Section 80 I of Income Tax Act "Deduction in respect of profits and gains from industrial undertakings after a certain date, etc"
80-I. (1) Where the gross total income of an assessee
includes any profits and gains derived from an industrial
undertaking or a ship or the business of a hotel or the
business of repairs to ocean-going vessels or other powered
craft, 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 twenty per cent thereof :
Provided that in the case of an assessee, being a company,
the provisions of this sub-section shall have effect in
relation to profits and gains derived from an industrial
undertaking or a ship or the business of a hotel as if for
the words "twenty per cent", the words "twenty-five per
cent" had been substituted.
(1A) Notwithstanding anything contained in sub-section
(1), in relation to any profits and gains derived by an
assessee from—
(i) an industrial undertaking which begins to manufacture or
produce articles or things or to operate its cold storage
plant or plants; or
(ii) a ship which is first brought into use; or
(iii) the business of a hotel which starts functioning,
on or after the 1st day of April, 1990, but before the 1st
day of April, 1991, 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 twenty-five per
cent thereof :
Provided that in the case of an assessee, being a company,
the provisions of this sub-section shall have effect in
relation to profits and gains derived from an industrial
undertaking or a ship or the business of a hotel as if for
the words "twenty-five per cent", the words "thirty per
cent" had been substituted.
(2) This section applies to any industrial undertaking which
fulfils all the following conditions, namely :—
(i) it is not formed by the splitting up, or the
reconstruction, of a business already in existence;
(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, and begins to
manufacture or produce articles or things or to operate such
plant or plants, at any time within the period of ten years
next following the 31st day of March, 1981, or such further
period as the Central Government may, by notification in the
Official Gazette, specify with reference to any particular
industrial undertaking;
(iv) 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 :
Provided that the condition in clause (i) shall not apply in
respect of any 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 :
Provided further that the condition in clause (iii) shall,
in relation to a small-scale industrial undertaking, apply
as if the words "not being any article or thing specified in
the list in the Eleventh Schedule" had been omitted.
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.
Explanation 3.—For the purposes of this sub-section,
"small-scale industrial undertaking" shall have the same
meaning as in clause (b) of the Explanation below
sub-section (8) of section 80HHA.
(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 within the period of ten years next following the 1st
day of April, 1981.
(4) This section applies to the business of any hotel, where
all the following conditions 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 hotel is for the time being approved for the
purposes of this sub-section by the Central Government;
(iv) the business of the hotel starts functioning after the
31st day of March, 1981, but before the 1st day of April,
1991.
(4A) This section applies to the business of repairs to
ocean-going vessels or other powered craft which fulfils all
the following conditions, namely :—
(i) the business is not formed by the splitting up, or the
reconstruction, of a business already in existence;
(ii) it is not formed by the transfer to a new business of
machinery or plant previously used for any purpose;
(iii) it is carried on by an Indian company and the work by
way of repairs to ocean-going vessels or other powered craft
has been commenced by such company after the 31st day of
March, 1983, but before the 1st day of April, 1988; and
(iv) it is for the time being approved for the purposes of
this sub-section by the Central Government.
(5) The deduction specified in sub-section (1) shall be
allowed in computing the total income in respect of 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 or the company commences
work by way of repairs to ocean-going vessels or other
powered craft (such assessment year being hereafter in this
section referred to as the initial assessment year) and each
of the seven assessment years immediately succeeding the
initial assessment year:
Provided that in the case of an assessee, being a
co-operative society, the provisions of this sub-section
shall have effect as if for the words "seven assessment
years", the words "nine assessment years" had been
substituted :
Provided further that in the case of an assessee carrying on
the business of repairs to ocean-going vessels or other
powered craft, the provisions of this sub-section shall have
effect as if for the words "seven assessment years", the
words "four assessment years" had been substituted:
Provided also that in the case of—
(i) an industrial undertaking which begins to manufacture or
produce articles or things or to operate its cold storage
plant or plants; or
(ii) a ship which is first brought into use; or
(iii) the business of a hotel which starts functioning,
on or after the 1st day of April, 1990 but before the 1st
day of April, 1991, provisions of this sub-section shall
have effect as if for the words "seven assessment years",
the words "nine assessment years" had been substituted :
Provided also that in the case of an assessee, being a
co-operative society, deriving profits and gains from an
industrial undertaking or a ship or a hotel referred to in
the third proviso, the provisions of that proviso shall have
effect as if for the words "nine assessment years", the
words "eleven assessment years" had been substituted.
(6) Notwithstanding anything contained in any other
provision of this Act, the profits and gains of an
industrial undertaking or a ship or the business of a hotel
or the business of repairs to ocean-going vessels or other
powered craft to which the provisions of sub-section (1)
apply shall, for the purposes of determining the quantum of
deduction under sub-section (1) for the assessment year
immediately succeeding the initial assessment year or any
subsequent assessment year, be computed as if such
industrial undertaking or ship or the business of the hotel
or the business of repairs to ocean-going vessels or other
powered craft were the only source of income of the assessee
during the previous years 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.
(7) 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 duly signed and verified
by such accountant.
(8) Where any goods held for the purposes of the business of
the industrial undertaking or the hotel or the operation of
the ship or the business of repairs to ocean-going vessels
or other powered craft 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 business of the industrial
undertaking or the hotel or the operation of the ship or the
business of repairs to ocean-going vessels or other powered
craft and, in either case, the consideration, if any, for
such transfer as recorded in the accounts of the business of
the industrial undertaking or the hotel or the operation of
the ship or the business of repairs to ocean-going vessels
or other powered craft 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 the industrial undertaking or the
business of the hotel or the operation of the ship or the
business of repairs to ocean-going vessels or other powered
craft 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
industrial undertaking or the business of the hotel or the
operation of the ship or the business of repairs to
ocean-going vessels or other powered craft 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.
(9) Where it appears to the Assessing Officer that, owing to
the close connection between the assessee carrying on the
business of the industrial undertaking or the hotel or the
operation of the ship or the business of repairs to
ocean-going vessels or other powered craft 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 the business of the industrial
undertaking or the hotel or the operation of the ship or the
business of repairs to ocean-going vessels or other powered
craft, the Assessing Officer shall, in computing the profits
and gains of the industrial undertaking or the hotel or the
ship or the business of repairs to ocean-going vessels or
other powered craft for the purposes of the deduction under
this section, take the amount of profits as may be
reasonably deemed to have been derived therefrom.
(10) 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.