the assessment year for which the determination is to be made.

The CBDT vide Circular No. 1/2016 dated February 15, 2016 has clarified that the term ‘initial assessment year’ referred to in section 80-IA(5) would mean the first year opted by the assessee for claiming deduction under section 80-IA.

The deduction under section 80-IA is admissible only if the accounts of the undertaking have been audited by a Chartered Accountant and the audit report duly signed and verified by such accountant is furnished along with the return of income [Section. 80-IA(7)].

Section 80-IA(8) provides that, if any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services 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 or services as on the date of transfer, profit and gains of the eligible business shall be computed as if the transfer in either case, had been made at the market value of such goods or services as on that date. If, in the opinion of the Assessing Officer, the computation of the profits and gains of eligible business in the manner herein before specified exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. For this purpose ‘ market value’ in relation to any goods or services means the price that such goods or services would ordinarily fetch in the open market or the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA.

Section 80-IA(9) provides that where an amount of profits and gains of an industrial undertaking is claimed and allowed as deduction under section 80-IA, the profits to that extent shall not qualify for deduction for any assessment year under any other provisions of chapter VIA and in no case shall exceed the eligible profit of the industrial undertaking as the case may be.

Section 80-IA(10) provides that, if it appears to the Assessing Officer that owing to the close connection between the assessee carrying on the eligible business and any other person or for any other reason, the course of business 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, then the Assessing Officer shall take the amount of profit as may be reasonable deemed to have been derived therefrom. However, in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause (ii) of section 92F.

As per section 80-IA(12), where any undertaking of an Indian company which is entitled to the deduction is transferred before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger.

no deduction shall be admissible to the amalgamating or demerged company for the previous year in which the amalgamation or the demerger takes place, and

the amalgamated or the resulting company would be entitled to deduction for unexpired period, if the amalgamation or demerger had not taken place.

The benefit of deduction shall not be available to an enterprise under sub-section (12) which is transferred in the scheme of amalgamation or demerger on or after April 1, 2007

This section does not apply to SEZ notified on or after April 1, 2005

The Finance Act 2009 has inserted an explanation to section 80IA applicable w.r.e.f April 1, 2000 to clarify that nothing contained in this section shall apply to business which is in the nature of works contract awarded by any person (including the central or state government) and executed by the undertaking or enterprise.

(2) Deduction in respect of profits and gains by an undertaking or enterprise engaged in development of special economic zone [section 80-IAB]

Section 80-IAB provides that where the gross total income of an assessee, being a Developer, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after April 1,, 2005 under the Special Economic Zones Act, 2005, there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100% of the profits and gains derived from such business for ten consecutive assessment years.

The provisions of this section shall not apply to an assessee, being a developer, where the development of Special Economic Zone begins on or after April 1, 2017

The deduction may at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which a Special Economic Zone has been notified by the Central Government.

Where in computing the total income of any undertaking, being a Developer for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (13) of 80-IA i.e. SEZ notified on or after April 1, 2005 in accordance with 80-IA(4)(iii), the undertaking being the Developer shall be entitled to deduction referred to in this section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided this section.

Where an undertaking, being a Developer who develops a Special Economic Zone on or after April 1, 2005 and transfers the operation and maintenance of such Special Economic Zone to another Developer (hereafter in this section referred to as the transferee Developer), the deduction under sub-section (1) shall be allowed to such transferee Developer for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee Developer.

For the purposes of this section, the provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA shall apply to the Special Economic Zones for the purpose of allowing deductions under sub-section (1) of section 80-IAB.

“Developer” and “Special Economic Zone” shall have the same meanings respectively as assigned to them in clauses (g) and (za) of section 2 of the Special Economic Zones Act, 2005

(3) Deduction in respect of profits and gains from certain industrial undertaking other than infrastructure development undertakings [Section 80-IB]

For the purposes of section 80-IB, the following business are eligible business for the assessment year 2004/05 and thereafter the deduction shall be allowed in computing the total income of the assessee from such profits and gains of an amount equal to such percentage and such number of years as mentioned below.

Industrial undertaking manufacturing any.
Industrial backward state.
Industrial backward districts.
Business of a ship.
Hotel.
Multiplex theatre.
Convention center.
Scientific research & development.
Commercial production or refining mineral oil
Developing & building housing projects.
A cold chain facility for agriculture produce.
Business of processing, preservation, and packaging of fruits, vegetables or meat and meat products or poultry or marine, dairy products handling, storage and transportation of food grains.
Business of operating & maintaining a hospital in rural area.
Business of operating & maintaining a hospital located anywhere in India other than excluded area.

Industrial undertaking

In case of an industrial undertaking, the amount of deduction shall be @ 25% (30% where the assessee is a company) of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years (twelve consecutive assessment years where the assessee is a co-operative society) beginning with the initial assessment year, if:

it begins to manufacture or produce, articles or things or to operate such plant or plants before March 31,1995 or such further period as may be notified by the Central Government with reference to any particular undertaking.

it is an industrial undertaking being a small scale industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant before March 31,2002.

For this purpose, ‘small scale industrial undertaking’ means an industrial undertaking which is, as on the last day of the previous year, regarded as small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951.

Further ‘initial assessment year’ 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 cold chain facility or the ship is first brought into use or the business of the hotel starts functioning.

If conditions stipulated under section 80-IB are fulfilled, benefit of deduction cannot be denied to an assessee merely for reason that he did not claim that benefit in initial assessment year. [Praveen Soni v. CIT [2011] 333 ITR 324 (Delhi HC)]

Industrially backward State

Section 80-IB provides that the amount of deduction in case of an industrial undertaking in an industrially backward state in the Eight Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty five per cent (or thirty per cent in case assessee is a company) of the profits and gains derived from such industrial undertaking.

The total period of deduction should not exceed ten consecutive assessment years or twelve consecutive assessment years in case of a co-operative society, subject to condition that it begins to manufacture or produce article or thing or to operate its cold storage plant or plants before March 31, 2004.

However, in case of such industries in the North-Eastern Region as may be notified by the Central Government, the amount of deduction shall be 100% for a period of ten assessment years. No deduction under this sub-section shall be allowed from assessment year 2004-05 to an undertaking or enterprise referred in section 80-IC(2). In case of industrial undertaking in the state of Jammu & Kashmir, no deduction shall be allowed from assessment year 2012-13

In CIT v. Cement Distributors Ltd. Ltd. [1994] 208 ITR 355, the Delhi High Court observed that the word ‘derived’ has to be assigned a restricted meaning as compared to the words ‘attributable to’ or ‘referred to’ and, therefore, the assessee must establish that he has derived profits and gains from the industrial undertaking. In other words, the industrial undertaking must itself be the source of that profit and gain and it is not sufficient if a commercial connection is established between the profits and gains earned and the industrial undertaking. This view has been reiterated by the Supreme Court in Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278.

Industrially backward districts

An industrial undertaking, located in industrial backward districts notified by the Central Government as industrial backward district of category ‘A” shall be entitled for deduction of 100% profits and gains derived from an industrial undertaking located in such backward districts for five assessment years beginning with the initial assessment year and thereafter @ 25% (30% where the assessee is a company) of the profits and gains of an industrial undertaking. The total period of deduction shall not exceed ten consecutive assessment years or where the assessee is a co-operative society twelve consecutive assessment years. The industrial undertaking must begin to manufacture or produce article or things or to operate its cold storage plant or plants before March 31, 2004.

An industrial undertaking located in notified backward district of category ‘B’ shall be entitled for deduction @ 100% of the profits and gains derived from an industrial undertaking located in such backward district for three assessment years beginning with the initial assessment year and thereafter @ 25% (30% where the assessee is a company) of the profits and gains of the industrial undertaking. The total period of deduction shall not exceed eight consecutive assessment years (or where the assessee is a co-operative society, twelve consecutive assessment years). The industrial undertaking must begin to manufacture or produce articles or things or to operate its cold storage plant or plants before March 31, 2004.

Business of ship

In case of business of ships, the amount of deduction shall be 30% of the profits and gains derived from such ship for a period of 10 consecutive assessment years including the initial assessment year provided that the ship:

is owned by an Indian company and is wholly used for the purpose of the business carried on by 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
is brought into use by the Indian company at any time between April 1,1991 and March 31,1995.

Hotel

In case of any hotel, the amount of deduction shall be:

50% of the profits and gains derived from the business of such hotel for a period of ten consecutive years beginning from the initial assessment year as is located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may notify having regard to the need for development of infrastructure for tourism in any place and other relevant consideration and such hotel should start functioning before March 31, 2001.

Nothing contained in this clause shall apply to a hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai which has started functioning before March 31, 2001.

Further, for the purpose of this clause, where the said hotel has been approved by the prescribed authority before March 31, 1992 shall be deemed to have been approved for the purpose of this section.

30% of the profits and gains derived from the business of such hotel as is located in any place other than those mentioned in para (a) above, for a period of ten consecutive years beginning from the initial assessment year if such hotel has started functioning before March 31,2001

Nothing contained in this clause shall apply to a hotel located at a place within 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 or Mumbai which has started functioning before March 31, 2001

The deduction under this sub-section shall be available if:

the business of 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.
the business of hotel is owned and carried on by a company registered in India with a paid up capital of not less than Rs. 5,00,000/-.
the hotel is for the time being approved by the prescribed authority.

Any hotel approved by the prescribed authority before April 1, 1999 shall be deemed to have been approved under this sub section.

Multiplex theatre

In case of any multiplex theatre, the amount of deduction shall be:

50% of the profits and gains derived from the business of building owning and operating multiplex theatre, for a period of five consecutive years beginning from the initial assessment year in any place;
provided that a multiplex theatre should not be located at a place within the municipal jurisdiction (whether known as municipality, municipal corporation, notified area committee or a cantonment board or any name) of Chennai, Delhi, Kolkata or Mumbai.

The deduction shall be allowed only if:

such multiplex theater is constructed between April 1, 2002 and March 31, 2005;
the business of the multiplex theatre 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 any building or of any machinery or plant previously used for any purpose;
the assessee furnishes alongwith the return of income the report of an audit in Form no. 10CCB duly signed and verified by a chartered accountant, certifying that the deduction has been correctly claimed.

“Multiplex theater” means a building of a prescribed area comprising of two or more cinema theatres and commercial shops of such size and number and having such facilities and amenities as prescribed in rule 18DB.

Rule 18DB of the Income tax Rules 1962 prescribes, for the purpose of sub section 7(A) and clause (da) of sub section (14) of section 80IB that the multiplex theatre shall have the following facilities and amenities

The total build-up area occupied by all the cinema theatres comprised in the multiplex shall not be less than 22,500 square feet, and shall consist at least 50% of the total build-up area of the multiplex excluding the area specified for parking.

The multiplex theatres shall be comprised of at least three cinema theatres and at least three commercial shops.

Total seating capacity of all the cinema theatre comprised in the multiplex shall be at least 900 seats, and no cinema theatre should consist of less than 100 seats.

The total building area occupied by all commercial shops comprised in the multiplex theatre shall not be less than 300 sq. ft. and the minimum built up area of each shop shall not be less than 250 sq. ft.

There shall be at least one lobby or foyer in the cinema theatre, whose area shall be at least 3 sq. ft. per seat.

The multiplex theatre shall have adequate parking, toilet blocks and other public conveniences, as per local building or cinema regulations and shall also fulfill all local building or cinema regulations in respect of fire and safety.

The cinema theatre comprised in the multiplex theatre shall use modern stereo projection systems with at least two screen speakers per screen and one surround speaker per 25 seats in a theatre. The expression ‘modern stereo projection system’ shall consists of Xerox lamp, plattex and digital sound systems.

The cinema theatres shall use seats with seat pitch not less than 20” (center to center).

Ticketing system employed by the cinema theatre shall be fully computerized.

The multiplex theatre cinema shall be centrally air-conditioned.

Convention Center

In case of any convention centre, the amount of deduction shall be:

50% of the profits and gains derived, by the assessee from the business of building, owning and operating a convention centre for a period of five consecutive years beginning from the initial assessment year.

The deduction shall be allowable only if –

such convention centre is constructed between April 1,2003 and March 31, 2005
the business of the convention centre is not formed by the splitting up; or reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machinery or plant previously used for any purpose.

The assessee furnishes along with the return of income the report of an audit in Form no. 10CCBA duly signed and verified by a chartered accountant, certifying that the deduction has been correctly claimed.

‘Convention centre ’ means a building of prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities as may be prescribed. Rule 18DC of the Income tax Rules 1962 prescribes the conditions for the convention centre.

Scientific research and development

In case of any company carrying on scientific research and development, the amount of deduction, shall be 100% of the profits and gains of such business for a period of five assessment years beginning from the initial assessment year if such company –

is registered in India;
has the main object of scientific and industrial research and development;
is for the time being approved by the Secretary Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India at any time after March 31, 2000 but before April 1, 2007; and
fulfills the following conditions; viz:
has adequate infrastructure such as laboratory facilities, qualified manpower, scale-up facilities and prototype development facilities for undertaking, scientific research and development of its own;
has a well formulated research and development programme comprising of time bound research and development projects with proper mechanism for selection and review of the projects or programme.
is engaged exclusively in scientific research and development activities leading to technology development, improvement of technology and transfer of technology developed by themselves;
submits the annual return alongwith statement of accounts and annual report within eight months after the close of each accounting year to the prescribed authority.

In the case of a company carrying on scientific and industrial research and development, initial assessment year means the assessment year relevant to the previous year in which the company is approved by the prescribed authority.

Mineral Oil

In the case of production or refining of mineral oil, the amount of deduction to an undertaking shall be 100% of the profits for a period of seven consecutive assessment years including the initial assessment year from the commencement of commercial production. The deduction is available if the undertaking fulfills any of the following conditions:

is located in North-Eastern Region and has begun or begins commercial production of mineral oil before April 1, 1997;
is located in any part of India and has begun or begins commercial production of mineral oil on or after April 1, 1997 but not later than March 31, 2017;
is engaged in refining of mineral oil and begins such refining on or after October 1, 1998 but not later than March 31, 2012.
is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereafter referred to as “NELP-VIII”) under the New Exploration

Licencing Policy announced by the Government of India vide Resolution No.O-19018/22/95-ONG.DO.VL, dated February 10, 1999 and begins commercial production of natural gas on or after April 1, 2009 but not later than March 31, 2017;

is engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts for Coal Bed Methane blocks and begins commercial production of natural gas on or after April 1, 2009 but not later than March 31, 2017.

For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated February 10, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by Central or a State Government in any other manner, shall be treated as a single “undertaking”.

Housing project

In case of an undertaking developing and building housing projects approved before March 31, 2008 by a local authority, the amount of deduction shall be 100% of the profits derived from such housing projects if-

such undertaking has commenced development and construction of housing project on or after October 1,1998 and completes such construction on or before the dates provided below:

(i) in a case where a housing project has been approved by the local authority before April 1, 2004, on or before March 31, 2008;

(ii) in a case where a housing project has been, or, is approved by the local authority on or after April 1, 2004 but not later than March 31, 2007 , within four years from the end of the financial year in which the housing project is approved by the local authority;

(iii) in a case where a housing project has been approved by the local authority on or after April 1, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.

For the purposes of this clause,—

(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;

(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;

the project is on the size of a plot of land which has a minimum area of one acre, and the conditions mentioned in clause (a) or clause (b) shall not apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the CBDT.

the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty five kilometers from the municipal limit of these cities and one thousand and five hundred square feet at any other place.

the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher;

not more than one residential unit in the housing project is allotted to any person not being an individual; and

in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:—

the individual or the spouse or the minor children of such individual, the Hindu undivided family in which such individual is the karta,
any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.]

Nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).

Cold chain facility for agriculture produce

In case of industrial undertaking carrying on business of setting up and operating a cold chain facility for agricultural produce, the amount of deduction, shall be 100% of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter, 25% (30% where the assessee is a company) of the profits and gains derived from the operation of such facility in a manner that the total period of deduction does not exceed ten consecutive assessment years (twelve consecutive assessment years where the assessee is a co-operative society) and subject to condition that it has began to operate such facility on or after April 1, 1999 but before April 1, 2004.

(L) Business of processing, preservation and packaging of fruits or vegetables or meat products or poultry or marine or dairy products or integrated business of handling, storage and transportation of food grains

In case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat products or poultry or marine or dairy products or integrated business of handling, storage and transportation of food grains, the amount of deduction shall be 100% of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter 25% (30% where the assessee is a company) of the profits and gains derived from the operation of such business for consecutive ten assessment years, subject to fulfillment of the condition that it begins to operate such business on or after April 1, 2001.

The provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the April 1, 2009.

(M) Business of operating & maintaining a hospital in rural area

The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area shall be hundred per cent of the profits and gains of such business for a period of five consecutive assessment years, beginning with the initial assessment year, if—

(i) such hospital is constructed at any time during the period beginning on October 1, 2004 and ending on March 31, 2008;

(ii) the hospital has at least one hundred beds for patients;

(iii) the construction of the hospital is in accordance with the regulations, for the time being in force, of the local authority; and

(iv) the assessee furnishes along with the return of income, the report of audit in such form and containing such particulars as prescribed in Rule 18DD, Form no. 10CCBC, and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed.

A hospital shall be deemed to have been constructed on the date on which a completion certificate in respect of such construction is issued by the concerned local authority.

(N) Business of operating & maintaining a hospital located anywhere in India other than excluded area.

The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India, other than the excluded area, shall be hundred per cent of the profits and gains derived from such business for a period of five consecutive assessment years, beginning with the initial assessment year, if—

(i) the hospital is constructed and has started or starts functioning at any time during the period beginning on April 1, 2008 and ending on March 31, 2013;

(ii) the hospital has at least one hundred beds for patients;

(iii) the construction of the hospital is in accordance with the regulations or bye-laws of the local authority; and

(iv) the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as prescribed in rule 18DDA, Form no. 10CCBD and duly signed and verified by an accountant, as defined in the Explanation to sub-section (2) of section 288, certifying that the deduction has been correctly claimed.

All other provisions such as computation of income, audit report, amalgamation, re-computation of profits by the Assessing Officer, consequences of merger/amalgamation etc. are applicable similar to section 80-IA.

(4) Deductions in respect of profits and gains from housing projects [Section 80-IBA]

Section 80-IBA provides that where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business.

A housing project shall be a project which fulfils the following conditions, namely:

the project is approved by the competent authority after June 1, 2016, but on or before March 31, 2019;

the project is completed within a period of 5 years from the date of approval by the competent authority:

Provided that:

where the approval in respect of a housing project is obtained more than once, the project shall be deemed to have been approved on the date on which the building plan of such housing project was first approved by the competent authority; and
the project shall be deemed to have been completed when a certificate of completion of project as a whole is obtained in writing from the competent authority;
the carpet area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate carpet area;
the project is on a plot of land measuring not less than—

1000 square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai; or
2000 square metres, where the project is located in any other place;

the project is the only housing project on the plot of land as specified in clause (d);
the carpet area of the residential unit comprised in the housing project does not exceed—

30 square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai; or
60 square metres, where the project is located in any other place;

where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual;
the project utilises—

not less than 90% of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or
not less than eighty per cent of such floor area ratio where such project is located in any place other than the place referred to in sub-clause (i); and
the assessee maintains separate books of account in respect of the housing project.

Nothing contained in this section shall apply to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).

Where the housing project is not completed within the period specified and in respect of which a deduction has been claimed and allowed under this section, the total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assessee chargeable under the head "Profits and gains of business or profession" of the previous year in which the period for completion so expires.

Where any amount is claimed and allowed under this section for any assessment year, deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act.

(5) Special provisions in respect of certain undertakings or enterprises in certain special category states. [Section 80-IC]

Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business mentioned below shall be entitled for deduction, from such profits and gains for ten consecutive assessment years from the initial assessment year i.e. the undertaking or enterprise begins to manufacture or produce articles or things or commences operation or complete substantial expansion:

Which has began or begins to manufacture or produce any article or things not being any article or things specified in Thirteenth Schedule or which manufactures or produces any article or thing not being any article or thing specified in the Thirteenth Schedule an undertakes substantial expansion during the period beginning

Sr No	Particulars	Percentage of profit of such under- taking	Number of years ommencing with the initial assessment year
(i)	Between December 23, 2002 and April 1, 2007, in any Export Processing Zone or Integrated Infrastructure Development centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by CBDT in accordance with the scheme framed and notified by the Central Government in this regards, in the state of Sikkim; or	100%	10
(ii)	Between January 7, 2003 and April 1, 2012 in any Export Processing Zone or Integrated Infrastructure
	Development Centre or Industrial Growth centre or Industrial Estate or Industrial Park or Software Technology park or Industrial Area or Theme Park as notified by CBDT in accordance with the scheme framed and notified by the Central Government in this regard in the State of Himachal Pradesh or the state of Uttarachal	100% 25% (30%) in case of	5 5
(iii)	Between December 24, 1997 and April 1, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park as notified by the CBDT in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States	100%	10%

Infrastructure Development centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by CBDT in accordance with the scheme framed and notified by the Central Government in this regards, in the state of Sikkim; or

Between January 7, 2003 and April 1, 2012 in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth centre or Industrial Estate or Industrial Park or Software Technology park or Industrial Area or Theme Park as notified by CBDT in accordance with the scheme framed and notified by the Central Government in this regard in the State of Himachal Pradesh or the state of Uttarachal

Between December 24, 1997 and April 1, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park as notified by the CBDT in accordance with the scheme framed and notified

Percentage Number of of profit of years such commencing under- with the taking initial assessment year

		Percentage of profit of such undertaking	Number of years commencing with the initial assessment year
(i)	Between December 23, 2002 and April 2007 in the State of Sikkim	100%	10
(ii)	Between January 7, 2003 and April 2012 in State of Himachal Pradesh or State of Uttarachal	100% 25% (30%) in case of Company	5 5
(iii)	Between December 24, 1997 and April 1, 2007 in any of the North Eastern State	100%	10%

Which has began or begins to manufacture or produce any article or thing specified in the Fourteenth Schedule or commences any operation specified in that schedule, or which manufactures or produces any article or thing specified in the Fourteenth Schedule or commences any operation specified in that schedule and undertakes substantial expansion during the period beginning –

For the purpose of this section, ‘substantial expansion’, means increase in the investment in the plant and machinery by at least 50% of the book value of plant and machinery i.e. before taking depreciation of any year, as on the first day of the previous year in which the substantial expansion is undertaken.

All other provisions such as splitting and reconstruction of business computation of income, audit report, amalgamation, re-computation of profits by the Assessing Officer, consequences of merger/amalgamation etc. are applicable similar to section 80-IA.

Losses of section 80-IC eligible industrial undertaking can be set off against other taxable business income. [Wipro Ltd. v. ACIT [2013] 55 SOT 3 (Bangalore Tribunal)(URO)]

(6) Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste [Section 80JJA]

Section 80JJA provides that if the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power or producing bio fertilizers, bio-pesticides or other biological agents or for producing bio-gas or making pallets or briquettes fuel or organic manure, shall be entitled for a deduction of an amount equal to the whole of such profits and gains of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences.

(7) Deduction in respect of employment of new employees [Section 80JJAA]

Section 80JJAA provides for 30% of the additional employee cost for three assessment years (including the assessment year in which the new employment is provided) to all assessees covered under tax audit provisions as per section 44AB of the Act.

Additionally, section 80JJAA(2) also lays down the following specific scenarios in which the above deduction will not be available:

If the business is formed by splitting up, or the reconstruction, of an existing business; or

If the business is acquired by the assessee by way of transfer from any other person or as a result of any business reorganisation; or

Unless the assessee furnishes alongwith the return of income the report of the accountant, as defined in the Explanation to section 288, giving such particulars in the report as may be prescribed.

Meaning of additional employee under the section is provided as-

"additional employee" means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include,—

an employee whose total emoluments are more than Rs. 25,000 per month; or
an employee for whom the entire contribution is paid by the Government under the Employees' Pension Scheme notified in accordance with the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or
an employee employed for a period of less than 240 days during the previous year (150 days in respect of specific industries viz. the manufacturer of apparels or footwear or leather products); or
an employee who does not participate in the recognised provident fund;

Finance Act 2018 made an amendment to the above provision to include that if the condition of 240/150 days as the case may be is not completed in the first year of employment, but is complied with in the immediately succeeding year, the deduction under this section shall be available from such succeeding year considering that the employee deemed to have been employed in the said succeeding year.

Similarly, one may also need to borne in mind the meaning of ‘additional employee cost’ and ‘emoluments’ while computing the deduction under section 80JJAA of the Act.

(7) Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre [Section 80LA]

Section 80LA(1) provides that where the gross total income of an assessee,—

being a scheduled bank, or, any bank incorporated by or under the laws of a country outside India; and having an Offshore Banking Unit in a Special Economic Zone; or

being a Unit of an International Financial Services Centre,

includes any income referred to in sub-section (2), there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such income, of an amount equal to—

100% of such income for five consecutive assessment years beginning with the assessment year relevant to the previous year in which the permission, under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949) or permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other relevant law was obtained, and thereafter;
50% of such income for five consecutive assessment years.

The income referred to in sub-section (1) shall be the income—

from an Offshore Banking Unit in a Special Economic Zone; or
from the business referred to in sub-section (1) of section 6 of the Banking Regulation Act, 1949 (10 of 1949) with an undertaking located in a Special Economic Zone or any other undertaking which develops, develops and operates or develops, operates and maintains a Special Economic Zone; or
from any Unit of the International Financial Services Centre from its business for which it has been approved for setting up in such a Centre in a Special Economic Zone. [Section 80LA(2)]

As per section 80LA(3), no deduction under this section shall be allowed unless the assessee furnishes along with the return of income,—

(i) the report, in Form no. 10CCF of an accountant certifying that the deduction has been correctly claimed in accordance with the provisions of this section; and

(ii) a copy of the permission obtained under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949).

(8) Deduction on interest on deposits in saving account (not being time deposits) [Section 80TTA]

This deduction is available to Individual/HUF. The amount subject to maximum deduction is Rs. 10,000/-. The conditions for deduction are as below:

The saving account is with the banking co., co-op society or post office

Where the interest is from saving a/c held by, or on behalf of a firm, AOP or BOI, no deduction to be allowed in respect of interest in computing the total income of any partner of the firm, or any member of AOP or BOI

Other deductions available in respect of all assesses (including non-residents):

Deduction in respect of profits and gains from business of hotels and convention centers in specified area [Section 80-ID]

Special provisions in respect of certain undertakings in north eastern states [Section 80-IE]