Section 80IA - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. - Income-tax Act, 1961

1 [Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. 2 [ (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 3 [ or develops 4 [ *** ] a special economic zone referred to in clause ( iii ) of sub-section (4) ] or generates power or commences transmission or distribution of power 5 [ or undertakes substantial renovation and modernisation of the existing transmission or distribution lines 6 [***]] : 7 [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. ] 8 [ (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 9 [ an 10 [ undertaking ] referred to in 11 [ clause ( ii ) or ] clause ( iv ) 12 [ *** ] 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 13 [ undertaking ] which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such 14 [ 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: 15 [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 16 [ 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 17 [ 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 18 [ or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; ] 19 [ ( 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 transfer or 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. 58 [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 ] 20 [ 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 21 [ inland port or navigational channel in the sea ] ; ] 22 [ ( 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, 23 [ 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 24 [ 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, 25 [ 2006 ] : 26 [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 : 27 [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 28 [ 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 55 [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 56 [the 31st day of March, 2017]: Provided that the deduction under this section to an 31 [ 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; 32 [ (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 57 [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 ;] 34 [ (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, 35 [ 2012 ].] 48 [ *****] (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) 36 [ The deduction ] under sub-section (1) from profits and gains derived from an 37 [ undertaking ] shall not be admissible unless the accounts of the 38 [ 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, 59 [ 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 39 [ 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 40 [ 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 41 [ 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 42 [ 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 herein before specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation - 43 [ 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 44 [ 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 45 [ 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. 51 [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. 49 [ (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 . ] 46 [ (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). ] 47 [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). ] --------------------------------- Notes :- 1. Sections 80-IA and 80-IB substituted for section 80-IA by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its substitution, section 80-IA, as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991 and later on amended by the Finance Act, 1992, w.e.f. 1-4-1993, Finance Act, 1993, w.e.f. 1-4-1994, Finance Act, 1994, w.e.f. 1-4-1994/1-4-1995, Finance Act, 1995, w.e.f. 1-4-1996, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, Finance Act, 1997, w.r.e.f. 1-4-1996/w.e.f. 1-4-1998, Income-tax (Amendment) Act, 1998, w.r.e.f. 1-4-1995/w.e.f. 1-4-1998 and Finance (No. 2) Act, 1998, w.r.e.f. 1-4-1998/w.e.f. 1-4-1999, read as under : '80-IA. Deduction in respect of profits and gains from industrial undertakings, etc., in certain cases.- (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure facility or scientific and industrial research and development or providing telecommunication services whether basic or cellular including radio paging, domestic satellite service or network of trunking and electronic data interchange services or construction and development of housing projects or operating an industrial park or commercial production or refining of mineral oil in the North Eastern Region or in any part of India on or after the 1st day of April, 1997 (such business being hereinafter referred to as the eligible business), 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 the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6). (2) This section applies to any industrial undertaking 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 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; (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 : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-clause (b) of clause (iv) which begins to manufacture or produce an article or thing during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2000, apply as if the words not being any article or thing specified in the list in the Eleventh Schedule had been omitted; (iv) (a) in the case of an industrial undertaking not specified in sub-clause (b) or sub-clause (c), it begins to manufacture or produce articles or things or to operate such plant or plants, at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (b) in the case of an industrial undertaking located in an industrially backward State specified in the Eighth Schedule or set up in any part of India for the generation, or generation and distribution, of power, it begins to manufacture or produce articles or things or to operate its cold storage plant or plants or 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, 2000 : Provided that in the case of an industrial undertaking set up in any part of India for the generation, or generation and distribution, of power, the period ending shall have effect as if for the figures 1998 , the figures 2003 had been substituted; (c) in the case of an industrial undertaking located in such industrially backward district as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf, as an industrially backward district of Category A or an industrially backward district of Category B, and, it begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994, and ending on the 31st day of March, 2000; (d) in the case of an industrial undertaking being a small scale industrial undertaking, not specified in sub-clause (b) or in sub-clause (c), it begins to manufacture or produce articles or things or to operate its cold storage plant at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, 2000; (v) 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. 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. (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 during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995. (4) This section applies to the business of any hotel- (a) where conditions (i), (ii) and (v); and (b) either of the conditions (iii) or (iv); or (c) either of the conditions (iiia) or (iva), 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 business of the hotel, located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may having regard to the need for development of infrastructure for tourism in any place and other relevant considerations specify for the purpose of this clause, starts functioning at any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of March, 1994; (iiia) the business of the hotel, located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify for the purpose of this clause, starts functioning at any time during the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001 : Provided that nothing contained in this clause shall apply to any hotel located at a place within the municipal jurisdiction (whether known as a municipality, munici-pal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi and Mumbai; (iv) the business of the hotel- (1) located in any place, or (2) located in a place other than a place referred to in clause (iii) of this sub-section, starts functioning at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995; (iva) the business of the hotel, located in a place other than a place referred to in clause (iiia) of this sub-section and not being located at a place within the 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 and Mumbai, starts functioning at any time during the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001; (v) the hotel is for the time being approved by the prescribed authority. (4A) This section applies to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :- (i) the enterprise is owned by a company registered in India or by a consortium of such companies; (ii) the enterprise has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement; (iii) the enterprise starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. (4B) This section applies to any company registered in India carrying on scientific and industrial research and development which fulfils all the following conditions, namely :- (i) the company has the main object of scientific and industrial research and development; (ii) the company is for the time being approved by the prescribed authority at any time before the 1st day of April, 1999. (4C) This section applies to any undertaking which starts providing telecommunication services whether basic or cellular including radiopaging, domestic satellite service or network of trunking and electronic data interchange services at any time on or after the 1st day of April, 1995 but before the 31st day of March, 2000. (4D) This section applies to any undertaking which begins to operate an industrial park 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, 2002. (4E) This section applies to any undertaking which begins commercial production or refining of mineral oil in the North-Eastern Region or in any part of India on or after the 1st day of April, 1997 : Provided that the provisions of this section shall apply in case of refining of mineral oil where the undertaking begins refining on or after the 1st day of October, 1998. (4F) This section applies to an undertaking, engaged in developing and building housing projects approved by a local authority subject to the condition that the size of the plot of land has a minimum area of one acre, and the residential unit has a built up area not exceeding one thousand square feet : Provided that the undertaking commences development and construction of the housing project on or after the 1st day of October, 1998 and completes the same before the 31st day of March, 2001. (5) The amount referred to in sub-section (1) shall be- (i) (a) in the case of an industrial undertaking referred to in sub-clause (a) or sub-clause (d) of clause (iv) of sub-section (2), twenty-five per cent of the profits and gains derived from such industrial undertakings; (b) in the case of an industrial undertaking referred to in sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2), hundred per cent of the profits and gains derived from such industrial undertaking for the initial five assessment years and thereafter twenty-five per cent of the profits and gains derived from such industrial undertaking : Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words twenty-five per cent , the words thirty per cent had been substituted : Provided further that in case of an industrial undertaking located in an industrially backward district of Category B, the provisions of this clause shall have effect as if for the words five assessment years , the words three assessment years had been substituted; (ia) in the case of an enterprise referred to in sub-section (4A), hundred per cent of the profits and gains derived from such business for the initial five assessment years and thereafter, thirty per cent of such profits and gains; (ib) in the case of a company referred to in sub-section (4B), hundred per cent of the profits and gains derived from such business; (ic) in the case of an undertaking referred to in sub-section (4C), hundred per cent of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent of the profits and gains derived from such business : Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words twenty-five per cent , the words thirty per cent had been substituted; (id) in the case of an industrial park referred to in sub-section (4D), hundred per cent of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent of the profits and gains derived from such business : Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words twenty-five per cent , the words thirty per cent had been substituted; (ii) in the case of a hotel referred to in clause (iii) of sub-section (4), fifty per cent of the profits and gains derived from the business of such hotel : Provided that the said hotel is approved by the prescribed authority for the purpose of this clause in accordance with the rules made under this Act : Provided further that the said hotel approved by the prescribed authority before the 31st day of March, 1992, shall be deemed to have been approved by the prescribed authority for the purposes of this section in relation to the assessment year commencing on the 1st day of April, 1991; (iia) in the case of a hotel referred to in clause (iiia) of sub-section (4), fifty per cent of the profits and gains derived from the business of such hotel : Provided that the said hotel is approved by the prescribed authority for the purposes of this clause in accordance with the rules made under this Act; (iii) in the case of a hotel referred to in clause (iv) or clause (iva) of sub-section (4), thirty per cent of the profits and gains derived from the business of such hotel; (iv) in the case of a ship, thirty per cent of the profits and gains derived from such ship; (v) in the case of undertaking referred to in sub-section (4E) hundred per cent of profits and gains derived from such business for the initial seven assessment years; (vi) in the case of a housing project referred to in sub-section (4F), hundred per cent of profits and gains derived from such business. (6) The number of assessment years referred to in sub-section (1) shall, including the initial assessment year, be- (i) twelve in the case of an assessee, being a co-operative society, deriving profits and gains from an industrial undertaking; (ii) ten in the case of an assessee, not being a co-operative society, deriving profits and gains from an industrial undertaking specified in sub-clause (a) or sub-clause (b) or sub-clause (d) of clause (iv) of sub-section (2) or located in an industrially backward district of Category A specified in sub-clause (c) of clause (iv) of that sub-section; (iia) eight in the case of an assessee deriving profits and gains from an industrial undertaking located in an industrially backward district of Category B specified in sub-clause (c) of clause (iv) of sub-section (2) and such an undertaking is not covered under clauses (i) and (ii) of this sub-section; (iii) ten in the case of any other assessee deriving profits and gains, from a ship or the business of a hotel; (iv) any ten consecutive assessment years falling within a period of twelve assessment years beginning with the assessment year in which an assessee begins operating and maintaining infrastructure facility : Provided that where the assessee begins operating and maintaining any infrastructure facility referred to in sub-clause (ii) of clause (ca) of sub-section (12), the provisions of this clause shall have effect as if for the word twelve , the word twenty had been substituted; (v) five in the case of an assessee, being a company referred to in sub-section (4B), deriving profits and gains from scientific and industrial research and development; (vi) ten in the case of an assessee, being an undertaking referred to in sub-section (4C), deriving profits and gains from telecommunication services whether basic or cellular including radio-paging and domestic satellite service; (vii) ten in the case of an assessee, being an undertaking referred to in sub-section (4D), deriving profits and gains from operating an industrial park; (viii) seven in the case of an assessee being an undertaking referred to in sub-section (4E) deriving profits and gains from commercial production or refining of mineral oil in the North-Eastern Region and other parts of the country on or after the 1st day of April, 1997. (7) 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 sub-section (5) 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. (7A) Notwithstanding anything contained in sub-section (4A), 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 transfer to reserve account took place. (8) 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. (9) Where any goods held for the purposes of the eligible business 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 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 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 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 .-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. (9A) Where any amount of profits and gains of an industrial undertaking or of a hotel 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 the undertaking or hotel, 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. (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 with effect from such date as it may specify in the notification. (12) For the purposes of this section,- (a) domestic satellite means a satellite owned and operated by an Indian company for providing telecommunication service; (aa) hilly area means any area located at a height of one thousand metres or more above the sea level; (b) industrial undertaking shall have the meaning assigned to it in the Explanation to section 33B; (c) initial assessment year - (1) 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 ship is first brought into use or the business of the hotel starts functioning; (2) in the case of an enterprise, carrying on the business of developing, operating and maintaining any infrastructure facility, means the assessment year specified by the assessee at his option to be the initial year, not falling beyond the twelfth assessment year starting from the previous year in which the enterprise begins operating and maintaining the infrastructure facility; (3) in the case of a company carrying on scientific and industrial research and development, means the assessment year relevant to the previous year in which the company is approved by the prescribed authority for the purposes of sub-section (4B); (4) in the case of an undertaking referred to in sub-section (4C) means the assessment year relevant to the previous year in which the undertaking starts to provide the telecommunication services whether basic or cellular including radio-paging and domestic satellite service; (5) in the case of an undertaking operating an industrial park referred to in sub-section (4D) means the assessment year relevant to the previous year in which the undertaking starts operating such industrial park notified for the purposes of the said sub-section; (6) in the case of an undertaking engaged in the business of commercial production or refining of mineral oil referred to in sub-section (4E) means the assessment year relevant to the previous year in which the undertaking commences the commercial production of mineral oil; (ca) infrastructure facility means- (i) a road, bridge, airport, port, inland waterways and inland ports, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette; (ii) a highway project including housing or other activities being an integral part of the highway project; and (iii) a water supply project, irrigation project, sanitation and sewerage system; (d) place of pilgrimage means a place where any temple, mosque, gurdwara, church or other place of public worship of renown throughout any State or States is situated; (e) 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 or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the preceding census of which 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; (f) small-scale industrial undertaking means an industrial undertaking which is, as 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); (g) North Eastern Region means the region comprising of the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.' 2. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, sub-section (1) read as under : '(1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or an enterprise 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 from such profits and gains of an amount equal to hundred per cent of profits and gains derived from such business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, twenty-five per cent of the profits and gains for further five assessment years: Provided that where the assessee is a company, the provisions of this sub-section shall have effect as if for the words twenty-five per cent , the words thirty per cent had been substituted.' 3. Inserted by the Finance Act, 2002, w.e.f. 1-4-2003. 4. Words or develops and operates or maintains and operates omitted by the Finance Act, 2003, w.r.e.f. 1-4-2002. 5. Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. 6. Omitted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2010, before it was inserted by the Finance Act, 2007, w.e.f. 1-4-2008 as, or lays and begins to operate a cross-country natural gas distribution network 7. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, proviso read as under : 'Provided that where the assessee begins operating and maintaining any infrastructure facility referred to in clause ( b ) of 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.' 8. Inserted by the Finance Act, 2001, w.e.f. 1-4-2001. 9. Substituted for any industrial undertaking by the Finance Act, 2000, w.e.f. 1-4-2000. 10. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 11. Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. 12. Omitted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2010, before it was inserted by the Finance Act, 2007, w.e.f. 1-4-2008 as, or clause ( vi ) 13. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 14. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 15 . Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. 16. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 17. Substituted for of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating by the Finance Act, 2001, w.e.f. 1-4-2002. 18. Inserted by the Finance Act, 2005, w.e.f. 1-4-2006. 19. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, sub-clause (b) read as under : (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, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement; 20 . Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, Explanation, as amended by the Finance Act, 2000, w.e.f. 1-4-2001, read as under : ' Explanation .-For the purposes of this clause, infrastructure facility means,- (a) a road, bridge, airport, port, inland waterways and inland ports, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette; (b) a highway project including housing or other activities being an integral part of the highway project; and (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;' 21. Substituted for or inland port by the Finance Act, 2007, w.e.f. 1-4-2008. 22. Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Prior to its substitution, clause (ii) read as under : '(ii) any undertaking which has started or starts providing telecommunication services whether basic or cellular, including radio-paging, domestic satellite service or network of trunking and electronic data interchange services at any time on or after the 1st day of April, 1995, but before the 31st day of March, 2000.' 23. Substituted for 2004 by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Earlier 2004 was substituted for 2003 by the Finance Act, 2003, w.e.f. 1-4-2004. 24. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 25. Substituted for 2002 by the Finance Act, 2001, w.e.f. 1-4-2001. 26. Substituted by the Finance Act, 2003, w.r.e.f. 1-4-2002. Prior to its substitution, the proviso read as under : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 and transfers the operation and maintenance of such industrial park 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 in a manner as if the operation and maintenance were not so transferred to the transferee undertaking; 27. Inserted by the Finance Act, 2006, w.e.f. 1-4-2007. 28. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 29. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2009, before it was read as, 2010 , earlier Substituted for 2006 by the Finance Act, 2006, w.e.f. 1-4-2007. e arlier 2006 was substituted for 2003 by the Finance Act, 2001, w.e.f. 1-4-2002. Further substituted vide Finance Act, 2011, w.e.f. 1.4.2012, before it was read as, 2011 . Further Substituted vide Finance Act, 2012, w.e.f. 01-04-2013, before it was read as:- the 31st day of March, 2012 30. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2009, before it was read as, 2010 , , earlier Substituted for 2006 by the Finance Act, 2006, w.e.f. 1-4-2007. earlier 2006 was substituted for 2003 by the Finance Act, 2001, w.e.f. 1-4-2002. Further substituted vide Finance Act, 2011, w.e.f. 1.4.2012, before it was read as, 2011 Further Substituted vide Finance Act, 2012, w.e.f. 01-04-2013, before it was read as:- the 31st day of March, 2012 31. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 32. Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. 33. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2009, before it was read as, 2010 , earlier Substituted for 2006 by the Finance Act, 2006, w.e.f. 1-4-2007. Further substituted vide Finance Act, 2011, w.e.f. 1.4.2012, before it was read as, 2011 Further Substituted vide Finance Act, 2012, w.e.f. 01-04-2013, before it was read as:- the 31st day of March, 2012 34. Inserted by the Taxation Laws (Amendment) Act, 2005, w.e.f. 1-4-2006. 35. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2008, before it was read as, 2008 earlier, Figures 2008 substituted for 2007 by the Finance Act, 2007, w.e.f. 1-4-2008. Further substituted vide Finance Act, 2011, w.e.f. 1.4.2012, before it was read as, 2011 36. Substituted for Where the assessee is a person other than a company or a co-operative society, the deduction by the Finance Act, 2002, w.e.f. 1-4-2003. 37. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 38. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 39. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 40. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 41. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 42. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 43. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, Explanation read as under : ' Explanation .-For the purposes of 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.' Further Substituted vide Finance Act, 2012, w.e.f. 01-04-2013 , before it was read as:- Explanation. - For the purposes of this sub-section, market value , in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market . 44. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 45. Substituted for industrial undertaking by the Finance Act, 2001, w.e.f. 1-4-2002. 46 . Inserted by the Special Economic Zones Act, 2005, w.e.f. 10-2-2006. 47. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2000, before it was Inserted by the Finance Act, 2007, w.r.e.f. 1-4-2000 as Explanation. -For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be. 48. Clause ( vi ) inserted by the Finance Act, 2007, w.e.f. 1-4-2008. This clause has been deleted Finance (No.2) Act, 2009, w.e.f. 1-4-2010, before it was read as, ( vi ) any undertaking carrying on the business of laying and operating a cross-country natural gas distribution network, including pipelines and storage facilities being an integral part of such network, which fulfils 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 established or constituted under any Central or State Act; ( b ) it has been approved by the Petroleum and Natural Gas Regulatory Board established under sub-section (1) of section 3 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006) and notified by the Central Government in the Official Gazette; ( c ) one-third of its total pipeline capacity is available for use on common carrier basis by any person other than the assessee or an associated person; ( d ) it has started or starts operating on or after the 1st day of April, 2007; and ( e ) any other condition which may be prescribed. Explanation . -For the purposes of this clause, an associated person in relation to the assessee means a person- ( i ) who participates directly or indirectly or through one or more intermediaries in the management or control or capital of the assessee; ( ii ) who holds, directly or indirectly, shares carrying not less than twenty-six per cent of the voting power in the assessee; ( iii ) who appoints more than half of the Board of directors or members of the governing board, or one or more executive directors or executive members of the governing board of the assessee; or ( iv ) who guarantees not less than ten per cent of the total borrowings of the assessee 49. Sub-section (12A) inserted by the Finance Act, 2007, w.e.f. 1-4-2008. 50. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2009, before it was read as, 31st day of March, 2009 51. Inserted vide Finance Act, 2012, w.e.f. 01-04-2013 52. Substituted vide Finance Act, 2013, w.e.f. 1st day of April, 2014 , before it was read as, 29 [ the 31st day of March, 2013 ] . 53. Substituted vide Finance Act, 2013, w.e.f. 1st day of April, 2014 , before it was read as, 30 [ the 31st day of March, 2013 ] . 54. Substituted vide Finance Act, 2013, w.e.f. 1st day of April, 2014 , before it was read as, 33 [ the 31st day of March, 2013 ] . 55. Substituted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015, before it was read as, 52 [ the 31st day of March, 2014 ] 56. Substituted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015, before it was read as, 53 [ the 31st day of March, 2014 ] 57. Substituted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015, before it was read as, 54 [ the 31st day of March, 2014 ] . 58. Inserted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017 59. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as and the assessee furnishes, along with his return of income