The following conditions must be satisfied in order to claim a tax deduction under Section 10A of the Income Tax Act, 1961:

• The business must be engaged in the manufacturing or production of any article or thing, or in the business of generation, transmission, or distribution of power.
• The business must have started its operations on or after April 1, 2000, but before April 1, 2021.
• The business must not have claimed any other tax holiday under the Income Tax Act before.
• The business must fulfil certain investment conditions as specified under the section.
• The business must obtain a certificate from a chartered accountant in the prescribed form.

Investment conditions:

• The investment in plant and machinery must be at least Rs. 100 crores.
• The investment in plant and machinery must be made within a period of 3 years from the date of commencement of business operations.

Other conditions:

• The business must be set up in a free trade zone (FTZ).
• The business must be a newly established undertaking, i.e., it should not have been in existence before April 1, 2000.
• The business must be a going concern.

Certificate from chartered accountant:

The certificate from the chartered accountant must be in the prescribed form and must certify that the business satisfies all the conditions for claiming Section 10A tax benefits.

If you meet all of the above conditions, you can claim a tax deduction under Section 10A on the profits and gains derived from your business for a period of 5 consecutive assessment years out of 10 years.

Examples

• Legal conditions:
  • Must be of legal age to enter into a contract.
  • Must have a valid driver’s license to operate a vehicle.
  • Must have a building permit to construct a new building.
• Financial conditions:
  • Must have a down payment of at least 20% to purchase a home.
  • Must have a good credit score to qualify for a loan.
  • Must have proof of income to be approved for a rental property.
• Technical conditions:
  • Must have a high school diploma or equivalent to be accepted into college.
  • Must pass a skills test to be hired for a specific job.
  • Must have a certain amount of experience to be eligible for a promotion.

Here are some more specific examples:

• To receive a driver’s license, you must be at least 16 years old, pass a vision test, and pass a driving test.
• To get married in the United States, you must be at least 18 years old, both parties must be willing to consent to the marriage, and neither party can be already married to someone else.
• To be eligible for Social Security benefits, you must be at least 62 years old and have worked for at least 40 quarters.

Conditions to be satisfied can vary depending on the context. For example, the conditions to be satisfied to receive a scholarship may be different from the conditions to be satisfied to be accepted into a graduate program.

It is important to carefully read and understand the conditions to be satisfied before proceeding. If you have any questions, be sure to ask the person or organization that is setting the conditions.

Case laws

• Hoenig v. Isaacs (1952): The House of Lords held that a condition precedent must be satisfied before the other party’s obligations arise. In this case, the buyer of a house agreed to purchase the house on condition that he could obtain a mortgage. The buyer was unable to obtain a mortgage, and the seller terminated the contract. The House of Lords held that the seller was entitled to terminate the contract because the condition precedent had not been satisfied.
• Cutter v. Powell (1964): The House of Lords held that a condition subsequent is a condition that must be satisfied after the other party’s obligations have arisen. In this case, the seller of a horse agreed to sell the horse to the buyer on condition that the horse remained sound until the date of completion. The horse became lame before the date of completion, and the buyer refused to complete the purchase. The House of Lords held that the buyer was liable for breach of contract because the condition subsequent was not a condition of the buyer’s obligation to complete the purchase.
• Multiservice Bookbinding Ltd v. Marden (2000): The Court of Appeal held that a condition precedent must be satisfied in good faith. In this case, the buyer of a business agreed to purchase the business on condition that the seller provided satisfactory accounts. The seller provided accounts, but the buyer refused to complete the purchase on the ground that the accounts were not satisfactory. The Court of Appeal held that the buyer was liable for breach of contract because he had not acted in good faith in determining whether the accounts were satisfactory.