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Unit 6: Deductions: For Special Conditions

c. plastic carry bags of less than 20 microns; and Notes
d. goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act,
1985 produced by petroleum oil or gas refineries.
Substantial expansion means increase in the investment in the plant and machinery by at
least 25% of the book value of 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.
Eligible business means the business of -
a. hotel (not below two star category);
b. adventure and leisure sports including ropeways;
c. providing medical and health services in the nature of nursing home with a minimum
capacity of 25 beds;
d. running an old-age home;
e. operating vocational training institute for hotel management, catering and food
craft, entrepreneurship development, nursing and Para-medical, civil aviation related
training, fashion designing and industrial training;
f. running information technology related training centre;
g. manufacturing of information technology hardware; and
h. Bio-technology.
Where the gross total income of an assessee includes any profits and gains derived by such an
undertaking, a deduction of 100% of the profits and gains derived from such business for
10 consecutive assessment years commencing with the initial assessment year shall be allowed
in computing the total income of the assessee. Initial assessment year means the assessment year
relevant to the previous year in which the undertaking begins to manufacture or produce
articles or things, or completes substantial expansion.
However, the following conditions have to be fulfilled by the undertaking for claiming benefit
of deduction under this section:
1. It should not be formed by splitting up, or the reconstruction, of a business already in
existence (except in circumstances provided in section 33B)
2. It should not be formed by the transfer to a new business of machinery or plant previously
used for any purpose exceeding 20% of the total value of machinery and plant used in the
business.
For this purpose, any machinery or plant which was used outside India by any person other than
the assessee shall not be regarded as machinery or plant previously used for any purpose if the
following conditions are fulfilled:

a. such machinery or plant was not at any time used in India;
b. such machinery or plant is imported into India from any country outside India; and
c. no deduction on account of depreciation has been allowed in respect of such machinery or
plant to any person earlier.
Where deduction has been allowed under this section in computing the total income of the
assessee, no deduction shall be allowed under any other section contained in Chapter VIA or
section 10AA in relation to the profits and gains of the undertaking. Further, no deduction shall
be allowed to any undertaking under this section, where the total period of deduction inclusive
of the period of deduction under this section, or under section 80-IC or under the second proviso
to sub-section (4) of section 80-IB, as the case may be, exceeds 10 assessment years.

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