SECTION 80-IA/80-IB
 
DEDUCTIONS - PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS, ETC.
[SEC. 80-IA/80-IB]

BOLT Scheme of Railways - The Indian Railways have formulated a Build-Own-Lease-Transfer (B-O-L-T) Scheme, whereunder a private enterprise will provide the necessary and crucial components of a railway system, own them for a stipulated period but will not maintain or operate the same. Instead, the enterprises will lease the asset back to Indian Railways for maintenance and operation and shall ultimately transfer it to Indian Railways. The said B-O-L-T Scheme shall be eligible for the benefit of section 80-IA, since it is not legally possible for any enterprise other than the Indian Railways to maintain and operate a railway system. However, this concession shall be applicable only to an infrastructure facility meant for development of Rail System and not to any other infrastructural facility including rolling stocks—Circular : No. 733, dated 3-1-1996.

Definition of ‘port’ as infrastructure facility for the purpose of sections 10(23G) and 80-IA - Structures at ports for storage, loading and unloading, etc., will fall under the definition of "port" for the purposes of sections 10(23G) and 80-IA, if the following conditions are fulfilled :

 (a)  the concerned port authority has issued a certificate that the said structures form part of the port, and

 (b)  such structures have been built under BOT or BOLT Schemes and there is an agreement that the same would be transferred to the said authority on the expiry of the time stipulated in the agreement - Circular : No. 793, dated 23-6-2000.

However, for and from assessment year 2002-03 onwards, structures at the ports for storage, loading and unloading etc. will be included in the definition of "port" for the purpose of sections 10(23G) and 80-IA of the Income-tax Act, 1961, if the following condition is fulfilled :

     -  the concerned port authority has issued a certificate that the said structures form part of the port - Circular : No. 10/2005, dated 16-12-2005.

Widening of existing road as infrastructure facility - References have been received by the Board as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i).

Section 80-IA(4)(i) provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of the conditions laid down in the section. The Explanation to section 80-IA(4)(i) states that for the purpose of this clause, infrastructure facility means inter alia :—

"(a)  a road including toll road, a bridge or a rail system;

 (b)  a highway project including housing or other activities being an integral part of the highway project;"

The issue has been examined by the Board. It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose. - Circular No. 4/2010, dated 18-5-2010.

Infrastructure facilities, definition as amended by Finance Act, 2001 - ‘Infrastructure facility’ as defined in Explanation to sub-clause (c) of clause (i) of sub-section (4) of section 80-IA, as it stood prior to its substitution by the Finance Act, 2001, meant :

  (i)  a road, bridge, airport, inland waterways and inland ports, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette;

 (ii)  a highway project including housing or other activities being an integral part of the highway project; and

(iii)  a water supply, water management system, irrigation project, sanitation and sewerage system or solid waste management system.

The Finance Act, 2001 has further rationalised the above definition. The definition of ‘Infrastructure facility’, as given in the Explanation introduced with effect from 1-4-2002 excludes ‘any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette’. Under the earlier provisions, several public facilities have already been notified by the Board as ‘infrastructure facilities’. In this connection, a need has been felt to clarify doubts as to whether such notified "infrastructure facilities" would continue to be eligible for such benefit on or after 1-4-2002. It is, hereby clarified that :

"Such projects, for which agreements have been entered into on or after 1-4-1995 but on or before 31-3-2001 and which have been notified by the Board on or before 31-3-2001, would continue to be exempt, subject to the fulfilment of the conditions prescribed in section 80-IA(4)(i)( b), as it existed prior to its substitution by the Finance Act, 2001." - Circular : No. 7/2002, dated 26-8-2002.

Notified Company under section 80-IA(4)(v)(a) - In exercise of the powers conferred by sub-clause (a) of clause (v) of sub-section (4) of section 80-IA, the Central Government hereby notifies the Ratnagiri Gas & Power Private Limited, being an Indian company, (having its registered office at ‘NTPC Bhawan’ SCOPE Complex, 7, Institutional Area, Lodhi Road, New Delhi-110 003) for the purposes of the said sub-clause - Notification No. 263/2005 [F. No. 142/45/2005-TPL], dated 23-12-2005.

Effluent treatment and conveyance system - Infrastructure facility under section 80-IA - In order to control environmental degradation, due to discharge of effluents into nearby rivers by industries, the Pollution Control Boards have prescribed norms for treatment and conveyance of effluents to a safe disposal point. As a result, a number of plants have been set up for treatment of effluents and its conveyance system. In this context, a number of representations have been received seeking clarification as to whether the ‘effluent treatment and conveyance system’ may be treated as an ‘infrastructure facility’ for the purposes of tax benefit under section 80-IA.

Under the treatment of effluents and its conveyance system, the effluents emanating from chemical industries are to be conveyed inside the sea through onshore pipeline and before discharging effluent through pipeline, entire load of effluent is to be treated to marine standards. Therefore, it is a part of ‘water treatment system’ and would accordingly, qualify as an infrastructure facility for the purposes of tax benefit under section 80-IA. However, an enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining such infrastructure facility shall be eligible to the tax benefit under section 80-IA, subject to fulfilment of other conditions laid down therein - Circular : No. 1/2006, dated 12-1-2006.

"States" include Union Territories - The word ‘State’ in sub-section (4) of section 80-IB includes the Union Territories specified in the Eighth Schedule—Circular : No. 788, dated 11-4-2000.

Notified industrially backward districts under section 80-IB(5) - In exercise of the powers conferred by sub-section (5) of section 80-IB and in supersession of the notification of the Government of India, in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number 714(E), dated 7th October, 1997, except as respects things done or omitted to be done before such supersession, the Central Government specifies the following districts as industrially backward districts of category ‘A’ and category ‘B’ under sub-section (5) of section 80-IB, read with rule 11EA, of the Income-tax Rules, 1962, namely :—

A. Category ‘A’ industrially backward districts :

1.
Godda
Bihar
2.
Gumla
Bihar
3.
Araria
Bihar
4.
Gadchiroli
Maharashtra
5.
Madhepura
Bihar
6.
Sidharthnagar
Uttar Pradesh
7.
Dumka
Bihar
8.
Mandla
Madhya Pradesh
9.
Khagaria
Bihar
10.
Kishanganj
Bihar
11.
Malda
West Bengal
12.
Palamau
Bihar
13.
Phulbani
Orissa
14.
Madhubani
Bihar
15.
Kalahandi
Orissa
16.
Jehanabad
Bihar
17.
Saharsa
Bihar
18.
West Dinajpur
West Bengal
19.
Nawadah
Bihar
20.
Bahraich
Uttar Pradesh
21.
Sitamarhi
Bihar
22.
Sahebganj
Bihar
23.
Murshidabad
West Bengal
24.
Cooch Behar
West Bengal
25.
Bankura
West Bengal
26.
Panna
Madhya Pradesh
27.
Pratapgarh
Uttar Pradesh
28.
Maharajganj
Uttar Pradesh
29.
Jalore
Rajasthan
30.
Aurangabad
Bihar
31.
East Champaran
Bihar
32.
Banda
Uttar Pradesh
33.
Barmer
Rajasthan
34.
Purnia
Bihar
35.
Bastar
Madhya Pradesh
36.
Siwan
Bihar
37.
Vaishali
Bihar
38.
Basti
Uttar Pradesh
39.
Sarguja
Madhya Pradesh
40.
Chamoli
Uttar Pradesh
41.
Jaisalmer
Rajasthan
42.
Lohardagga
Bihar
43.
Chhatarpur
Madhya Pradesh
44.
Uttarkashi
Uttar Pradesh
45.
Churu
Rajasthan
46.
Wayanad
Kerala
47.
Idukki
Kerala
48.
Jalpaiguri
West Bengal
49.
Almora
Uttar Pradesh
50.
Pithoragarh
Uttar Pradesh
51.
Tehri Garhwal
Uttar Pradesh
52.
The Dangs
Gujarat
53.
Banswara
Rajasthan

B. Category ‘B’ Industrially backward districts :

1.
Srikakulam
Andhra Pradesh
2.
Mahbubnagar
Andhra Pradesh
3.
Katiyar
Bihar
4.
Bhagalpur
Bihar
5.
Gopalganj
Bihar
6.
Darbhanga
Bihar
7.
West Champaran
Bihar
8.
Saran
Bihar
9.
Bhojpur
Bihar
10.
Samastipur
Bihar
11.
Deoghar
Bihar
12.
Nalanda
Bihar
13.
Gaya
Bihar
14.
Mazaffarpur
Bihar
15.
Rohtas
Bihar
16.
Banaskantha
Gujarat
17.
Sabarkantha
Gujarat
18.
Bidar
Karnataka
19.
Seoni
Madhya Pradesh
20.
Tikamgarh
Madhya Pradesh
21.
Shivpuri
Madhya Pradesh
22.
Balaghat
Madhya Pradesh
23.
Jhabua
Madhya Pradesh
24.
Sidhi
Madhya Pradesh
25.
Vidisha
Madhya Pradesh
26.
Raigarh
Madhya Pradesh
27.
Morena
Madhya Pradesh
28.
Betul
Madhya Pradesh
29.
Rajgarh
Madhya Pradesh
30.
Rajnandgaon
Madhya Pradesh
31.
Sagar
Madhya Pradesh
32.
Beed
Maharashtra
33.
Bolangir
Orissa
34.
Mayurbhanj
Orissa
35.
Balasore
Orissa
36.
Ganjam
Orissa
37.
Dungarpur
Rajasthan
38.
Dholpur
Rajasthan
39.
Sawai Madhopur
Rajasthan
40.
Tonk
Rajasthan
41.
Nagaur
Rajasthan
42.
Jhalawar
Rajasthan
43.
Sikar
Rajasthan
44.
Hardoi
Uttar Pradesh
45.
Lalitpur
Uttar Pradesh
46.
Hamirpur
Uttar Pradesh
47.
Badaun
Uttar Pradesh
48.
Fatehpur
Uttar Pradesh
49.
Azamgarh
Uttar Pradesh
50.
Etah
Uttar Pradesh
51.
Barabanki
Uttar Pradesh
52.
Etawah
Uttar Pradesh
53.
Deoria
Uttar Pradesh
54.
Ghazipur
Uttar Pradesh
55.
Ballia
Uttar Pradesh
56.
Jaunpur
Uttar Pradesh
57.
Sitapur
Uttar Pradesh
58.
Jalaun
Uttar Pradesh
59.
Unnao
Uttar Pradesh
60.
Faizabad
Uttar Pradesh
61.
Kanpur Dehat
Uttar Pradesh
62.
Mainpur
Uttar Pradesh
63.
Gonda
Uttar Pradesh
64.
Farukhabad
Uttar Pradesh
65.
Sultanpur
Uttar Pradesh
66.
Mirzapur
Uttar Pradesh
67.
Mau
Uttar Pradesh
68.
Purulia
West Bengal
69.
Birbhum
West Bengal
70.
Midnapore
West Bengal

Explanation : For the purpose of this notification, the districts correspond to the districts mentioned in the Report of the Study Group on Identification of Backward Districts dated 4th October, 1994 and are based on districts as they stood in the Census Report of 1991. Where a district specified as an industrially backward district for the purposes of section 80-IB is reorganised, either by split or otherwise, after the Census Report of 1991, all the areas comprised in the district as it existed in the Census Report of 1991 will qualify for the purpose of this rule.

2. This notification shall apply for the previous year relevant to the assessment year commencing on the 1st day of April, 2000 and subsequent assessment years—Notification : No. SO 440(E), dated 15-6-1999.

Notified industries in North-Eastern Region under section 80-IB(4), second proviso - In exercise of the powers conferred by the second proviso to sub-section (4) of section 80-IB, the Central Government hereby notifies the following industries in the North-Eastern Region to be the industries for the purposes of said proviso, namely:—

Name of Industries in the North-Eastern Region:

   1.  Fruit and Vegetable Processing industries manufacturing or producing—

  (i)  Canned or Bottled Products;

 (ii)  Aseptic Packaged Products;

(iii)  Frozen Products;

 (iv)  Dehydrated Products;

  (v)  Oleoresins.

   2.  Meat and Poultry Product industries manufacturing or producing—

  (i)  Meat Products (buffalo, sheep, goat and pork);

 (ii)  Poultry production;

(iii)  Egg Powered Plant.

   3.  Cereal Based Products industries manufacturing or producing—

  (i)  Maize Milling including starch and its derivatives;

 (ii)  Bread Biscuits, Breakfast Cereals, etc.

   4.  Food and Beverage industries manufacturing or producing—

  (i)  Snacks;

 (ii)  Non-alcoholic beverages;

(iii)  Confectionery including chocolate;

 (iv)  Pasta Products;

  (v)  Processed Spices, etc.;

 (vi)  Processed Pulses;

(vii) Tapioca Products.

   5.  Milk and Milk based Product industries manufacturing or producing—

  (i)  Milk Powder;

 (ii)  Cheese;

(iii)  Butter/Ghee;

 (iv)  Infant food;

  (v)  Weaning Food;

 (vi)  Malted Milk Food.

   6.  Food Packaging Industry

   7.  Paper Products Industry

   8.  Jute & Mesta Products Industry

   9.  Cattle/Poultry/Fishery Feed Products Industry

 10.  Edible Oil Processing/Vanaspati Industry

 11.  Processing of Essential Oils and Fragrances Industry

 12.  Processing and Raising of Plantation Crops industries manufacturing or producing

        Tea, Rubber, Coffee, Coconuts, etc.

 13.  Gas based Intermediate Products industry manufacturing or producing—

  (i)  Gas Exploration and Production;

 (ii)  Gas Distribution and Bottling;

(iii)  Power Generation;

 (iv)  Plastics;

  (v)  Yarn Raw Materials;

 (vi)  Fertilizers;

(vii) Methanol;

(viii)Formaldehyde and FR Resin Melamine and MF Resin;

 (ix)  Methylamine, Hexamethiene Tetramine, Ammonium Bi-Carbonate;

  (x)  Nitric Acid and Ammonium Nitrate;

 (xi)  Carbon Black;

(xii) Polymer Chips;

 14.  Agro forestry based Industry

 15.  Horticulture Industry

 16.  Mineral based Industry

 17.  Floriculture Industry

 18.  Agro based Industry - Notification No. SO 627(E), dated 4-8-1999.

Deduction under section 80-IB(10) in respect of undertakings developing building and housing projects - Deduction under section 80-IB(10) can be claimed on a year to year basis where the assessee is showing profit from partial completion of the project in every year.

In case it is found that the condition of completing the project within the specified time limit of 4 years as stated in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn - Instruction No. 4/2009, dated 30-6-2009.

Clarification regarding deduction under section 80-IB(10) in respect of undertakings developing building and housing projects - The deduction can be claimed on a year-to-year basis where the assessee is showing profit from partial completion of the project in every year. In case it is late, found that the condition of completing the project within the specified time-limit of 4 years as stated in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn - Instruction No. 4/2009, dated 30-6-2009.

Notified areas falling outside local limits of municipality or cantonment board under section 80-IB(14) - In exercise of powers conferred by clause (f) of sub-section (14) of section 80-IB, the Central Government, having regard to the stage of development of such area including the extent of and scope for urbanisation of such area and other relevant consideration specifies the areas shown in column 3 of the Schedule below and falling outside the local limits of the municipality or cantonment board, as the case may be, shown in the corresponding entry in column (2) thereof, for the purposes of the said section, namely :

SCHEDULE

Sl. No.
Name of the municipality or cantonment board
Details of the area
(1)
(2)
(3)
1.
Mumbai, Calcutta, Delhi, Hyderabad, Chennai and New Delhi
Areas up to a distance of 15 kilometres in all directions from the municipal limits, or, as the case may be, cantonment limits.
2.
Ahmedabad, Bangalore, Kanpur, Lucknow, Nagpur and Pune
Areas up to a distance of 12 kilometres in all directions from the municipal limits, or, as the case may be, cantonment limits.
3.
Agra, Allahabad, Amritsar, Bhopal, Cochin, Coimbatore, Dhanbad, Gwalior, Indore, Jabalpur, Jaipur, Jamshedpur, Ludhiana, Madurai, Patna, Salem, Sholapur, Srinagar, Surat, Tiruchirapally, Trivandrum, Varanasi (Benaras) and Vadodara (Baroda)
Areas up to a distance of 10 kilometres in all directions from the municipal limits, or, as the case may be, cantonment limits.
4.
Any other municipality or cantonment board
Areas up to a distance of 8 kilometres in all directions from the municipal limits, or, as the case may be, cantonment limits.

2. It shall be deemed to have come into force on the 1st day of April, 2000—Notification : No. SO 1014, dated 6-10-1999.

Notified undertaking/mineral oil refinery projects under section 80-IB(9), third proviso

In exercise of the powers conferred by clause (ii) of the third proviso to sub-section (9) of section 80-IB of the Income-tax Act, the Central Government hereby notifies the following undertakings, being mineral oil refinery projects, for the purposes of the said sub-section, namely :—

  (i)  15 MMTPA capacity refinery project of Indian Oil Corporation Ltd. at Paradip, Orissa;

 (ii)  6 MMTPA capacity refinery project of Bharat Oman Refineries Ltd. at Bina, Madhya Pradesh;

(iii)  9 MMTPA capacity (with thruput around 12 MMTPA) refinery project of HPCL-Mittal Energy Ltd. at Bathinda, Punjab;

 (iv)  3000 BOPD (387 TPD) capacity mini-refinery project of Oil & Natural Gas Corporation Ltd. at CPF, Gandhar, Ankleshwar, Gujarat;

  (v)  5.31 MMTPA capacity Phase-III refinery project of Mangalore Refinery and Petrochemicals Ltd. at Mangalore, Karnataka:

 (vi)  7.5 MMTPA capacity New Visakh refinery expansion project of Hindustan Petroleum Corporation Ltd. at Vishakapatnam, Andhra Pradesh;

(vii) 1500 BOPD (193 TPD) capacity Unit II of mini-refinery project of Oil & Natural Gas Corporation Ltd. at Tatipaka, Rajahmundry, Andhra Pradesh; and

(viii)3 MMTPA capacity Panipat refinery expansion project of Indian Oil Corporation at Panipat, Haryana.

2. The notification of the above shall be subject to conditions that—

  (i)  the mineral oil refinery projects constitute a separate undertaking within the meaning of section 80-IB of the Income-tax Act;

 (ii)  the undertaking begins refining of mineral oil not later than the March 31, 2012; and

(iii)  the undertaking continues to be wholly owned by a public sector company or any other company in which a public sector company or companies hold at least forty-nine per cent of the voting rights—Notification No. S.O. 1273(E), dated 30-5-2008.