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Income Tax Laws – I

Notes reasonable basis for allowing the deduction. 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-IAB and any other person is so
arranged that the transaction produces excessive profits to the eligible business.

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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.

The deduction under this section should not exceed the profits of such eligible business of the
undertaking or the enterprise. Further, where any amount of profits of an undertaking or
enterprise is allowed as deduction under this section, no deduction under any other provision of
Chapter VI-A is allowable in respect of such profits. The Central Government may notify that
the benefit conferred by this section shall not apply to any class of industrial undertaking or
enterprise with effect from any specified date.
Where any undertaking of an Indian company which is entitled to the deduction under this
section is transferred before the expiry of the period of deduction to another Indian company in
a scheme of amalgamation or demerger, no deduction shall be admissible to the amalgamating
or demerged company for the previous year in which the amalgamation or demerger takes
place and the amalgamated or the resulting company shall be entitled to the deduction as if the
amalgamation or demerger had not taken place.

Self Assessment

Fill in the blanks:
6. Sub-section (1) of Section 80-IAB provides for a deduction of 100% of profits and gains
derived by an undertaking or an enterprise from any business of developing a SEZ for
………………consecutive assessment years.
7. Developer means a ……………..which has been granted a letter of approval by the Central
Government under section 3(10) of the SEZ Act, 2005.
8. Co-developer means a person who, or a State Government which has been granted a letter
of approval by the Central Government under ………………of the SEZ Act, 2005.
9. The deduction under section 80-IAB shall be allowed only if the accounts are audited by a
Chartered Accountant and the audit report is furnished along with the …………………….

10. The deduction under section 80-IAB should not exceed the…………… of such eligible
business of the undertaking or the enterprise.

6.3 Special Provisions in Respect of Certain Undertakings or

Enterprises in Certain Special Category States (Section 80-IC)

Section 80-IC allows tax holiday to the new undertakings or existing undertakings on their
substantial expansion in the states of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern
States.

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