Page 161 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes The profits and gains from the eligible business should be computed as if such eligible business
were the only source of income of the assessee during the relevant assessment year.
The deduction under this section should not exceed the profits of such eligible business of the
undertaking. The deduction shall be allowed only if the accounts are audited by a Chartered
Accountant, who is also required to certify that the deduction has been correctly claimed. Further,
the audit report should be furnished along with the return of income.
Where any goods or services held for the purposes of eligible business are transferred to any
other business carried on by the assessee or, where any goods held for any other business are
transferred to the eligible business and, in either case, if the consideration for such transfer as
recorded in the accounts of the eligible business does not correspond to the market value
thereof, then the profits eligible for deduction shall be computed by adopting market value for
such goods or services. In case of exceptional difficulty in this regard, the profits shall be computed
by the Assessing Officer on a reasonable basis.

Notes Assessment Information System" (AST): AST module is the core process of ITD
applications conceptualized as an on-line, menu driven software capable of carrying out
all assessment and related functions.

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-IE and any other person is so arranged that the transaction produces excessive profits
to the eligible business.

!
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.
Similarly, where due to the close connection between the assessee and the other person or for
any other reason, it appears to the Assessing Officer that the profits of eligible business is
increased to more than the ordinary profits, the Assessing Officer shall compute the amount of
profits on a reasonable basis for allowing the deduction. The Central Government may notify
that the benefit conferred by this section shall not apply to any class of undertaking 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

State whether the following statements are true or false:
14. Substantial expansion means increase in the investment in the plant and machinery by at
least 25% of the book value of plant and machinery, as on the first day of the previous year
in which the substantial expansion is undertaken.

156 LOVELY PROFESSIONAL UNIVERSITY