Income Tax Act

Official PDF pages 201–205

SOURCE PDF PAGE 201
of the machinery or plant used in the business, then, for the purposes of sub-section
(3)( b ), the condition specified therein shall be deemed to have been complied with.
(7) Irrespective of 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 that sub-sec -
tion for the tax year immediately succeeding the initial tax year or any subsequent
tax year, be computed as if such eligible business was the only source of income of
the assessee during the initial tax year and to every subsequent tax year up to and
including the tax year for which the determination is to be made.
(8) The deduction under sub-section (1) from profits and gains derived from an
eligible business shall not be admissible unless the accounts of the eligible busi -
ness for the tax year for which the deduction is claimed have been audited by an
accountant, before the specified date referred to in section 63 and the assessee
furnishes by that date the report of such audit in the prescribed form duly signed
and verified by such accountant.
(9) In a case where, any goods or services held—
( i )   for the purposes of the eligible business are transferred to any other
business carried on by the assessee; or
( ii )   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.
(10) For the purposes of sub-section (9), where, in the opinion of the Assessing Offi -
cer, 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.
(11) For the purposes of sub-section (9), “market value”, in relation to any goods
or services, means—
( i )   the price that such goods or services would ordinarily fetch in the open
market; or
( ii )   the arm’s length price as defined in section 173( a ), where the transfer of
such goods or services is a specified domestic transaction referred to in
section 164.
(12) 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 tax year,
deduction to the extent of such profits and gains shall not be allowed under any
other provisions of Part C of this Chapter and shall in no case exceed the profits
and gains of such eligible business of undertaking or enterprise, as the case may be.
(13) 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

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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.
(14) Where the arrangement as mentioned in sub-section (13) involves a specified
domestic transaction referred to in section 164, the amount of profits from such
transaction shall be determined having regard to arm’s length price as defined in
section 173( a ).
(15) The Central Government may, after making such inquiry as it may think fit,
direct, by notification, 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.
(16) For the purposes of this section,—
( a )   “eligible business” means a business carried out by an eligible start-up
engaged in innovation, development or improvement of products or
processes or services or a scalable business model with a high potential
of employment generation or wealth creation;
( b )   “eligible start-up” means a company or a limited liability partnership
engaged in eligible business which fulfils the following conditions:—
( i )   it is incorporated on or after the 1st April, 2016 but before the 1st
April, 2030;
( ii )   the total turnover of its business does not exceed  
12
[ three ]   hundred
crore rupees in the tax year relevant to the tax year for which de -
duction under sub-section (1) is claimed; and
( iii )   it holds a certificate of eligible business from the Inter-Ministerial
Board of Certification as may be notified by the Central Government;
( c )   “limited liability partnership” means a partnership referred to in
section 2(1)( n ) of the Limited Liability Partnership Act, 2008 (6 of 2009).
Deduction in respect of profits and gains from certain industrial under-takings.
141.   In respect of any tax year, where—
( a )   the gross total income of an assessee, includes any profits and gains
derived from any business referred to in section 80-IB of the Income-
tax Act, 1961 (43 of 1961); and
( b )   such assessee is eligible to claim a deduction from the profits and gains
derived from such business for such tax year under the provisions of the
said section, as if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the conditions that—
12.   Substituted for “one” by the Finance Act, 2026, w.e.f.   1-4-2026 .

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( i )   the amount of deduction is calculated as per the provisions of section
80-IB of the Income-tax Act, 1961 (43 of 1961); and
( ii)   the deduction under this Act shall be allowed only for such tax years,
as would have been allowed under section 80-IB of the Income-tax Act,
1961 (43 of 1961), as if the said Act had not been repealed.
Deductions in respect of profits and gains from housing projects.
142.   In respect of any tax year, where—
( a )   the gross total income of an assessee, includes any profits and gains
derived from the business of developing and building housing projects or
rental housing projects referred to in section 80-IBA of the Income-tax
Act, 1961 (43 of 1961); and
( b )   such assessee is eligible to claim a deduction from the profits and gains
derived from such business for such tax year under the provisions of the
said section, as if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the conditions that—
( i )   the amount of deduction is calculated as per the provisions of section
80-IBA of the Income-tax Act, 1961 (43 of 1961); and
( ii )   the deduction under this Act shall be allowed only for such tax years, as
would have been allowed under section 80-IBA of the Income-tax Act,
1961 (43 of 1961), as if the said Act had not been repealed.
Special provisions in respect of certain undertakings in North-Eastern States.
143.   (1) Where the gross total income of an assessee includes any profits and gains
derived by an undertaking, to which this section applies, from any busi -
ness referred to in sub-section (2), there shall be allowed, in computing the total
income of the assessee, a deduction of an amount equal to 100% of the profits and
gains derived from such business for ten consecutive tax years commencing with
the initial tax year.
(2) This section applies to any undertaking which during the period beginning on
the 1st April, 2007 and ending before the 1st April, 2017, has begun or begins, in
any of the North-Eastern States,—
( a )   to manufacture or produce any eligible article or thing; or
( b )   to undertake substantial expansion to manufacture or produce any eli -
gible article or thing; or
( c )   to carry on any eligible business.
(3) This section applies to any undertaking which fulfils all the following conditions:—
( a )   it is not formed by splitting up, or the reconstruction, of a business
already in existence (other than an undertaking which is formed as a
result of the re-establishment, reconstruction or revival by the assessee of
the business of any such undertaking as is referred to in section 140(4),
in the circumstances and within the period specified therein);
( b )   it is not formed by the transfer to a new business of machinery or plant
previously used for any purpose.

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(4) For the purposes of sub-section (3)( b ), the provisions of section 140(5) and (6)
shall apply.
(5) Irrespective of anything contained in any other provision of this Act, in com -
puting the total income of the assessee, no deduction shall be allowed under any
other section contained in this Chapter in relation to the profits and gains of the
undertaking.
(6) Irrespective of anything contained in this Act, no deduction shall be allowed to
any undertaking under this section, where the total period of deduction inclusive
of the period of deduction under this section or under second proviso to section
80-IB(4) of the Income-tax Act, 1961 (43 of 1961) exceeds ten tax years.
(7) The provisions contained in section 140(7) to (15) shall, so far as may be, apply
to the eligible undertaking under this section.
(8) For the purposes of this section,—
( a )   “eligible article or thing” means the article or thing other than the
following:—
( i )   goods falling under Chapter 24 of the First Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986), which pertains to tobacco and
manufactured tobacco substitutes;
( ii )   pan masala as covered under Chapter 21 of the First Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986);
( iii )   plastic carry bags of less than twenty microns as specified by the
Ministry of Environment and Forests   vide   notification numbers
S.O. 705(E), dated the 2nd September, 1999 and S.O. 698(E), dated
the 17th June, 2003; and
( iv )   goods falling under Chapter 27 of the First Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986), produced by petroleum oil or
gas refineries;
( b )   “eligible business” means the business of—
( i )   hotel (not below two star category);
( ii )   adventure and leisure sports including ropeways;
( iii )   providing medical and health services in the nature of nursing home
with a minimum capacity of twenty-five beds;
( iv )   running an old-age home;
( v )   operating vocational training institute for hotel management,
catering and food craft, entrepreneurship development, nursing
and para-medical, civil aviation related training, fashion designing
and industrial training;
( vi )   running information technology related training centre;
( vii )   manufacturing of information technology hardware; and
( viii )   bio-technology;

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( c )   “initial tax year” means the tax year in which the undertaking begins
to manufacture or produce articles or things, or completes substantial
expansion;
( d )   “North-Eastern States” means the States of Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;
( e )   “substantial expansion” means increase in the investment in the plant
and machinery by at least 25% of the book value of plant and machinery
(before taking depreciation in any year), as on the first day of the tax
year in which the substantial expansion is undertaken.
Special provisions in respect of newly established Units in Special Economic
Zones.
144.   In respect of any tax year, where—
( a )   in computing the total income of an assessee, being an entrepreneur
as referred to in section 2( j ) of the Special Economic Zones Act, 2005
(28 of 2005), who begins to manufacture or produce articles or things
or provide any services, as referred to in section 10AA of the Income-tax
Act, 1961 (43 of 1961); and
( b )   such assessee is eligible to claim a deduction from the profits and gains
derived from the export, of such articles or things or from services for
such tax year under the provisions of the said section, if the said Act had
not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction
from the profits and gains derived from such business, subject to the conditions that—
( i )   the amount of deduction is calculated as per the provisions of section
10AA of the Income-tax Act, 1961 (43 of 1961); and
( ii )   the deduction under this Act shall be allowed only for such tax years,
as would have been allowed under section 10AA of the Income-tax Act,
1961 (43 of 1961), as if the said Act had not been repealed.
Deduction for businesses engaged in collecting and   processing of bio-de -
gradable waste.
145.   If the gross total income of an assessee includes any profits and gains
derived from the business of collecting and processing or treating of bio-
degradable waste for,—
( a )   generating power; or
( b )   producing bio-fertilizers, bio-pesticides or other biological agents; or
( c )   producing bio-gas; or
( d )   making pellets or briquettes for fuel or organic manure,
there shall be allowed a deduction equal to the whole amount of such profits and
gains for five consecutive tax years, beginning with the tax year in which such
business commences.
Deduction in respect of additional employee cost.
146.   (1) Subject to the conditions specified in sub-sections (2) and (3), if the gross
total income of an assessee, to whom section 63 applies, includes any