Page 153 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes 2. Where housing or other activities are an integral part of a highway project and the profits
and gains have been calculated in accordance with the section, the profits shall not be
liable to tax if the following conditions have been fulfilled:
a. The profit has been transferred to a special reserve account; and
b. The same is actually utilised for the highway project excluding housing and other
activities before the expiry of 3 years following the year of transfer to the reserve
account;
c. The amount remaining unutilised shall be chargeable to tax as income of the year in
which the transfer to the reserve account took place (Sub-section (6)).
3. The deduction shall be allowed to the industrial undertaking only if the accounts of the
industrial undertaking for the relevant previous year have been audited by a chartered
accountant and the assessee furnishes the audit report in the prescribed form, duly signed
and verified by such accountant along with his return of income (Sub-section (7)).
4. Where any goods or services held for the purposes of the eligible business are transferred
to any other business carried on by the assessee, or vice versa, and if the consideration for
such transfer does not correspond with the market value of the goods or services then the
profits and gains of the eligible business shall be computed as if the transfer was made at
market value. However, if, in the opinion of the Assessing Officer, such computation
presents exceptional difficulties, the Assessing Officer may compute the profits on such
reasonable basis as he may deem fit (Sub-section (8)).

Notes For the purpose of section 80-IA(8), the market value, in relation to any goods or
services transferred between the eligible business and any other business carried on by
the assessee, shall mean:
1. The price that such goods or services would ordinarily fetch in the open market; or

2. The arm’s length price as defined under section 92F, where the transfer of such
goods or services is a specified domestic transaction referred to in section 92BA.

5. The deductions claimed and allowed under this section shall not exceed the profits and
gains of the eligible business. Further, where deduction is claimed and allowed under this
section for any assessment year no deduction in respect of such profits will be allowed
under any other section under this chapter (Sub-section (9)).
6. The Assessing Officer is empowered to make an adjustment while computing the profit
and gains of the eligible business on the basis of the reasonable profit that can be derived
from the transaction, in case the transaction between the assessee carrying on the eligible
business under section 80-IA and any other person is so arranged that the transaction
produces excessive profits to the eligible business (Sub-section (10)).

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Caution It has now been provided that if the aforesaid arrangement between the assessee
carrying on the eligible business and any other person is a specified domestic transaction
referred to in section 92BA, then, the amount of profit of such transaction shall be determined
having regard to arm’s length price as defined under section 92F and not as per the
reasonable profit from such transaction.

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