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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 ..... roviding 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 endi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial 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 Explanationbelow 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olves 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) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;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;" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02. 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. 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" 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion.-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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