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Unit 7: Deductions: For Special Conditions

For the purpose of exemption, two classifications have been made and the Thirteenth Schedule Notes
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 fi rst 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 notifi ed by the Board. The second classifi cation 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 benefi t 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 diffi culties, the

Assessing Officer may compute the profits on such reasonable basis as he may deem fi t.

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.
!
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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