Section 80HH of Income Tax Act "Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas"
80HH. (1) Where the gross total income of an assessee
includes any profits and gains derived from an industrial
undertaking, or the business of a hotel, 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.
(2) This section applies to any industrial undertaking which
fulfils all the following conditions, namely :-
(i) it has begun or begins to manufacture or produce
articles after the 31st day of December, 1970 but before the
1st day of April, 1990, in any backward area;
(ii) it is not formed by the splitting up, or the
reconstruction, of a business already in existence in any
backward area :
Provided that this condition 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;
(iii) it is not formed by the transfer to a new business of
machinery or plant previously used for any purpose in any
backward area;
(iv) it employs ten or more workers in a manufacturing
process carried on with the aid of power, or employs twenty
or more workers in a manufacturing process carried on
without the aid of power.
Explanation.-Where any machinery or plant or any part
thereof previously used for any purpose in any backward area
is transferred to a new business in that area or in any
other backward area 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 (iii) of this
sub-section, the condition specified therein shall be deemed
to have been fulfilled.
(3) This section applies to the business of any hotel, where
all the following conditions are fulfilled, namely :-
(i) the business of the hotel has started or starts
functioning after the 31st day of December, 1970 but before
the 1st day of April, 1990, in any backward area;
(ii) the business of the hotel is not formed by the
splitting up, or the reconstruction, of a business already
in existence;
(iii) the hotel is for the time being approved for the
purposes of this sub-section by the Central Government.
(4) The deduction specified in sub-section (1) shall be
allowed in computing the total income in respect of each of
the ten assessment years beginning with the assessment year
relevant to the previous year in which the industrial
undertaking begins to manufacture or produce articles or the
business of the hotel starts functioning:
Provided that,-
(i) in the case of an industrial undertaking which has begun
to manufacture or produce articles, and
(ii) in the case of the business of a hotel which has
started functioning,
after the 31st day of December, 1970, but before the 1st day
of April, 1973, this sub-section shall have effect as if the
reference to ten assessment years were a reference to ten
assessment years as reduced by the number of assessment
years which expired before the 1st day of April, 1974.
(5) Where the assessee is a person other than a company or a
co-operative society, the deduction under sub-section (1)
shall not be admissible unless the accounts of the
industrial undertaking or the business of the hotel 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.
(6) Where any goods held for the purposes of the business of
the industrial undertaking or the hotel 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 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 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
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 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.
(7) 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 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, the Assessing Officer shall, in
computing the profits and gains of the industrial
undertaking or the hotel for the purposes of the deduction
under this section, take the amount of profits as may be
reasonably deemed to have been derived therefrom.
(8) [***]
(9) In a case where the assessee is entitled also to the
deduction under section 80-I or section 80J in relation to
the profits and gains of an industrial undertaking or the
business of a hotel to which this section applies, effect
shall first be given to the provisions of this section.
(9A) Where a deduction in relation to the profits and gains
of a small-scale industrial undertaking to which section
80HHA applies is claimed and allowed under that section for
any assessment year, deduction in relation to such profits
and gains shall not be allowed under this section for the
same or any other assessment year.
(10) Nothing contained in this section shall apply in
relation to any undertaking engaged in mining.
(11) For the purposes of this section, "backward area" means
such area as the Central Government may, having regard to
the stage of development of that area, by notification in
the Official Gazette, specify in this behalf :
Provided that any notification under this sub-section may be
issued so as to have retrospective effect to a date not
earlier than the 1st day of April, 1983.
What is Deduction in respect of health insurance premia? Section 80D of Income Tax Act 1961
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