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Deduction u/s 80IB - Deduction in respect of profit and gains from industrial undertakings other than infrastructure development undertakings - Exemptions and Deductions - Income Tax

Deduction u/s 80IB - Deduction in respect of profit and gains from industrial undertakings other than infrastructure development undertakings
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SEC – 80-IB: DEDUCTION IN RESPECT OF PROFIT AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS

  1. The deduction in case of an assessee whose gross total income includes any profits and gains from any business of an industrial undertaking, shall be of the following amount:

i.In case of an industrial undertaking located in an industrial Backward State:

  1. For the initial 5 assessment years100% of the profit and gains derived from such undertaking and
  2. Thereafter, for the next 5 assessment years25% of the profits and gains derived from such industrial undertaking. (30% in case of a company) (25% for 7 assessment years in case of co-operative society)

ii.In case of an industrial undertaking located in an industrial Backward district:

  1. For the initial 5 assessment years100% of the profit and gains derived from such undertaking and
  2. Thereafter, for the next 5 assessment years25% of the profits and gains derived from such industrial undertaking. (30% in case of a company) (25% for 7 assessment years in case of co-operative society)

Note: The deduction is available to an Industrial Undertaking, which fulfills all the following conditions:

  1. It is not formed by splitting up, or the reconstruction of a business in existence.

Exception: If re-construction takes place in the circumstances and period given in section 33B, then deduction is available.

  1. It is not formed by the transfer to a new business of machinery or plant previously used for any purpose. [Note: The deduction under section 80IB shall be available if the new undertaking is started in an old building or if old furniture and fittings are used]

Exception:

  • Imported old Plant & Machinery
  • 20% of total Plant & Machinery can be old.
  • It begins to manufacture or produce articles or things at any time up to 31-03-2004. For Jammu & Kashmir sunset date is 31-03-2012.
  • 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.
  • The deduction is available to any undertaking which begins commercial production or refining of mineral oil in any part of India. The deduction is 100% of the profits from such business for the 7 consecutive assessment years including the initial assessment year. Initial assessment year means the assessment year relevant to the previous year in which the undertaking commences the commercial production or refining of mineral oil.

2. The deduction under section 80-IB shall be:

  • 100% of the profits for a period of 7 consecutive Assessment Years
  • Derived from an undertaking which is engaged in commercial production of natural gas in blocks licensed under the New Exploration Licensing Policy (NELP)
  • And which begins commercial production of natural gas
  • The deduction shall commence from the AY relevant to the previous year in which the undertaking commences commercial production of natural gas.

Explanation: For the purpose of claiming deduction under this section, all blocks licensed under a single contract, which has been awarded under the NELP, shall be treated as a single undertaking. (This explanation is relevant for both mineral oil and natural gas)

Business

Sunset Date

Refining of Mineral Oil

Refining to start by 31st March, 2012 9 (but not later than 31.03.2017)

Production of Mineral Oil

No deduction in respect of blocks licensed after 31.03.2011 (but not later than 31.03.2017)

Production of Natural Gas

Commercial production to start by 01.04.2009 (but not later than 31.03.2017)

3. The amount of deduction in the  case of an undertaking developing and building housing projects approved by a local authority shall be 100% of the profits derived in any previous year from such housing project if:

  • such undertaking commences development and construction of the housing project and completes such construction within 5 years, from the end of the financial year in which the housing project is approved by the local authority.
  • the project is on the size of a plot of land which has a minimum area of an acre
  • the residential unit has a maximum built-up area of 1000 square feet where such residential unit is situated within the city of Delhi or Mumbai or within 25 kilometers from the municipal limits of these cities and 1500 square feet at any other place and
  • the built up area of the shops and other commercial establishments included in the housing project does not exceed 3% of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher.
  • not more than one residential unit in the housing project is allotted to any person not being an individual and
  • in a case  where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:

i.the individual or the spouse or the minor children of such individual

ii.the HUF in which such individual is the Karta

iii.the person representing such Individual, the spouse or the minor children of such individual or the HUF in which such individual is the Karta.

The deduction is 100% of the profits derived from the housing project in any previous year. It is possible that the residential units are sold say over a period of 6 years, then the deduction shall be profits derived during these 6 years from the housing project.

Note: Deduction can be claimed on a year to year basis where assessee is showing profit from partial completion of project. If later any of the condition is violated, then deduction allowed in earlier years shall be withdrawn.

4. The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India, other than the excluded area, shall be 100% of the profits and gains derived from such business for a period of 5 consecutive assessment years, beginning with  the initial assessment year, if –

i. The hospital has at least 100 beds for patients

ii. The construction of the hospital is in accordance with the regulations or bye-laws of the local authority.