Income Tax Act

Official PDF pages 266–270

SOURCE PDF PAGE 266
( c )   without any exemption or deduction for allowances or perquisite, called
by any name, provided under any other law in force.
(3) The loss and depreciation referred to in sub-section (2)( b ) shall be deemed to
have been given full effect to and no further deduction for such loss or depreciation
shall be allowed for any subsequent year.
(4) Nothing contained in sub-section (1) shall apply to a person, where an option is
exercised by such person under this section, in such manner as may be prescribed,
for any tax year, and such option is exercised,—
( a )   in case of a person having income from business or profession,—
( i )   on or before the due date specified under section 263(1) for fur -
nishing the returns of income for such tax year
15
;
( ii )   such option, once exercised, shall apply to subsequent tax years;
( iii )   such option, once exercised, may be withdrawn only once for a tax
year other than the tax year for which it was exercised; and
( iv )   after such withdrawal, the person shall never be eligible to exercise
the option under this sub-section, except where such person ceases
to have any income from business or profession, and in such a case
the option under clause ( b ) shall be available;
( b )   in case of a person not having income from business or profession, along
with the return of income to be furnished under section 263(1) for the
tax year.
(5) In case of a person, having a Unit in the International Financial Services Centre,
the provisions of sub-section (2) shall be modified to the extent that deduction under
section 147 shall be available to such Unit subject to fulfilment of the conditions
contained in that section.
Tax on income of certain resident co-operative societies.
203.   (1) Irrespective of anything contained in this Act but subject to the provisions
of Part A, B, E and this Part (other than section 204) of this Chapter, the
income-tax payable for a tax year shall be at the rate of 22%, at the option of a
person being a co-operative society resident in India, in respect of the total income
of such person computed in the following manner:—
( a )   without any deduction under—
( i )   Chapter VIII other than the provisions of section 146  
26
[ or 150 ] ; or
( ii )   sections specified in section 205(1)( a ) to ( g );
( b )   without set off of any loss carried forward or depreciation from any
earlier tax year, if such loss or depreciation is attributable to any of the
deductions referred to in clause ( a ).
(2) Where a person fails to satisfy the requirements contained in sub-section (1)
in any tax year, the option shall become invalid in respect of the said tax year and
26.   Inserted by the Finance Act, 2026, w.e.f.   1-4-2026 .

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subsequent tax years and other provisions of the Act shall apply, as if the option had
not been exercised for such tax year and for subsequent tax years.
(3) The loss and depreciation referred to in clause ( b ) of sub-section (1) shall be
deemed to have been given full effect to and no further deduction for such loss or
depreciation shall be allowed for any subsequent tax year.
(4) In case of a person, having a Unit in the International Financial Services Centre,
which has exercised option under sub-section (5), the requirements contained in
sub-section (1) shall be modified to the extent that the deduction under section 147
22
shall be available to such Unit subject to fulfilment of the conditions contained in
the said section.
(5) The provisions of this section shall not apply unless the option is exercised by
the person in the prescribed manner on or before the due date specified under
section 263(1) for furnishing the return of income and such option once exercised
shall apply to subsequent tax years.
(6) Once the option under this section has been exercised for any tax year, it shall
not be subsequently withdrawn for the same or any other tax year.
26
[ (7) In case of an assessee, being a co-operative society, which has exercised option
under sub-section (5), the requirements contained in sub-section (1) shall be modified
to the extent that the deduction under section 149(2)( d )( ii ) shall be available to such
assessee as does not exceed the amount of dividend distributed by it to its members at
least one month before the due date for filing the return of income under section 263(1). ]
Tax on income of certain new manufacturing co-operative societies.
204.   (1) Irrespective of anything contained in this Act but subject to the provisions
of Part A, B, E and this Part (other than section 203) of this Chapter, the in -
come-tax payable in respect of the total income of an assessee, being a co-operative
society, resident in India, engaged in the business of manufacture or production of
any article or thing, shall at the option of such assessee, be computed at the rates
specified in column A of the said Table, if the conditions contained in column B
thereof are fulfilled.
TABLE
Total income and rate of tax   Conditions
A   B
( a )   15% on the total income other than
the income mentioned in clauses
( b ), ( c ) and ( d );
( b )   22% (without any deduction or
allowance in respect of any ex -
penditure or allowance) on such
income,—
( i )   which has neither been de -
rived from nor is incidental to
manufacturing or production
of an article or thing; and
Such co-operative society—
( a )   exercises the option in the manner
provided in sub-section (2);
( b )   has been set-up and registered on
or after the 1st April, 2023;
( c )   has commenced manufacturing
or production of an article or thing
on or before the 31st March, 2024;
( d )   the total income of which is com -
puted as per the provisions of
sub-section (3); and
26.   Inserted by the Finance Act, 2026, w.e.f.   1-4-2026 .

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Total income and rate of tax   Conditions
A   B
( ii )   in respect of which no specific
rate of tax has been provided
separately under this Part;
( c )   22% on short-term capital gains
derived from transfer of a capital
asset on which no depreciation is
allowable under this Act;
( d )   30% on the income deemed so
under section 205(4).
( e )   fulfils all the conditions provided
in section 205(2).
(2) The option under this section shall be exercised by the assessee in the manner
as may be prescribed subject to the following conditions:—
( a )   it shall be exercised on or before the due date specified under section
263(1) for furnishing the first of the returns of income for any tax year;
and
( b )   such option, once exercised, shall apply to subsequent tax years;
( c )   once the option has been exercised for any tax year, it shall not be sub -
sequently withdrawn for the same or any other tax year;
( d )   where the assessee fails to fulfil the conditions contained in sub-section
(1) (Table: Sl. No. 1.B) in any tax year,—
( i )   the option shall become invalid in respect of such tax year and
subsequent tax years; and
( ii )   the other provisions of this Act shall apply, as if the option had not
been exercised for that tax year and subsequent tax years.
(3) For the purposes of sub-section (1), the total income of the assessee shall be
computed,—
( a )   without any deduction under—
( i )   Chapter VIII other than the provisions of section 146  
27
[   or 150 ] ; or
( ii )   sections specified in section 205(1)( a ) to ( g )
32
;
( b )   without set off of any loss carried forward or depreciation from earlier tax
year, if such loss or depreciation is attributable to any of the deductions
referred to in clause ( a ).
(4) While computing the income of the assessee, the loss and depreciation, or both,
as specified in sub-section (3)( b ) shall be deemed to have been given full effect to
and no further deduction for such loss or depreciation, or both, shall be allowed
for any subsequent year.
27
[ (5) In case of an assessee, being a co-operative society, which has exercised option
under sub-section (2), the requirements contained in sub-section (3) shall be modified
27.   Inserted   by the Finance Act, 2026, w.e.f.   1-4-2026 .

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to the extent that the deduction under section 149(2)( d )( ii )shall be available to such
assessee as does not exceed the amount of dividend distributed by it to its members at
least one month before the due date for filing the return of income under section 263(1). ]
Conditions for tax on income of certain companies and co-operative societies.
205.   (1) For the purposes of sections 199(1)( c )( i )( C ), 200(1)( a )( iii ), 201(3)( a )( iii ),
203(1)( a )( ii ) and 204(3)( a )( ii ), the total income shall be computed without
any deduction or exemption, under the following provisions:—
( a )   section 33(8);
( b )   section 45(3)( a ) or ( b ) or ( c );
( c )   section 46;
( d )   section 47(1)( a );
( e )   section 48;
( f )   section 49; and
( g )   section 144.
(2) For the purposes of section 201 or 204, the following conditions shall apply to
the assessee:—
( a )   its business is not formed by splitting up, or the reconstruction, of
a business already in existence, unless it is formed as a result of the
re-establishment, reconstruction or revival of the business of any such
undertaking as is referred to in section 140(4)in the circumstances and
within the period specified in the said section;
( b )   it does not use any machinery or plant, previously used for any purpose,
other than—
( i )   permitted machinery or plant used outside India;
( ii )   machinery or plant or any part thereof previously used for any
purpose and the total value of such machinery or plant or any part
thereof put to use by the assessee does not exceed 20% of the total
value of the machinery or plant used by such assessee;
( c )   in case of a domestic company, it does not use any building previously
used as a hotel or a convention centre, in respect of which deduction
under section 80-ID of the Income-tax Act, 1961 (43 of 1961) has been
claimed and allowed;
( d )   it is not engaged in any business other than the business of manufacture
or production of any article or thing and research in relation to, or dis -
tribution of, such article or thing manufactured or produced by it,
and, if any difficulty arises in fulfilling any of the conditions contained in clause
( b ) or ( c ) or ( d ), the Board may, with the previous approval of the Central Govern -
ment, issue guidelines for the purpose of removing the difficulty and to promote
manufacturing or production of article or thing using new plant and machinery.
(3) Every guideline issued by the Board under sub-section (2) shall be laid before
each House of Parliament while it is in session for a total period of thirty days which

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may be comprised in one session or in two or more successive sessions, and if,
before the expiry of the session immediately following the session or the successive
sessions aforesaid, both houses agree in making any modification in such guideline
or both Houses agree that the guideline, should not be issued, the guideline shall
thereafter have effect only in such modified form or be of no effect, as the case may
be; so, however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that guideline.
(4) For the purposes of sections 201 and 204,—
( a )   where it appears to the Assessing Officer that, owing to the close connec -
tion between the person to which the said section applies 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 business, then the Assessing Officer shall, in computing the
profits and gains of such business for the purposes of this section, take
profits as may be reasonably deemed to have been derived therefrom,
and where the said arrangement involves a specified domestic transac -
tion referred to in section 164, profits from such transaction shall be
determined having regard to the arm’s length price as defined in section
173( a ); and
( b )   the amount, being profits in excess of the profits determined by the
Assessing Officer under clause ( a ), shall be deemed to be the income of
the person and shall be chargeable at the rates specified in section 201(1)
[Table: Sl. No. 1.C( d )] or 204(1) [Table: Sl. No. 1.A( d )], as the case may
be.
(5) For the purposes of this Part,—
( a )   the business of manufacture or production of any article or thing shall
include the business of generation of electricity but shall not include
business of—
( i )   development of computer software in any form or in any media;
or
( ii )   mining; or
( iii )   conversion of marble blocks or similar items into slabs; or
( iv )   bottling of gas into cylinder; or
( v )   printing of books or production of cinematograph film; or
( vi )   any other business as may be notified by the Central Government
in this behalf; and
( b )   the expressions,—
( i )   “hotel” and “convention centre” shall have the meanings respectively
assigned to them in clause ( b ) and clause ( a ) of section 80-ID(6) of
the Income-tax Act, 1961 (43 of 1961);