Tax Holiday- Deduction [Section-80-IB]

(Deduction In Respect Of Profits And Gains From Certain Industrial Undertakings Other Than Infrastructure Development Undertaking)

The deduction under this section is available to an assessee whose Gross Total Income includes any profits and gains derived from the business of:

  1. commercial production and refining of mineral oil;
  2. processing, preservation and packaging of fruits or vegetables, meat and meat products or poultry or marine or dairy products;
  3. integrated business of handling, storage and transportation of food grains;
  4. operating and maintaining a hospital located anywhere in India other than the excluded area.

(1) Industrial undertaking Producing or Refining Mineral Oil in the North Eastern Region or in any part of India [Section 80-IB(9)]

Deduction under this section is allowed if an undertaking fulfils any of the following conditions:

  1. It should be a new undertaking. It should not be formed by transfer of machinery or plant previously used for any purpose.
  2. The undertaking should be located anywhere in India.
  3. It should commence production of mineral oil after March 31, 1997 but before April 1, 2017 or refining of mineral oil during October 1, 1998 and March 31, 2012 or production of natural gas (in a specified blocks) on or after April 1, 2009 but before April 1, 2017.

Quantum of Deduction under Section 80-IB(9) :

Deduction shall be available @ 100% of eligible profits for 7 assessment years commencing from the initial assessment year.

Initial Assessment Year:

It means the assessment year relevant to the previous year in which the undertaking commences the commercial production or refining of mineral oil.

(2) Undertaking engaged in the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or integrated business of handling, storage and transportation of food grains [Section 80-IB(11A)]

Essential condition:

  1. It must begin or operate the business of processing, preservation and packaging of fruits or vegetables or integrated business of handling, storage and transportation of food grains on or after 1.4.2001.
  2. The business of processing preservation and packaging of meat and meat products or poultry or marine or dairy products should commence on or after 31.3.2009.

Quantum of deduction under Section Section 80-IB(11A) :

AssesseePeriod of Deduction (commencing from initial assessment year)% of Profit eligible for Deduction
(a)Owned by a CompanyFirst 5 Years100%
Next 5 Years30%
(b)Owned by any other AssesseeFirst 5 Years100%
Next 5 Years25%

Initial assessment year:

It means the assessment year relevant to the previous year in which the undertaking begins such business.

(3) Undertaking Operating and Maintaining a Hospital located anywhere in India other than Excluded Area [Section 80-IB(11C)]

Essential conditions: The deduction is allowed if the following conditions are satisfied:

  1. the hospital is constructed and has started or starts functioning at any time during the period beginning on 1.4.2008 and ending on 31.3.2013;
  2. the hospital has at least 100 beds for patients;
  3. the construction of the hospital is in accordance with the regulations or bye-laws of the local authority; and
  4. the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation to sub-section (2) of section 288, certifying that the deduction has been correctly claimed.

Quantum and Period of Deduction under Section [Section 80-IB(11C)] :

100% of the profits and gains of such business for a period of 5 consecutive assessment years, beginning with the initial assessment year.

Initial assessment year:

It means the assessment year relevant to the previous year in which the undertaking begins such business.

(4) Further Conditions applicable for all Assessees Claiming Deduction under Section 80-IB [Section 80-IB(13)]:

The provisions contained in section 80-IA(5) and 80-IA(7) to (12) shall, so far as may be, apply to the eligible business under this section. These provisions relate to the following:—

1. Audit of accounts [Section 80-IA(7)]:

The deduction under section 80-IA from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by a chartered accountant and the assessee furnishes, alongwith his return of income, the report of such audit in Form No. 10CCB duly signed and verified by such accountant.

2. Inter-unit transfer of goods or services [Section 80-IA(8)]:

Where any goods 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 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 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 or services as on that date:

However, 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. “Market value” in relation to any goods or service, means the price that such goods or service, would ordinarily fetch on sale in the open market.

3. Double deduction not allowed [Section 80-IA(9)]:

Where any amount of profits and gains of an 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 the heading “deductions in respect of certain incomes”, and shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise, as the case may be.

4. Restriction of excessive profits [Section 80-IA(10)]:

Where it appears to the Assessing Officer that, owing to the (i) close connection between the assessee carrying on the eligible business to which this section applies and any other person, or (ii) 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 maybe reasonably deemed to have been derived therefrom.

5. Power of Central Government to declare that the section shall not apply [Section 80-IA(11)]:

The Central Govt. may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section not apply to any class of industrial undertaking or enterprise with effect from such date as it may specify in the notification.

6. Deduction not to be allowed in cases where return is not filed within the specified time limit specified under section 139(1) [Section 80AC]:

No deduction shall be allowed to the assessee under this section unless he furnishes a return of his income of the relevant assessment year on or before the due date specified u/s 139(1).