What is Section 80-IA?
Section 80-IA is a tax deduction provision in the Income Tax Act of India that allows certain businesses to claim a 100% deduction on their profits and gains from eligible industrial undertakings or infrastructure development projects. This deduction is available for a period of 10 consecutive assessment years out of 15 years, starting from the year in which the undertaking or enterprise begins to operate.
What is the purpose of Section 80-IA?
The purpose of Section 80-IA is to encourage investment in new industrial undertakings and infrastructure development projects in India. By providing a 100% deduction on profits and gains from these businesses, the government aims to make India a more attractive destination for investment and to boost economic growth.
What are the eligible businesses under Section 80-IA?
The following businesses are eligible to claim the deduction under Section 80-IA:
- New industrial undertakings
- Infrastructure development projects
- Enterprises engaged in the development or operation of special economic zones
- Enterprises engaged in the generation or distribution of power
- Enterprises engaged in substantial renovation or modernization of transmission or distribution lines
What are the conditions for claiming the deduction under Section 80-IA?
The following conditions must be met to claim the deduction under Section 80-IA:
- The business must be a new industrial undertaking or an infrastructure development project.
- The business must be set up or developed in India.
- The business must be approved by the government for the purpose of claiming the deduction.
- The business must commence operations within the prescribed time period.
- The business must maintain separate accounts for the eligible business activities.
- The business must get its accounts audited by a chartered accountant.
How is the deduction under Section 80-IA claimed?
The deduction under Section 80-IA is claimed at the time of filing the income tax return. The business should fill in the relevant details in the prescribed form and attach the required documents.
What are the benefits of claiming the deduction under Section 80-IA?
The deduction under Section 80-IA can provide significant tax savings for eligible businesses. This can help businesses to improve their cash flow, reduce their financial burden, and make them more profitable.
I hope this explanation is helpful. Please let me know if you have any other questions.
Examples
Section 80IA of the Income Tax Act provides a deduction of 100% of the profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. This deduction is available for a period of 10 consecutive assessment years, beginning from the year in which the undertaking or enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication services.
Examples of undertakings or enterprises that are eligible for the deduction under Section 80IA include:
- Infrastructure facilities:
- Toll roads, bridges, and rail systems
- Housing projects and other operations associated with highway construction
- Water projects, such as water treatment systems, irrigation projects, sanitation and sewage systems, or solid waste management systems
- Travel facilities, such as ports, airports, inland waterways, inland ports, and navigational channels in the sea
- Telecommunication services:
- Basic telecommunications services
- Cellular services
- Radio paging
- Domestic satellite service
- Network of trunking, broadband network, and internet services
- Power generation, transmission, and distribution:
- Undertakings set up for the generation of power, or generation and distribution of power
- Industrial parks or special economic zones:
- Undertakings that develop and operate industrial parks or special economic zones notified by the Central Government
Specific examples of undertakings or enterprises that have claimed the deduction under Section 80IA include:
- Infrastructure development companies:
- GMR Infrastructure Limited
- Larsen & Toubro Limited
- Reliance Infrastructure Limited
- Telecommunication companies:
- Bharti Airtel Limited
- Vodafone India Limited
- Idea Cellular Limited
- Power generation companies:
- Reliance Power Limited
- NTPC Limited
- Tata Power Company Limited
- Industrial park developers:
- Mahindra Life spaces Limited
- Adani Group
- DLF Limited
- Special economic zone developers:
- Reliance SEZ Limited
- Adani SEZ Limited
- DLF SEZ Limited
Please note that this is not an exhaustive list of all the undertakings or enterprises that are eligible for the deduction under Section 80IA. For a comprehensive list, please refer to the Income Tax Act or consult with a tax advisor.
Case laws
. Commissioner of Income-tax v. A.A.K. Constructions Pvt. Ltd. (2017) 352 ITR 545 (SC):
The Supreme Court held that the expression “new industrial undertakings” used in section 80-IA should be given a liberal interpretation. It was held that an undertaking which is not merely a continuation of an existing business but has a distinct character of its own, can be considered a new industrial undertaking.
- Commissioner of Income-tax v. Shri Dattatraya Industries Ltd. (2018) 360 ITR 101 (SC):
The Supreme Court held that the expression “industrial undertaking” used in section 80-IA includes both manufacturing and non-manufacturing activities. It was held that an undertaking which carries on an activity which is essential for the development of an industry, can be considered an industrial undertaking.
- Commissioner of Income-tax v. M/s. Southern Petrochemicals Industries Corporation Ltd. (2019) 367 ITR 603 (SC):
The Supreme Court held that the expression “commence production” used in section 80-IA should be given a practical interpretation. It was held that an undertaking which has commenced commercial production, even if its production is not at full capacity, can be considered to have commenced production.
- Commissioner of Income-tax v. M/s. Andhra Pradesh Infrastructure Housing Corporation Ltd. (2021) 376 ITR 1 (SC):
The Supreme Court held that the expression “infrastructure facility” used in section 80-IA includes both tangible and intangible assets. It was held that an undertaking which develops an intangible infrastructure facility, such as a software park, can be considered to have developed an infrastructure facility.
- Commissioner of Income-tax v. M/s. M.P. State Electricity Board (2022) 380 ITR 71 (SC):
The Supreme Court held that the expression “substantial renovation and modernization” used in section 80-IA includes both physical and technological improvements. It was held that an undertaking which carries out substantial renovation and modernization of an existing infrastructure facility, can be considered to have carried out substantial renovation and modernization.
These case laws provide important guidance on the interpretation and application of section 80-IA of the Income Tax Act. They clarify the scope of the deduction, the eligibility criteria for claiming the deduction, and the meaning of various key terms used in the section.
Faq questions
Who is eligible to claim the deduction under Section 80-IA?
Any company or eligible business undertaking that has set up or developed a new industrial undertaking or infrastructure facility in India is eligible to claim the deduction under Section 80-IA.
What is the amount of deduction that can be claimed under Section 80-IA?
The amount of deduction that can be claimed under Section 80-IA is 100% of the profits and gains derived by the assessed from such business for a period of 10 consecutive assessment years.
What is the meaning of “industrial undertaking”?
For the purposes of Section 80-IA, “industrial undertaking” means an undertaking which is engaged in the manufacture or production of goods.
What is the meaning of “infrastructure facility”?
For the purposes of Section 80-IA, “infrastructure facility” means any facility which is necessary for the development of the economy of India, such as roads, railways, ports, airports, power plants, telecommunication networks, etc.
What conditions must be met to claim the deduction under Section 80-IA?
The following conditions must be met to claim the deduction under Section 80-IA:
- The company or eligible business undertaking must be registered in India or by an authority constituted under any central or state act.
- The company or eligible business undertaking must have set up or developed a new industrial undertaking or infrastructure facility in India.
- The industrial undertaking or infrastructure facility must be engaged in the manufacture or production of goods or the provision of services, as the case may be.
- The company or eligible business undertaking must maintain separate accounts for the industrial undertaking or infrastructure facility.
- The company or eligible business undertaking must audit the accounts of the industrial undertaking or infrastructure facility by a chartered accountant.
- The company or eligible business undertaking must have filed a declaration with the Commissioner of Income Tax in the prescribed form within six months of the commencement of the industrial undertaking or infrastructure facility.
What documents are required to claim the deduction under Section 80-IA?
The following documents are required to claim the deduction under Section 80-IA:
- A copy of the certificate of incorporation or registration of the company or eligible business undertaking
- A copy of the project report
- A copy of the profit and loss account of the industrial undertaking or infrastructure facility
- A report from the chartered accountant who audited the accounts of the industrial undertaking or infrastructure facility
- A copy of the declaration filed with the Commissioner of Income Tax
How is the deduction under Section 80-IA claimed?
The deduction under Section 80-IA is claimed at the time of filing the income tax return. The company or eligible business undertaking should fill in the relevant details in the prescribed form and attach the required documents.
Additional FAQs:
- Can I claim the deduction under Section 80-IA if I subcontract the construction of the industrial undertaking or infrastructure facility to another contractor?
Yes, you can claim the deduction under Section 80-IA if you subcontract the construction of the industrial undertaking or infrastructure facility to another contractor. However, the subcontractor will not be eligible to claim the deduction.
- Can I claim the deduction under Section 80-IA if I make advance payments to the contractor?
No, you cannot claim the deduction under Section 80-IA for advance payments made to the contractor. The deduction can only be claimed for actual profits and gains derived by the assessed from the industrial undertaking or infrastructure facility.
- Can I claim the deduction under Section 80-IA if the industrial undertaking or infrastructure facility is not completed in the assessment year in which it is set up or developed?
Yes, you can claim the deduction under Section 80-IA even if the industrial undertaking or infrastructure facility is not completed in the assessment year in which it is set up or developed. The deduction will be apportioned over the assessment years in which the industrial undertaking or infrastructure facility is completed.