Section 80HHA of Income Tax Act "Deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas"
80HHA. (1) Where the gross total income of an assessee
includes any profits and gains derived from a small-scale
industrial undertaking 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 small-scale industrial
undertaking which fulfils all the following conditions,
namely :-
(i) it begins to manufacture or produce articles after the
30th day of September, 1977 but before the 1st day of April,
1990, in any rural area;
(ii) it is not formed by the splitting up, or the
reconstruction, of a business already in existence:
Provided that this condition shall not apply in respect
of any small-scale 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 ;
(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 in the case of a small-scale 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 (iii) of this sub-section,
the condition specified therein shall be deemed to have been
fulfilled.
(3) The deduction specified in sub-section (1) shall be
allowed in computing the total income of each of the ten
previous years beginning with the previous year in which the
industrial undertaking begins to manufacture or produce
articles :
Provided that such deduction shall not be allowed in
computing the total income of any of the ten previous years
aforesaid in respect of which the industrial undertaking is
not a small-scale industrial undertaking within the meaning
of clause (b) of the Explanation below sub-section (8).
(4) 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
small-scale 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.
(5) The provisions of sub-sections (6) and (7) of section
80HH shall, so far as may be, apply in relation to the
computation of the profits and gains of a small-scale
industrial undertaking for the purposes of the deduction
under this section as they apply in relation to the
computation of the profits and gains of an industrial
undertaking for the purposes of the deduction under that
section.
(6) 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 a small-scale industrial
undertaking to which this section applies, effect shall
first be given to the provisions of this section.
(7) Where a deduction in relation to the profits and gains
of a small-scale industrial undertaking to which section
80HH 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.
(8) Nothing contained in this section shall apply in
relation to any small-scale industrial undertaking engaged
in mining.
Explanation.-For the purposes of this section,-
(a) "rural area" means any area other than-
(i) an area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notified area committee, town area committee,
town committee or by any other name) or a cantonment board
and which has a population of not less than ten thousand
according to the last preceding census of which the relevant
figures have been published before the first day of the
previous year ; or
(ii) an area within such distance, not being more than
fifteen kilometres from the local limits of any municipality
or cantonment board referred to in sub-clause (i), as the
Central Government may, having regard to the stage of
development of such area (including the extent of, and scope
for, urbanisation of such area) and other relevant
considerations specify in this behalf by notification in the
Official Gazette ;
(b) an industrial undertaking shall be deemed to be a
small-scale industrial undertaking which is, on the last day
of the previous year, regarded as a small-scale industrial
undertaking under section 11B of the Industries (Development
and Regulation) Act, 1951 (65 of 1951).
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