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Unit 6: Deductions: For Special Conditions

For this purpose, substantial expansion means increase in the investment in plant and machinery Notes
by at least 50% of the book value of the plant and machinery (before taking depreciation in any
year), as on the first day of the previous year in which the substantial expansion is undertaken.
The tax holiday in the states of Himachal Pradesh and Uttaranchal will be 100% for the first five
assessment years and 25% (30% in the case of a company) for the next five assessment years.
However, tax holiday in the states of Sikkim and North-Eastern States will be 100% for ten
assessment years commencing from the initial assessment year.

For the purpose of exemption, two classifications have been made and the Thirteenth Schedule
and Fourteenth Schedule have been inserted in the Income-tax Act. The said Schedules specify
the list of articles and the States for the purposes of availing deduction under this section.
The first classification is applicable to undertakings or enterprises which manufacture or produce
any article or thing, not being any article or thing specified in the 13th Schedule (namely,
tobacco, aerated beverages, pollution causing paper and paper products etc.) in any export
processing zone or integrated infrastructure development centre or industrial growth centre or
industrial estate or industrial park or software technology park or industrial areas or theme
park in these States as notified by the Board. The second classification is applicable to those
undertakings or enterprises which manufacture or produce article or thing specified in the 14th
Schedule only in these States without any specification of the specified zone, area etc.

Did u know? The period during which the undertakings in different States should begin or
should have begun to manufacture or produce are given hereunder:
Himachal Pradesh and Uttaranchal From 7.1.03 and ending before 1.4.2012
Sikkim From 23.12.02 and ending before 1.4.2007

North-Eastern States From 24.12.97 and ending before 1.4.2007
No benefit to these undertakings will be available under any of the sections in Chapter VIA in
relation to the profits and gains of such undertakings. While computing the total period of
10 years the period for which the benefit under section 80IB has already been availed, if any,
shall also be included.

Task Take any company of your choice in India which has availed the benefit of Special
provisions in respect of certain undertakings or enterprises in certain special category
States as provided by Section 80-IC.

The other conditions such as that it should not be formed by splitting or reconstruction of a
business already in existence, or by transfer to a new business of plant and machinery previously
used for any purpose are the same as are applicable for claiming benefit under section 80IA.
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.
The deductions claimed and allowed under this section shall not exceed the profits and gains of
the eligible business.

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