Profits from Industrial Undertaking or Infrastructural Development [Section 80-IA]
• Deduction under this section is available to any assessee deriving profits from specified eligible businesses. The deduction is allowed up to 100% of profits for 10 consecutive assessment years out of 15 or 20 years, as applicable.
• Development, operation or maintenance of an infrastructure facility – This includes:
A road including a toll road, a bridge or a rail system;
A highway project including housing or other activities being an integral part of the highway project;
A water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;
A port, airport, inland waterway, inland port or navigational channel in the sea.
• Where the housing or other activities are an integral part of the highway project, profits from such activities are exempt if:
Such profits are computed as per Rule 18BBE;
Profits are transferred to a special reserve account
Actually utilised for the core highway project within 3 years from the year the amount was transferred to the reserve.
Unutilised amounts are taxable in the year of transfer to the reserve account. Separate books shall be maintained, and a certificate in Form No. 10CCC (specifying the amount credited to the reserve account and the amount utilised during the relevant previous year for the highway project) must be submitted.
• Conditions for Infrastructure Projects:
Owned by an Indian company, a consortium, or a statutory body;
Agreement with Central/State Government or authority for developing, operating or maintaining a new infrastructure facility;
Operation commenced between 01-04-1995 and 31-03-2017.
• Development, operation or maintenance of an industrial park or SEZ – Applicable to developers and operators of industrial parks and SEZs.
Deduction of 100% profits for 10 consecutive years within 15 years from commencement.
No deduction for SEZs notified on or after 01-04-2005 (such SEZs fall under Section 80-IAB).
SEZs and industrial parks must be notified under Central Government schemes:
o SEZ is notified between 01-04-1997 to 31-03-2006; and
o Industrial Parks or SEZs were notified between 01-04-1997 and 31-03-2006.
• Generation or distribution of power—This applies to the generation or generation and distribution of power, transmission or distribution by laying a network of new lines and substantial renovation and modernization of the existing network of transmission/distribution lines.
Deduction of 100% profits for 10 years within 15 years from commencement
Power generation: Business commenced between 01-04-1993 and 31-03-2017
Transmission or distribution of power: Business commenced between 01-04-1999 and 31-03-2017
Substantial renovation and modernisation: Business commenced between 01-04-2004 and 31-03-2017
The undertaking should not be formed by splitting up or reconstructing a business already in existence (except Section 33B).
Second-hand plant or machinery should not be used (except if its value does not exceed 20% of the total value of plant and machinery)
• Reconstruction or revival of power-generating plants – Assessee claiming deduction under this provision is required to fulfil the following conditions:
It is set up for the reconstruction or revival of a power-generating plant;
Undertaking shall be owned by an Indian company formed before 30-11-2005 with majority equity participation by public sector companies to enforce the security interest of the lenders to the company owning the power generating plant and notified before 31-12-2005 by the Central Government;
Such undertaking begins to generate, transmit, or distribute power before 31-03-2011.
Deduction of 100% profits for 10 years within 15 years from commencement.
• No deduction shall be allowed where the business is in the nature of a works contract awarded by any person, including the Government.
• Other Conditions
Deduction computed by deeming that the eligible business is the only source of income.
‘Initial Assessment Year’ is the first year opted by the assessee for claiming the deduction [Circular No. 1/2016, dated 15-02-2016].
Deduction cannot be claimed under any other provision of ‘Chapter VI-A under the heading C’ (Section 80HH to 80RRB). Further, the deduction amount shall not exceed the profits and gains of the eligible business.
Profit must not exceed reasonably expected; AO may recompute income.
Transfer pricing norms apply to specified domestic transactions.
Deduction claim under this section requires:
o Audit report under Form 10CCB (electronically filed 1 month before the due date to file return of income under section 139(1));
o Accompanied by separate financials and agreements/approvals with the Government/statutory authority.
Return of income must be filed within the due date under Section 139(1) to claim a deduction.