TMI BlogDeductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inary 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice 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 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 endin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking 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 Petrol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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