Section 80 IA of Income Tax Act "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc."
80-IA. (1) Where the gross total income of an assessee
includes any profits and gains derived by an undertaking or
an enterprise from any business referred to in sub-section
(4) (such business being hereinafter referred to as the
eligible business), 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 of
an amount equal to hundred per cent of the profits and gains
derived from such business for ten consecutive assessment
years.
(2) The deduction specified in sub-section (1) 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 the undertaking or the enterprise
develops and begins to operate any infrastructure facility
or starts providing telecommunication service or develops an
industrial park or develops a special economic zone referred
to in clause (iii) of sub-section (4) or generates power or
commences transmission or distribution of power or
undertakes substantial renovation and modernisation of the
existing transmission or distribution lines:
Provided that where the assessee develops or operates and
maintains or develops, operates and maintains any
infrastructure facility referred to in clause (a) or clause
(b) or clause (c) of the Explanation to clause (i) of
sub-section (4), the provisions of this sub-section shall
have effect as if for the words "fifteen years", the words
"twenty years" had been substituted.
(2A) Notwithstanding anything contained in sub-section (1)
or sub-section (2), the deduction in computing the total
income of an undertaking providing telecommunication
services, specified in clause (ii) of sub-section (4), shall
be hundred per cent of the profits and gains of the eligible
business for the first five assessment years commencing at
any time during the periods as specified in sub-section (2)
and thereafter, thirty per cent of such profits and gains
for further five assessment years.
(3) This section applies to an undertaking referred to in
clause (ii) or clause (iv) of sub-section (4) which fulfils
all the following conditions, namely :-
(i) it is not formed by splitting up, or the reconstruction,
of a business already in existence :
Provided that this condition shall not apply in respect of
an 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 is referred to in
section 33B, in the circumstances and within the period
specified in that section;
(ii) it is not formed by the transfer to a new business of
machinery or plant previously used for any purpose:
Provided that nothing contained in this sub-section shall
apply in the case of transfer, either in whole or in part,
of machinery or plant previously used by a State Electricity
Board referred to in clause (7) of section 2 of the
Electricity Act, 2003 (36 of 2003), whether or not such
transfer is in pursuance of the splitting up or
reconstruction or reorganisation of the Board under Part
XIII of that Act.
Explanation 1.-For the purposes of clause (ii), 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 machinery or plant by the assessee.
Explanation 2.-Where in the case of an 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.
(4) This section applies to-
(i) any enterprise carrying on the business of (i)
developing or (ii) operating and maintaining or (iii)
developing, operating and maintaining any infrastructure
facility which fulfils all the following conditions, namely
:-
(a) it is owned by a company registered in India or by a
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;
(b) it has entered into an agreement with the Central
Government or a State Government or 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;
(c) it has started or starts operating and maintaining the
infrastructure facility on or after the 1st day of April,
1995:
Provided that where an infrastructure facility is
transferred on or after the 1st day of April, 1999 by an
enterprise which developed such infrastructure facility
(hereafter referred to in this section as the transferor
enterprise) to another enterprise (hereafter in this section
referred to as the transferee enterprise) 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 during which the transferor enterprise
would have been entitled to the deduction, if the transfer
had not taken place:
Provided further that 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 the 1st day of April, 2017.
Explanation.-For the purposes of this clause,
"infrastructure facility" means-
(a) a road including toll road, a bridge or a rail system;
(b) a highway project including housing or other activities
being an integral part of the highway project;
(c) a water supply project, water treatment system,
irrigation project, sanitation and sewerage system or solid
waste management system;
(d) a port, airport, inland waterway, inland port or
navigational channel in the sea;
(ii) any undertaking which has started or starts providing
telecommunication services, whether basic or cellular,
including radio paging, domestic satellite service, network
of trunking, broadband network and internet services on or
after the 1st day of April, 1995, but on or before the 31st
day of March, 2005.
Explanation.-For the purposes of this clause, "domestic
satellite" means a satellite owned and operated by an Indian
company for providing telecommunication service;
(iii) any undertaking which develops, develops and operates
or maintains and operates an industrial park or special
economic zone notified by the Central Government in
accordance with the scheme framed and notified by that
Government for the period beginning on the 1st day of April,
1997 and ending on the 31st day of March, 2006 :
Provided that in a case where an undertaking develops an
industrial park on or after the 1st day of April, 1999 or a
special economic zone on or after the 1st day of April, 2001
and transfers the operation and maintenance of such
industrial park or such special economic zone, as the case
may be, to another undertaking (hereafter in this section
referred to as the transferee undertaking), the deduction
under sub-section (1) 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 :
Provided further that in the case of any undertaking which
develops, develops and operates or maintains and operates an
industrial park, the provisions of this clause shall have
effect as if for the figures, letters and words "31st day of
March, 2006", the figures, letters and words "31st day of
March, 2011" had been substituted;
(iv) an undertaking which,-
(a) 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 the period beginning on
the 1st day of April, 1993 and ending on the 31st day of
March, 2017;
(b) starts transmission or distribution by laying a network
of new transmission or distribution lines at any time during
the period beginning on the 1st day of April, 1999 and
ending on the 31st day of March, 2017:
Provided that the deduction under this section to an
undertaking under sub-clause (b) shall be allowed only in
relation to the profits derived from laying of such network
of new lines for transmission or distribution;
(c) undertakes substantial renovation and modernisation of
the existing network of transmission or distribution lines
at any time during the period beginning on the 1st day of
April, 2004 and ending on the 31st day of March, 2017.
Explanation.-For the purposes of this sub-clause,
"substantial renovation and modernisation" means an increase
in the plant and machinery in the network of transmission or
distribution lines by at least fifty per cent of the book
value of such plant and machinery as on the 1st day of
April, 2004;
(v) an undertaking owned by an Indian company and set up for
reconstruction or revival of a power generating plant, if-
(a) such Indian company is formed before the 30th day of
November, 2005 with majority equity participation by public
sector companies for the purposes of enforcing the security
interest of the lenders to the company owning the power
generating plant and such Indian company is notified before
the 31st day of December, 2005 by the Central Government for
the purposes of this clause;
(b) such undertaking begins to generate or transmit or
distribute power before the 31st day of March, 2011;
(vi) [***]
(5) Notwithstanding anything contained in any other
provision of this Act, the profits and gains of an eligible
business to which the provisions of sub-section (1) apply
shall, for the purposes of determining the quantum of
deduction under that sub-section for the assessment year
immediately succeeding the initial assessment year or any
subsequent assessment year, be computed as if such eligible
business were the only source of income of the assessee
during the previous year relevant to the initial assessment
year and to every subsequent assessment year up to and
including the assessment year for which the determination is
to be made.
(6) Notwithstanding anything contained in sub-section (4),
where housing or other activities are an integral part of
the highway project and the profits of which are computed on
such basis and manner as may be prescribed, such profit
shall not be liable to tax where the profit has been
transferred to a special reserve account and the same is
actually utilised for the highway project excluding housing
and other activities before the expiry of three years
following the year in which such amount was transferred to
the reserve account; and the amount remaining unutilised
shall be chargeable to tax as income of the year in which
such transfer to reserve account took place.
(7) The deduction under sub-section (1) from profits and
gains derived from an undertaking shall not be admissible
unless the accounts of the 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,
30[before the specified date referred to in section 44AB and
the assessee furnishes by that date] the report of such
audit in the prescribed form duly signed and verified by
such accountant.
(8) Where 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 the transfer, then, for the purposes of
the deduction under this section, the profits and gains of
such eligible business shall be computed as if the transfer,
in either case, had been made at the market value of such
goods or services as on that date:
Provided that where, in the opinion of the Assessing
Officer, the computation of the profits and gains of the
eligible business in the manner hereinbefore specified
presents exceptional difficulties, the Assessing Officer may
compute such profits and gains on such reasonable basis as
he may deem fit.
Explanation.-For the purposes of this sub-section, "market
value", in relation to any goods or services, means-
(i) the price that such goods or services would ordinarily
fetch in the open market; or
(ii) 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.
(9) Where any amount of profits and gains of an undertaking
or of an enterprise in the case of an assessee is claimed
and allowed under this section for any assessment year,
deduction to the extent of such profits and gains shall not
be allowed under any other provisions of this Chapter under
the heading "C.-Deductions in respect of certain incomes",
and shall in no case exceed the profits and gains of such
eligible business of undertaking or enterprise, as the case
may be.
(10) Where it appears to the Assessing Officer that, owing
to the close connection between the assessee carrying on the
eligible business to which this section applies and any
other person, or for any other reason, the course of
business between them is so arranged that the business
transacted between them produces to the assessee more than
the ordinary profits which might be expected to arise in
such eligible business, the Assessing Officer shall, in
computing the profits and gains of such eligible business
for the purposes of the deduction under this section, take
the amount of profits as may be reasonably deemed to have
been derived therefrom:
Provided that 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.
(11) The Central Government may, after making such inquiry
as it may think fit, direct, by notification in the Official
Gazette, that the exemption conferred by this section shall
not apply to any class of industrial undertaking or
enterprise with effect from such date as it may specify in
the notification.
(12) Where any undertaking of an Indian company which is
entitled to the deduction under this section is transferred,
before the expiry of the period specified in this section,
to another Indian company in a scheme of amalgamation or
demerger-
(a) no deduction shall be admissible under this section to
the amalgamating or the demerged company for the previous
year in which the amalgamation or the demerger takes place;
and
(b) the provisions of this section shall, as far as may be,
apply to the amalgamated or the resulting company as they
would have applied to the amalgamating or the demerged
company if the amalgamation or demerger had not taken place.
(12A) Nothing contained in sub-section (12) shall apply to
any enterprise or undertaking which is transferred in a
scheme of amalgamation or demerger on or after the 1st day
of April, 2007.
(13) Nothing contained in this section shall apply to any
Special Economic Zones notified on or after the 1st day of
April, 2005 in accordance with the scheme referred to in
sub-clause (iii) of clause (c) of sub-section (4).
Explanation.-For the removal of doubts, it is hereby
declared that nothing contained in this section shall apply
in relation to a business referred to in sub-section (4)
which is in the nature of a works contract awarded by any
person (including the Central or State Government) and
executed by the undertaking or enterprise referred to in
sub-section (1).