Deductions Under Section(s) 80IA, Deductions Under Section(s) 80IA, 80IB, 80IC & 80JJA80IB, 80IC & 80JJA

All India Chartered All India Chartered Accountants’ SocietyAccountants’ Society

66thth Annual Workshop on Annual Workshop on Direct TaxesDirect Taxes

99thth July , 2010 July , 2010

Presented By: Mr. Anil Presented By: Mr. Anil ChopraChopra

Dewan P.N. Chopra & Co. Dewan P.N. Chopra & Co.

H-57 Connaught Circus H-57 Connaught Circus N.Delhi-110001N.Delhi-110001

Ph : 24645891, 92,93Ph : 24645891, 92,93

E-mail: E-mail: dpnc@dpncindia.comdpnc@dpncindia.com

Section 80 A Deductions to be made in computing total income

•Assessee will be allowed deduction specified under section 80 C to 80U from his Gross Total Income (GTI)

•The aggregate amount of deduction shall not exceed, in any case, the GTI

•If any deduction is allowed under Chapter VI A to any AOP or BOI, then no deduction shall be allowed to any member of such AOP or BOI from share of income from such AOP or BOI

•If deduction allowed under section 10A, 10AA, 10B and 10BA, it should not exceed GTI and further no deduction shall be allowed under any other provision of the Act

•No deduction to be allowed If the assessee fails to make the claim.

•Transfer of goods and services to any other business of the assessee shall be taken to be at market value for computing deduction under this chapter

•Market Value defined in Explanation to be the value which the Market Value defined in Explanation to be the value which the goods and service will fetch if sold in the market or will cost if goods and service will fetch if sold in the market or will cost if acquired from the market.acquired from the market.

Section 80AB Deduction to be made with Section 80AB Deduction to be made with reference to the income included in the gross reference to the income included in the gross total incometotal income

Where any deduction is required to be made or allowed under Where any deduction is required to be made or allowed under any section included in this chapter under the heading “C– any section included in this chapter under the heading “C– Deduction in respect of certain income” in respect of any Deduction in respect of certain income” in respect of any income of the nature specified in that section which is income of the nature specified in that section which is included in the gross total income of the assessee, then included in the gross total income of the assessee, then notwithstanding anything contained in that section, the amount notwithstanding anything contained in that section, the amount of income of that nature as computed in accordance of the of income of that nature as computed in accordance of the provision of this Act, (before making any deduction under this provision of this Act, (before making any deduction under this chapter) shall alone be deemed to be the amount of income of chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and that nature which is derived or received by the assessee and which is included in his gross total income.which is included in his gross total income.

Section 80AC Deduction not to be allowed unless Section 80AC Deduction not to be allowed unless return furnishedreturn furnished

No deduction under section 80IA, 80IAB, 80IB, 80IC, 80ID, No deduction under section 80IA, 80IAB, 80IB, 80IC, 80ID, 80IE, shall be allowed unless return is furnished on or before 80IE, shall be allowed unless return is furnished on or before due date u/s 139 (1)due date u/s 139 (1)

80-IA80-IA Deductions in respect of profits and gains Deductions in respect of profits and gains from industrial undertakings or enterprises engaged from industrial undertakings or enterprises engaged in infrastructure development, etc.in infrastructure development, etc.

• Assessment years from which applicable 01.04.2000Assessment years from which applicable 01.04.2000

• Original Section was for only industrial undertakings etc. w.e.f. Original Section was for only industrial undertakings etc. w.e.f. 01.04.199101.04.1991

• DeductionDeduction

100% deduction for 10 Consecutive Years out of 15 Years 100% deduction for 10 Consecutive Years out of 15 Years (20 years in case of Development etc of specified (20 years in case of Development etc of specified Infrastructure Facilities)Infrastructure Facilities)

In case of Telecommunication Services 100% for first 5 years In case of Telecommunication Services 100% for first 5 years and 30% for further 5 yearsand 30% for further 5 years

• Deduction is available toDeduction is available to

Undertaking engaged in development or operation & Undertaking engaged in development or operation & maintenance or development, operation and maintenance of maintenance or development, operation and maintenance of Infrastructure facilitiesInfrastructure facilities

o Starts Operation on or after 01.04.1995Starts Operation on or after 01.04.1995

o Owned by Indian Company or their consortium Owned by Indian Company or their consortium

o Agreement with central/state government etc.Agreement with central/state government etc.

o Infrastructure facility means road, toll road, a bridge, Infrastructure facility means road, toll road, a bridge, rail system, highway projects, water supply projects, rail system, highway projects, water supply projects, water treatment system, irrigation project, sanitation water treatment system, irrigation project, sanitation and sewerage system or solid waste management and sewerage system or solid waste management system, port, airport, inland waterway, inland port or system, port, airport, inland waterway, inland port or navigational channel in sea.navigational channel in sea.

Undertaking engaged in Telecommunication ServicesUndertaking engaged in Telecommunication Services

o Which starts operation during 01.04.1995 to 31.03.2005Which starts operation during 01.04.1995 to 31.03.2005

Undertaking engaged in development and operation or Undertaking engaged in development and operation or operation and maintenance in industrial park and Special operation and maintenance in industrial park and Special economic zoneeconomic zone

o Notified by the government for 01.04.1997 to Notified by the government for 01.04.1997 to 31.03.200631.03.2006

o In case of industrial park notified upto 31.03.2011 in In case of industrial park notified upto 31.03.2011 in place of 31.03.2006place of 31.03.2006

o Benefit of deduction available to transferee if operation Benefit of deduction available to transferee if operation & maintenance is transferred to another undertaking.& maintenance is transferred to another undertaking.

Undertaking engaged in Power generation, transmission Undertaking engaged in Power generation, transmission and distribution of powerand distribution of power

o Begins to generate or distribute power between Begins to generate or distribute power between 01.04.1993 to 31.03.201101.04.1993 to 31.03.2011

o Begins to transmit or distribute power between Begins to transmit or distribute power between 01.04.1999 to 31.03.2011 by laying network of new 01.04.1999 to 31.03.2011 by laying network of new distribution lines. distribution lines.

o Begins to undertake substantial renovation and Begins to undertake substantial renovation and modernization between 01.04.2004 to 31.03.2011modernization between 01.04.2004 to 31.03.2011

Undertaking owned by Indian company & set up for Undertaking owned by Indian company & set up for reconstruction of a Power generating plantsreconstruction of a Power generating plants

o Company formed before 30.11.2005 with majority Company formed before 30.11.2005 with majority equity participation by PSUequity participation by PSU

o Such Indian company notified by central Government Such Indian company notified by central Government before 31.12.2005before 31.12.2005

o Begin to generate power before 31.03.2011Begin to generate power before 31.03.2011

Deduction under clause v to an Undertaking operating a Deduction under clause v to an Undertaking operating a cross country natural gas distribution has been withdrawn cross country natural gas distribution has been withdrawn with effect from 1/4/2010.with effect from 1/4/2010.

• Computation of deduction as and independent and stand alone Computation of deduction as and independent and stand alone unitunit

• Transfer of goods/services at fair market valueTransfer of goods/services at fair market value

• Deduction to the extent allowed under this section not to be Deduction to the extent allowed under this section not to be allowed under any other sectionsallowed under any other sections

• Accountant’s Report in form 10CCB read with Rule 18 BBB. Accountant’s Report in form 10CCB read with Rule 18 BBB.

• No tax on Profits arising from Housing Projects or other No tax on Profits arising from Housing Projects or other activities forming part of Highway Projects provided profits activities forming part of Highway Projects provided profits are transferred to a special reserve account and utilized before are transferred to a special reserve account and utilized before 3 years for Highway Project (excluding Housing). 3 years for Highway Project (excluding Housing). Accountant’s Report in Form 10 CCC read with Rule 18 Accountant’s Report in Form 10 CCC read with Rule 18 BBE.BBE.

• AO has the power to re-compute profit of the undertaking if AO has the power to re-compute profit of the undertaking if owing to close connection, the eligible undertaking result in owing to close connection, the eligible undertaking result in higher profitshigher profits

• Provision of this section not to apply to any eligible business in Provision of this section not to apply to any eligible business in the nature of work contractthe nature of work contract

• Power of Central Government to issue notification directing that Power of Central Government to issue notification directing that the exemption shall not apply to any class(s) of undertaking(s)the exemption shall not apply to any class(s) of undertaking(s)

• In case of amalgamation or demerger on or after 01.04.2007, In case of amalgamation or demerger on or after 01.04.2007, benefit under the section will not be available to the amalgamated benefit under the section will not be available to the amalgamated or demerged companyor demerged company

• In case of SEZ notified on or after 01.04.2005, provisions of this In case of SEZ notified on or after 01.04.2005, provisions of this section will not apply as separate deduction u/s 80IAB was section will not apply as separate deduction u/s 80IAB was introduced w.e.f. 10.02.2006 by Special Economic Zones Act, introduced w.e.f. 10.02.2006 by Special Economic Zones Act, 20052005

• Undertaking engaged in providing Telecommunication services Undertaking engaged in providing Telecommunication services or generation of power referred to in Clause ii & iv of s/s 4: or generation of power referred to in Clause ii & iv of s/s 4:

Should not be formed by splitting up, or reconstructionShould not be formed by splitting up, or reconstruction

Should not be formed by the transfer of a used plant and Should not be formed by the transfer of a used plant and machinery except where the used plant and machinery does machinery except where the used plant and machinery does not exceed 20% of total value of plant and machinery. User not exceed 20% of total value of plant and machinery. User of P & M used outside India subject to fulfillment of of P & M used outside India subject to fulfillment of specified conditions would not amount to used of previously specified conditions would not amount to used of previously used P & M.used P & M.

• Relevant Circulars on Section (s) 80IA Relevant Circulars on Section (s) 80IA

Circular No. 1 dated Jan 12, 2006 clarifies that the ‘effluent Circular No. 1 dated Jan 12, 2006 clarifies that the ‘effluent treatment and conveyance system’ treated as ‘Infrastructure treatment and conveyance system’ treated as ‘Infrastructure Facility’Facility’

Circular No.7 dated August 26, 2002 provides that benefit Circular No.7 dated August 26, 2002 provides that benefit under section 80-IA would be available in respect of under section 80-IA would be available in respect of infrastructure facilities for which agreement was executed infrastructure facilities for which agreement was executed between 01.04.1995 to 31.03.2001 & notified by Central between 01.04.1995 to 31.03.2001 & notified by Central Board of Direct Taxes prior to March 31, 2001.Board of Direct Taxes prior to March 31, 2001.

Circular No.793 classifies port as infrastructure facility for Circular No.793 classifies port as infrastructure facility for the purpose of sections 10 (23G) and 80-IA of the Income the purpose of sections 10 (23G) and 80-IA of the Income Tax Act, 1961.Tax Act, 1961.

Circular No. 4/2010 dated May 18, 2010 clarifies that Circular No. 4/2010 dated May 18, 2010 clarifies that widening of an existing road by constructing additional widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility.would be regarded as a new infrastructure facility.

Circular No.733 dated January 3, 1996 clarifies that the Circular No.733 dated January 3, 1996 clarifies that the BOLT Scheme of the Indian Railways shall be eligible for BOLT Scheme of the Indian Railways shall be eligible for the benefit of section 80-IA of the Income Tax Act, 1961.the benefit of section 80-IA of the Income Tax Act, 1961.

80IB. Deduction in respect of profits & gains from 80IB. Deduction in respect of profits & gains from certain industrial undertakings other than certain industrial undertakings other than infrastructure development undertakingsinfrastructure development undertakings

• Assessment years from which applicable 01.04.2000Assessment years from which applicable 01.04.2000

• Eligible BusinessEligible Business Business of Industrial Undertaking in backward areaBusiness of Industrial Undertaking in backward area Operation of ShipOperation of Ship HotelHotel Multiple Theaters/Convention centreMultiple Theaters/Convention centre Scientific researchScientific research Production of mineral oilProduction of mineral oil Developing and building housing projectsDeveloping and building housing projects Integrated handling, storage & transportation of food grains Integrated handling, storage & transportation of food grains

unitsunits Operation and maintenance of hospital in rural areaOperation and maintenance of hospital in rural area

• Specific ConditionSpecific Condition

Business of Industrial undertaking in backward statesBusiness of Industrial undertaking in backward states

o Does not manufacture article specified in ‘Eleventh Does not manufacture article specified in ‘Eleventh Schedule’Schedule’

o Set up in an industrial backward areaSet up in an industrial backward area

o Employ 10 or more worker, 20 or more in case of Employ 10 or more worker, 20 or more in case of manufacturing process without the aid of powermanufacturing process without the aid of power

o Deduction varies according to nature of undertaking Deduction varies according to nature of undertaking ranging from 25% to 100% for 8 to 12 yearsranging from 25% to 100% for 8 to 12 years

o Commences production from the dates specified in Commences production from the dates specified in sub sections.sub sections.

o Not formed by splitting up, or reconstructionNot formed by splitting up, or reconstruction

o Should not be formed by the transfer of a used plant Should not be formed by the transfer of a used plant and machinery except where the used plant and and machinery except where the used plant and machinery does not exceed 20% of total value of plant machinery does not exceed 20% of total value of plant and machinery. User of P & M used outside India and machinery. User of P & M used outside India subject to fulfillment of specified conditions would subject to fulfillment of specified conditions would not amount to used of previously used P & M.not amount to used of previously used P & M.

Operation of a ShipOperation of a Ship

o Owned by an Indian company and wholly used for the Owned by an Indian company and wholly used for the businessbusiness

o Brought in use between 1.04.1991 to 31.03.1995Brought in use between 1.04.1991 to 31.03.1995

o Not used in Indian Territorial water by a person Not used in Indian Territorial water by a person resident in India.resident in India.

o Deduction @ 30% for first 10 yearsDeduction @ 30% for first 10 years

Specified Hotels/ Non- Specified HotelsSpecified Hotels/ Non- Specified Hotels

o Owned by an Indian company with paid up capital of 5 lacs Owned by an Indian company with paid up capital of 5 lacs or moreor more

o Located in a hilly area, rural area, place of pilgrimage or Located in a hilly area, rural area, place of pilgrimage or other places specified by Central Governmentother places specified by Central Government

o Specified Hotel starts functioning during 01.01.1990 to Specified Hotel starts functioning during 01.01.1990 to 31.03.1994 or during 01.04.1997 to 31.03.2001 & Non- 31.03.1994 or during 01.04.1997 to 31.03.2001 & Non- Specified Hotel starts functioning during 01.01.1991 to Specified Hotel starts functioning during 01.01.1991 to 31.03.1995 or during 01.04.1997 to 31.03.2001 in places 31.03.1995 or during 01.04.1997 to 31.03.2001 in places other than 4 metropolitan citiesother than 4 metropolitan cities

o Approved by the prescribed authority as per Rule 18BBCApproved by the prescribed authority as per Rule 18BBC

o Deduction : 50% for Specified and 30% for Non Deduction : 50% for Specified and 30% for Non Specified Hotels for first 10 yearsSpecified Hotels for first 10 years

o Not formed by splitting up, or reconstruction or transfer Not formed by splitting up, or reconstruction or transfer to new business building or plant and machinery to new business building or plant and machinery previously used .previously used .

Multiplex theaters/Convention CentreMultiplex theaters/Convention Centre

o Construction during 01.04.2002 to 31.03.2005Construction during 01.04.2002 to 31.03.2005

o Located except municipal jurisdiction of four Located except municipal jurisdiction of four metropolitan cities in case of multiplex theaters metropolitan cities in case of multiplex theaters

o Not formed by splitting up, or reconstruction or transfer Not formed by splitting up, or reconstruction or transfer to new business building or plant and machinery to new business building or plant and machinery previously used .previously used .

o Accountant’s Report in Form 10 CCBA r/w Rule 18 DB for Accountant’s Report in Form 10 CCBA r/w Rule 18 DB for Multiplex and Form 10 CCBB r/w Rule 18DC for convention Multiplex and Form 10 CCBB r/w Rule 18DC for convention centre certifying deduction. centre certifying deduction.

o Deduction 50% for initial 5 yearsDeduction 50% for initial 5 years

Scientific ResearchScientific Research

o Company registered in India Company registered in India

o Main object of the company scientific and industrial research Main object of the company scientific and industrial research and developmentand development

o Approved by prescribed authority in accordance with Rule Approved by prescribed authority in accordance with Rule 18 BBD.18 BBD.

o Deduction if approved before 01.04.1999 100% for initial 5 Deduction if approved before 01.04.1999 100% for initial 5 yearsyears

o Deduction if approved after 31.03.2000 to 31.03.2007 100% Deduction if approved after 31.03.2000 to 31.03.2007 100% for initial 10 yearsfor initial 10 years

Production / Refining of Mineral OilProduction / Refining of Mineral Oil

o Is located in North-Eastern Region and started Is located in North-Eastern Region and started commercial production before 1.04.1997commercial production before 1.04.1997

o Is located in any part of India and started commercial Is located in any part of India and started commercial production after 1.04.1997production after 1.04.1997

o Is engaged in refining of mineral oil and begins such Is engaged in refining of mineral oil and begins such refining on or after 1.10.1998 but on or before refining on or after 1.10.1998 but on or before 31.03.2012.31.03.2012.

o Is engaged in commercial production of natural gas in Is engaged in commercial production of natural gas in blocks licensed under New Exploration Licensing blocks licensed under New Exploration Licensing Policy of Govt. of India and begins production on or Policy of Govt. of India and begins production on or after 1.4.2009.after 1.4.2009.

o Is engaged in commercial production of natural gas in Is engaged in commercial production of natural gas in blocks licensed for Coal Bed Methane blocks and blocks licensed for Coal Bed Methane blocks and begins commercial production on or after 1.04.2009. begins commercial production on or after 1.04.2009.

o Deduction: 100% for first 7 yearsDeduction: 100% for first 7 years

Developing and Building Housing Project approved by Developing and Building Housing Project approved by local authority upto 31/3/2008local authority upto 31/3/2008

o Size of plot of land minimum of one acreSize of plot of land minimum of one acre

o Commences construction after 1.10.1998 and completesCommences construction after 1.10.1998 and completes

On or before 31.03.2008, if housing project On or before 31.03.2008, if housing project approved before 01.04.2004approved before 01.04.2004

Within 4 years, if housing project approved between Within 4 years, if housing project approved between 01.04.2004 to 31.03.200501.04.2004 to 31.03.2005

Within 5 years, if housing project approved after Within 5 years, if housing project approved after 01.04.200501.04.2005

o Stipulation regarding size of plot or date of Stipulation regarding size of plot or date of completion not to apply for projects in slum area as completion not to apply for projects in slum area as notified by the Board.notified by the Board.

oBuilt up area of commercial establishment not Built up area of commercial establishment not exceed 3% or 5000sq ft whichever is lessexceed 3% or 5000sq ft whichever is less

oMaximum limit of built up area of a unit within city Maximum limit of built up area of a unit within city of Delhi and Mumbai or within 25 Kms thereof of Delhi and Mumbai or within 25 Kms thereof 1000 sq ft (1500 sq ft for any other place)1000 sq ft (1500 sq ft for any other place)

oNot more than one residential unit in the housing Not more than one residential unit in the housing project is allotted to any person not being an project is allotted to any person not being an individual (w.e.f. 01.04.2010)individual (w.e.f. 01.04.2010)

o if any unit is allotted to an individual, no other unit in if any unit is allotted to an individual, no other unit in such housing project, shall be allotted to the individual, such housing project, shall be allotted to the individual, spouse or minor children of such individual or to HUF in spouse or minor children of such individual or to HUF in which he is the karta or to any person representing such which he is the karta or to any person representing such individual, spouse, minor children or HUF in which he is individual, spouse, minor children or HUF in which he is the karta (w.e.f. 01.04.2010)the karta (w.e.f. 01.04.2010)

oDeduction 100% of the profits.Deduction 100% of the profits.

o Provisions of section would not apply to a contractorProvisions of section would not apply to a contractor

Processing, preservation , integrated handling, storage and Processing, preservation , integrated handling, storage and transportation of food grains, vegetables, poultry etc.transportation of food grains, vegetables, poultry etc.

o Begins operation on or after 01.04.2001Begins operation on or after 01.04.2001

o Deduction 100% for first 5 years and 25% (30% in case Deduction 100% for first 5 years and 25% (30% in case of Company)for next 5 years of Company)for next 5 years

o Provisions not to apply to an undertaking engaged in the Provisions not to apply to an undertaking engaged in the business of processing, preservation and packaging of business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy meat or meat products or poultry or marine or dairy products, if it begins operation before 01.04.2009products, if it begins operation before 01.04.2009

Operation and maintaining hospital in rural areaOperation and maintaining hospital in rural area

o Such hospital is constructed during 01.10.2004 to Such hospital is constructed during 01.10.2004 to 31.03.200831.03.2008

o Minimum 100 beds for patientsMinimum 100 beds for patients

o Construction is as per regulation of local authorities.Construction is as per regulation of local authorities.

o Accountant’s report 10CCBC r/w Rule 18DD certifying Accountant’s report 10CCBC r/w Rule 18DD certifying amount of deduction . amount of deduction .

o Deduction 100 % for initial 5 yearsDeduction 100 % for initial 5 years

Operation and maintaining hospital located anywhere in Operation and maintaining hospital located anywhere in India except excluded areaIndia except excluded area

o The hospital is constructed and starts functioning The hospital is constructed and starts functioning between 01.04.2008 to 31.03.2013between 01.04.2008 to 31.03.2013

o At least 100 beds for patientsAt least 100 beds for patients

o Construction is as per the regulations or the bye-laws of Construction is as per the regulations or the bye-laws of the local authoritythe local authority

o Accountant’s report 10CCBD r/w Rule 18DDA Accountant’s report 10CCBD r/w Rule 18DDA certifying amount of deductioncertifying amount of deduction

o Excluded area to include Greater Mumbai, Delhi, Excluded area to include Greater Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Bangalore, Ahemdabad, Kolkata, Chennai, Hyderabad, Bangalore, Ahemdabad, Districts of Faridabad, Gurgaon, Gautam Budh Nagar, Districts of Faridabad, Gurgaon, Gautam Budh Nagar, Ghaziabad, Gandhinagar and City of Secunderabad Ghaziabad, Gandhinagar and City of Secunderabad

o Deduction 100% for initial 5 yearsDeduction 100% for initial 5 years

• Accountant’s Report in form 10CCB to be obtained..Accountant’s Report in form 10CCB to be obtained..

• Subsections 5 & 7 to 12 of Section 80IA shall apply to 80 IB .Subsections 5 & 7 to 12 of Section 80IA shall apply to 80 IB .

• In case of amalgamation and demerger, deductions to be In case of amalgamation and demerger, deductions to be allowed to amalgamated or demerged undertakingallowed to amalgamated or demerged undertaking

• Relevant Circular on Section 80IBRelevant Circular on Section 80IB

Circular No.788 dated 11.4.2000 clarifies that the Word Circular No.788 dated 11.4.2000 clarifies that the Word “State” in sub-section (4) of section 80-IB includes Union “State” in sub-section (4) of section 80-IB includes Union Territories specified I Eighth Schedule.Territories specified I Eighth Schedule.

80IC Special provisions in respect of certain 80IC Special provisions in respect of certain undertakings or enterprises in certain special undertakings or enterprises in certain special category statescategory states

• Applicable from AY 01.04.2004 to an undertaking carrying on Applicable from AY 01.04.2004 to an undertaking carrying on or undertaking substantial expansion of specified business in a or undertaking substantial expansion of specified business in a special category state.special category state.

• ConditionsConditions Not formed by splitting up or reconstruction except Not formed by splitting up or reconstruction except

business discontinued due to extensive damage etc.business discontinued due to extensive damage etc.

Not formed by the transfer of a used plant and machinery Not formed by the transfer of a used plant and machinery except where the used plant and machinery does not exceed except where the used plant and machinery does not exceed 20% of total value of plant and machinery.20% of total value of plant and machinery.

Set up in certain special category statesSet up in certain special category states

Manufacture or produce specified goodsManufacture or produce specified goods

Deduction varies from 25% to 100% for 10 years, Deduction varies from 25% to 100% for 10 years, according to the nature of undertaking, article according to the nature of undertaking, article manufactured and produced, and the specified category of manufactured and produced, and the specified category of statesstates

• Accountant’s Report in form 10CCB to be obtained..Accountant’s Report in form 10CCB to be obtained..

• Subsections 5 & 7 to 12 of Section 80IA shall apply to 80 IB .Subsections 5 & 7 to 12 of Section 80IA shall apply to 80 IB .

• Substantial expansion means increase in an investment in plant Substantial expansion means increase in an investment in plant and machinery by at least 50% of book value (without and machinery by at least 50% of book value (without considering depreciation) of plant and machinery as on the 1st considering depreciation) of plant and machinery as on the 1st day of the previous year in which substantial expansion is day of the previous year in which substantial expansion is undertakenundertaken

80JJA Deduction in respect of profits and gains from 80JJA Deduction in respect of profits and gains from business of collecting and processing of bio-business of collecting and processing of bio-degradable wastedegradable waste

• Business of collecting and processing or treating of bio-Business of collecting and processing or treating of bio-degradable waste for generating Power or producing bio-degradable waste for generating Power or producing bio-fertilizers, bio-pesticides or other biological agents for fertilizers, bio-pesticides or other biological agents for producing bio-gas or making pellets or briquettes for fuel or producing bio-gas or making pellets or briquettes for fuel or organic manure.organic manure.

• Deduction 100% for 5 initial yearsDeduction 100% for 5 initial years

PropositionsPropositions

• Meaning of undertakingMeaning of undertaking

A unit qualifies to be an undertaking when it undertakes A unit qualifies to be an undertaking when it undertakes production or manufacture of articles or things in its own right and production or manufacture of articles or things in its own right and produces such articles or things by itself as a separate and produces such articles or things by itself as a separate and independent unit.independent unit.

114 ITD 189 (Mum.) – Joint CIT Vs. Associated 114 ITD 189 (Mum.) – Joint CIT Vs. Associated Capsules P. Ltd.Capsules P. Ltd.

• Meaning of the word ‘ Derived from’Meaning of the word ‘ Derived from’

Duty drawback receipts & DEPB benefits are not derived from eligible Duty drawback receipts & DEPB benefits are not derived from eligible industrial undertakings for the purpose of the deduction under section industrial undertakings for the purpose of the deduction under section 80-I / 80-IA / 80-IB of the Income-tax Act,1961. 80-I / 80-IA / 80-IB of the Income-tax Act,1961.

317 ITR 0218 (SC) - Liberty India v. CIT317 ITR 0218 (SC) - Liberty India v. CIT

[1999] 237 ITR 579 (SC) CIT v. Sterling Foods[1999] 237 ITR 579 (SC) CIT v. Sterling Foods

• Interest on deposit not derived from business of Interest on deposit not derived from business of undertakingundertaking

[2003] 262 ITR 278 (SC) Pandian Chemicals Ltd. v. CIT[2003] 262 ITR 278 (SC) Pandian Chemicals Ltd. v. CIT

Favouring AssesseeFavouring Assessee

301 ITR 427 ( Jharkhand) CIT vs. Eastern Tar ( P.) Ltd.301 ITR 427 ( Jharkhand) CIT vs. Eastern Tar ( P.) Ltd.

Interest on late payment received from customers is Interest on late payment received from customers is part of sale price and derived from Industrial part of sale price and derived from Industrial UndertakingUndertaking

324 ITR 221 (Bom) – CIT v. Vidyut Corporation (after 324 ITR 221 (Bom) – CIT v. Vidyut Corporation (after considering decision of SC on Liberty India)considering decision of SC on Liberty India)

303 ITR 0411 (P &H)- Phatela Cotgin Industries P. Ltd. v. C I T303 ITR 0411 (P &H)- Phatela Cotgin Industries P. Ltd. v. C I T

286 ITR 201 ( Mad) CIT vs. Indo Matsushita Carbon Co. Ltd.286 ITR 201 ( Mad) CIT vs. Indo Matsushita Carbon Co. Ltd.

• Amounts realised from sale of packing material not Amounts realised from sale of packing material not part of profit of Industrial undertakingpart of profit of Industrial undertaking

219 CTR (MP) 499 CIT vs. Alpine Solvex Ltd.219 CTR (MP) 499 CIT vs. Alpine Solvex Ltd.  

• Amounts received from insurance company for loss of Amounts received from insurance company for loss of goods by fire is from industrial undertakinggoods by fire is from industrial undertaking

183 Taxman 312 (Delhi) CIT vs. Sportking India Ltd.183 Taxman 312 (Delhi) CIT vs. Sportking India Ltd.

• Splitting up or ReconstructionSplitting up or Reconstruction

– Succession or sale does not amount to Succession or sale does not amount to reconstructionreconstruction

167 ITR 586 (A.P.) CIT vs U Foam Private Limited s. 80J 167 ITR 586 (A.P.) CIT vs U Foam Private Limited s. 80J

35 ITR 662 (Mum)CIT vs Gaekwar Foam & Rubber Company 35 ITR 662 (Mum)CIT vs Gaekwar Foam & Rubber Company Limited. Limited. s. 15Cs. 15C

– Take over of a firm by a company is not Take over of a firm by a company is not reconstructionreconstruction

35 ITR 662 (Mum)CIT vs Gaekwar Foam & Rubber Company 35 ITR 662 (Mum)CIT vs Gaekwar Foam & Rubber Company Limited. Limited. s. 15Cs. 15C

– Transfer of Plants & Machineries previously used- Transfer of Plants & Machineries previously used- negligible value or less than 20% value of Plant & negligible value or less than 20% value of Plant & Machinery previously used would not make an Machinery previously used would not make an undertaking disentitled to benefitundertaking disentitled to benefit

[2009] 30 SOT 340 Pembril Indl. & Engg. Co. (P) Ltd. v. DCIT [2009] 30 SOT 340 Pembril Indl. & Engg. Co. (P) Ltd. v. DCIT

304 ITR 365 (GUJ.) – CIT Vs. Lakhanpal National Ltd.304 ITR 365 (GUJ.) – CIT Vs. Lakhanpal National Ltd.

196 ITR 188 (SC) Bajaj Tempo vs. CIT196 ITR 188 (SC) Bajaj Tempo vs. CIT

137 ITR 851 CIT v. Hindustan General Industries Ltd. (Delhi)137 ITR 851 CIT v. Hindustan General Industries Ltd. (Delhi)

– Factory destroyed in fire, new machinery installed, no Factory destroyed in fire, new machinery installed, no reconstruction of old business, assessee entitled to reconstruction of old business, assessee entitled to deductiondeduction

167 ITR 586 CIT v. U Foam Private Limited (Andhra Pradesh)167 ITR 586 CIT v. U Foam Private Limited (Andhra Pradesh)

– Undertaking need not to have its own P&M to Undertaking need not to have its own P&M to manufacture goods and article.manufacture goods and article.

124 ITD 249 (DEL) – ITO V. Techdrive (India) (P.) Ltd.124 ITD 249 (DEL) – ITO V. Techdrive (India) (P.) Ltd.

130 ITR 477 (DEL)- Orient Longman Ltd. Vs. CIT130 ITR 477 (DEL)- Orient Longman Ltd. Vs. CIT

113 ITR 718 (CAL) ACIT vs. A Mukherjee & Co. P. Ltd.113 ITR 718 (CAL) ACIT vs. A Mukherjee & Co. P. Ltd.

137 ITR 879 (BOM.) CIT vs. Neo Pharma Pvt. Ltd.137 ITR 879 (BOM.) CIT vs. Neo Pharma Pvt. Ltd.

• Computation of deduction only with reference to Computation of deduction only with reference to profits of the undertaking and not total profit of the profits of the undertaking and not total profit of the business and without adjusting loss of other unitsbusiness and without adjusting loss of other units

161 ITR 320 (SC) CIT, (Central) Madras vs Canara Workshops 161 ITR 320 (SC) CIT, (Central) Madras vs Canara Workshops Pvt. Limited Pvt. Limited s. 80Es. 80E

160 Taxman 343 (Delhi) CIT vs. Dewan Kraft System P LTD. 160 Taxman 343 (Delhi) CIT vs. Dewan Kraft System P LTD. [2008] 297 ITR 0305[2008] 297 ITR 0305

251 ITR 471 (A.P.) CIT vs Visakha Industries Ltd 251 ITR 471 (A.P.) CIT vs Visakha Industries Ltd s. 80AB , s. 80B , s. 80AB , s. 80B , s. 80HH , s. 80Js. 80HH , s. 80J

• Loss from other unit to be adjusted before allowing Loss from other unit to be adjusted before allowing deductiondeduction

299 ITR 444 ( SC) Synco Industries Ltd. Vs. AO299 ITR 444 ( SC) Synco Industries Ltd. Vs. AO

243 ITR 26 (SC) CIT vs. Motilal Pesticides Pvt. Ltd.243 ITR 26 (SC) CIT vs. Motilal Pesticides Pvt. Ltd.

245 ITR 605 ( Mad) CIT vs. Sundaravel Match Industries P. 245 ITR 605 ( Mad) CIT vs. Sundaravel Match Industries P. Ltd.Ltd.

• Profit and gain are to be reduced by current Profit and gain are to be reduced by current depreciation including initial depreciation relating to depreciation including initial depreciation relating to new undertakingnew undertaking   

318 ITR 352 ( Bom) (FB) Plastiblends India Ltd vs. ACIT318 ITR 352 ( Bom) (FB) Plastiblends India Ltd vs. ACIT

213 ITR 721 (Raj) CIT vs Loonkar Tools Pvt. Limited 213 ITR 721 (Raj) CIT vs Loonkar Tools Pvt. Limited s. 80AB, s. 80AB, s. 80HHs. 80HH

• Previous Year’s losses & unabsorbed depreciation to be Previous Year’s losses & unabsorbed depreciation to be adjusted before claiming deductionadjusted before claiming deduction

234 ITR 529 (Mad) CIT vs. Veeraraghava Textiles P. Ltd.234 ITR 529 (Mad) CIT vs. Veeraraghava Textiles P. Ltd.

• PaPast depreciation/ business losses already set off against st depreciation/ business losses already set off against other income of that year, are not to be set off against the other income of that year, are not to be set off against the income of the unit in subsequent yearincome of the unit in subsequent year

115 ITR 640 (SC) CIT, Patiala vs Patiala Flour Mills Co. Pvt. 115 ITR 640 (SC) CIT, Patiala vs Patiala Flour Mills Co. Pvt. Limited s. 80JLimited s. 80J

96 ITD 160 (Mum.) ACIT vs. Ashok Alco Chem Ltd., 80-IA(7)96 ITD 160 (Mum.) ACIT vs. Ashok Alco Chem Ltd., 80-IA(7)

2010 (231) CTR 0368 MAD Velayudhaswamy spining Mills (P) 2010 (231) CTR 0368 MAD Velayudhaswamy spining Mills (P) Ltd.Ltd.

• Meaning of words Manufacture/ ProductionMeaning of words Manufacture/ Production

235 ITR 5 (Ker)CIT vs Indian Resins And Polymers235 ITR 5 (Ker)CIT vs Indian Resins And Polymers

204 ITR 412 (SC) CIT vs N.C. Budharaja and Co. & another (P) Ltd. 204 ITR 412 (SC) CIT vs N.C. Budharaja and Co. & another (P) Ltd. 80HH80HH

• ““Production" has a wider connotation than the word Production" has a wider connotation than the word "manufacture”"manufacture”

Delhi Cold Storage Pvt. Limited. Vs CIT. 191 ITR 656 (SC)Delhi Cold Storage Pvt. Limited. Vs CIT. 191 ITR 656 (SC)

• ““The expression process is wider than manufacture, The expression process is wider than manufacture, production”production”  

– Conversion of Polymer Granules into powder amounts to Conversion of Polymer Granules into powder amounts to manufacture u/s 80 IBmanufacture u/s 80 IB

300 ITR 115 (MAD) CIT vs. Shri Swasan Chemicals ( M) Pvt. 300 ITR 115 (MAD) CIT vs. Shri Swasan Chemicals ( M) Pvt. Ltd. Ltd. 

• Blending & bottling of IMFL would amount to Blending & bottling of IMFL would amount to manufacture u/s 80 IBmanufacture u/s 80 IB

218 CTR ( Mad) 634 CIT vs. Vinbros & Co. 218 CTR ( Mad) 634 CIT vs. Vinbros & Co. 

• Twisting & texturing of partially oriented yarn Twisting & texturing of partially oriented yarn amounts to manufacture amounts to manufacture

305 ITR 309 (Bom) CIT vs. Emptee Poly- Yarn (P.) Ltd.305 ITR 309 (Bom) CIT vs. Emptee Poly- Yarn (P.) Ltd.

• Cutting & Polishing of marble stones into marble Cutting & Polishing of marble stones into marble slabs and tiles amounts to manufactureslabs and tiles amounts to manufacture

295 ITR 148 ( Raj) Arihant Tiles & Marbles Pvt. Ltd295 ITR 148 ( Raj) Arihant Tiles & Marbles Pvt. Ltd

225 CTR (Delhi) 410 CIT vs. Sophisticated Marbles & Granite 225 CTR (Delhi) 410 CIT vs. Sophisticated Marbles & Granite IndustriesIndustries

• Conversion of a blank disc to a software loaded disc is Conversion of a blank disc to a software loaded disc is a manufacturing activitya manufacturing activity

292 ITR 353 ( Delhi) CIT vs. Oracle Software India Ltd.292 ITR 353 ( Delhi) CIT vs. Oracle Software India Ltd.

• Conversion of jumbo rolls into saleable packets/ rolls Conversion of jumbo rolls into saleable packets/ rolls of standard size does not amount to manufactureof standard size does not amount to manufacture

308 ITR 96 ( Mad) Computer Graphics Ltd vs. ACIT308 ITR 96 ( Mad) Computer Graphics Ltd vs. ACIT

• Poultry business is not entitled to 80 I deduction Poultry business is not entitled to 80 I deduction

159 Taxman 93 ( P & H) CIT vs. Bee Pee Poultries 159 Taxman 93 ( P & H) CIT vs. Bee Pee Poultries

• Common expenditure to be proportionately distributedCommon expenditure to be proportionately distributed

243 ITR 26, (SC) Motilal Perticides (I) Pvt Ltd. Vs CIT, s 243 ITR 26, (SC) Motilal Perticides (I) Pvt Ltd. Vs CIT, s 80AA,80AB,80HH80AA,80AB,80HH

95 TTJ 139 ITAT Chennai C Bench Alstom Ltd. Vs Deputi CIT95 TTJ 139 ITAT Chennai C Bench Alstom Ltd. Vs Deputi CIT

84 TTJ 241 (Del) DCIT vs. Catvision Products Ltd.84 TTJ 241 (Del) DCIT vs. Catvision Products Ltd.

• Fair Market Value of Consideration in sister concern / Fair Market Value of Consideration in sister concern / Inter UnitInter Unit

254 ITR 187 (Bom) CIT Vs Win Laboratories P. Ltd. 254 ITR 187 (Bom) CIT Vs Win Laboratories P. Ltd. s. 80HHs. 80HH

103 ITD 19 West Coast Paper Mills Ltd. V Asst CIT ITAT 103 ITD 19 West Coast Paper Mills Ltd. V Asst CIT ITAT Mumabi Mumabi

  

  

• Both 80HHC and 80IB may be claimed but not to Both 80HHC and 80IB may be claimed but not to exceed GTIexceed GTI

292 ITR 1 (SC) JCIT vs. Mandideep Eng. & Pkg Ind. (P) Ltd. s. 292 ITR 1 (SC) JCIT vs. Mandideep Eng. & Pkg Ind. (P) Ltd. s. 80HH, 80I80HH, 80I

285 ITR 423 (Del) CIT vs S. K. G. Engineering P. Limited285 ITR 423 (Del) CIT vs S. K. G. Engineering P. Limiteds. s. 80HH , s. 80I80HH , s. 80I

• WorkerWorker

Worker mean casual, permanent or temporary. Worker mean casual, permanent or temporary.

152 ITR 152 (Kar) CIT vs. K.G. Udiyurappa & Co., s.80HH152 ITR 152 (Kar) CIT vs. K.G. Udiyurappa & Co., s.80HH

Average number to be worked outAverage number to be worked out

122 ITR 259 (Bom) CIT vs Sawyer's Asia Limited. s.40(c), s. 122 ITR 259 (Bom) CIT vs Sawyer's Asia Limited. s.40(c), s. 84(2)84(2)

176 ITR 470 (Bom) CIT vs Ormerods (I.) Pvt. Limited. s. 84(2)176 ITR 470 (Bom) CIT vs Ormerods (I.) Pvt. Limited. s. 84(2)

Owner can not be counted as workerOwner can not be counted as worker

173 ITR 82 (Mad)CIT vs P. R. Alagappan s. 80J173 ITR 82 (Mad)CIT vs P. R. Alagappan s. 80J

Position during abnormal situation like strike should not be Position during abnormal situation like strike should not be consideredconsidered

220 ITR 84 (A.P.) CIT. Vs Abirami Cotton Mills (Private) 220 ITR 84 (A.P.) CIT. Vs Abirami Cotton Mills (Private) Limited. s. 80JLimited. s. 80J

Employment during substantial period may sufficeEmployment during substantial period may suffice

CIT vs Taluja Enterprises (P.) Ltd 250 ITR 675 (Del)CIT vs Taluja Enterprises (P.) Ltd 250 ITR 675 (Del)

Contract labourer, job worker etc can not be counted Contract labourer, job worker etc can not be counted for determination of the number of workerfor determination of the number of worker

279 ITR 536 (ALL) R & P Exports vs CIT 279 ITR 536 (ALL) R & P Exports vs CIT s. 80HH , s. 80-Is. 80HH , s. 80-I

Contra Case 280 ITR 94 (Guj) CIT vs. Prithviraj Bhoorchand, Contra Case 280 ITR 94 (Guj) CIT vs. Prithviraj Bhoorchand, s.80Is.80I

• Filing of audit report with return is not a mandatory Filing of audit report with return is not a mandatory conditioncondition

317 ITR 249 (Delhi) CIT vs. Contimeters Electricals Pvt. Ltd s. 317 ITR 249 (Delhi) CIT vs. Contimeters Electricals Pvt. Ltd s. 80 IA (7)80 IA (7)

209 ITR 63 (BOM) CIT vs Shivanand Electronics. s. 80J209 ITR 63 (BOM) CIT vs Shivanand Electronics. s. 80J

238 ITR 257 (Calcutta) Murali Export House And Others vs CIT 238 ITR 257 (Calcutta) Murali Export House And Others vs CIT s. 80HHCs. 80HHC

DISCLAIMER

The contents in this presentation are merely for reference and must not be taken as having authority of or binding in any way on the author. For authoritative information please refer to the relevant provisions of the Income Tax Act , Rules, Circulars and Judicial Precedents.

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