Page 170 - DCOM508_CORPORATE_TAX_PLANNING

Unit 7: Deductions: For Special Conditions

(g) manufacturing of information technology hardware; and Notes

(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 benefi t 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 fulfi lled:
(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.
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.

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 benefi t
LOVELY PROFESSIONAL UNIVERSITY 165