Section 80-IE — North-East Industrial Undertakings (FA…

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Special provisions in respect of certain undertakings in North-Eastern States.

80-IE. (1) Where the gross total income of an assessee includes any profits and gains derived by an

undertaking, to which this section applies, from any business referred to in sub-section (2), there shall be

allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent

of the profits and gains derived from such business for ten consecutive assessment years commencing with

the initial assessment year.

(2) This section applies to any undertaking which has, during the period beginning on the 1st day of April,

2007 and ending before the 1st day of April, 2017, begun or begins, in any of the North-Eastern States,—

(i) to manufacture or produce any eligible article or thing;

(ii) to undertake substantial expansion to manufacture or produce any eligible article or thing;

(iii) to carry on any eligible business.

(3) This section applies to any undertaking which fulfils all the following conditions, namely :—

(i) it is not formed by splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of an undertaking which is formed as a result

of the re-establishment, reconstruction or revival by the assessee of the business of any such

undertaking as referred to in section 33B, in the circumstances and within the period specified in

the said section;

(ii) it is not formed by the transfer to a new business of machinery or plant previously used for any

purpose.

Explanation.—The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the

purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.

(4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of

the assessee, no deduction shall be allowed under any other section contained in Chapter VIA or in section

10A or section 10AA or section 10B or section 10BA, in relation to the profits and gains of the undertaking.

(5) Notwithstanding anything contained in this Act, 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 or under section 10C, as

the case may be, exceeds ten assessment years.

(6) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as

may be, apply to the eligible undertaking under this section.

(7) For the purposes of this section,—

(i) "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;

(ii) "North-Eastern States" means the States of Arunachal Pradesh, Assam, Manipur, Meghalaya,

Mizoram, Nagaland, Sikkim and Tripura;

(iii) "substantial expansion" means increase in the investment in the plant and machinery by at least

twenty-five per cent 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;

(iv) "eligible article or thing" means the article or thing other than the following :—

(a) goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985

(5 of 1986), which pertains to tobacco and manufactured tobacco substitutes;

(b) pan masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff

Act, 1985 (5 of 1986);

(c) plastic carry bags of less than 20 microns as specified by the Ministry of Environment and

Forests vide Notification No. S.O. 705(E), dated the 2nd September, 1999 and S.O.

698(E), dated the 17th June, 2003; and

(d) goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985

(5 of 1986), produced by petroleum oil or gas refineries;

(v) "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.

Function in the statutory architecture

Section 80-IE allows a deduction of one hundred per cent of the profits and gains of an undertaking for ten consecutive assessment years from the initial assessment year. It applies to an undertaking that, between 1 April 2007 and before 1 April 2017, began in any of the North-Eastern States (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura) to manufacture or produce an eligible article or thing, to undertake substantial expansion for that purpose, or to carry on an eligible business.

Eligible articles exclude tobacco goods under Chapter 24, pan masala under Chapter 21, plastic carry bags of less than 20 microns, and Chapter 27 goods produced by petroleum oil or gas refineries. Eligible businesses are hotels (not below two star), adventure and leisure sports including ropeways, nursing homes of at least 25 beds, old-age homes, specified vocational training institutes, IT training centres, IT hardware manufacture and bio-technology. "Substantial expansion" means an increase of at least twenty-five per cent in the book value of plant and machinery.

Operative consequences

No deduction under any other section of Chapter VI-A or under s. 10A, s. 10AA, s. 10B or 10BA is allowed on the same profits (s. 80-IE(4)).
The total period, including any period under s. 80-IC, the second proviso to s. 80-IB(4) or s. 10C, cannot exceed ten assessment years (s. 80-IE(5)).
Sub-sections (5) and (7) to (12) of s. 80-IA apply (s. 80-IE(6)).
Under s. 80AC, no deduction is allowed unless the return is furnished on or before the due date under s. 139(1).

Status

Operative but time-limited. An undertaking that began in the previous year 2016-17 has its initial assessment year in 2017-18, and its ten-year period runs to assessment year 2026-27, the last year it can reach. The Finance Act, 2026 does not amend s. 80-IE.

The Income-tax Act, 1961 governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the corresponding provision is s. 143.

Case Laws & Commentary

SECTION 80-IE — SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKINGS IN NORTH-EASTERN STATES

Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)

STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)

Marginal heading: Special provisions in respect of certain undertakings in North-Eastern States.

Section 80-IE allows a deduction of 100 per cent of the profits and gains derived by an undertaking which begins to manufacture or produce eligible articles, or to provide eligible services, or undertakes substantial expansion, in any of the North-Eastern States within the qualifying window, for ten consecutive assessment years, subject to the manufacture, new-undertaking and negative-list conditions. It is the North-Eastern-States counterpart of section 80-IC and is sunset for new undertakings.

A. SECTION COMMENTARY

A.1 Structural position

Section 80-IE is the North-Eastern-States area incentive, closely parallel to section 80-IC, granting a 100-per-cent deduction for ten years. It is sunset for new undertakings but governs open assessments.

A.2 Provision taxonomy

A 100-per-cent, ten-year deduction for an eligible undertaking in a North-Eastern State (manufacture, eligible services, or substantial expansion within the window), subject to the manufacture, new-undertaking and negative-list conditions and the section 80-IA machinery.

A.3 Core doctrinal themes

The 'derived from' nexus including cost-reducing subsidies (Meghalaya Steels — which expressly concerned section 80-IE), the manufacture and new-undertaking conditions, and the treatment of substantial expansion (informed by the section 80-IC authority).

A.4 Legislative evolution / FA amendment trail

Inserted by the Finance Act, 2007 (w.e.f. assessment year 2008-09). The qualifying window has closed; sunset for new undertakings. Not amended by the Finance Act, 2026.

A.5 CA practitioner pointers

(1) Claim cost-reducing subsidies (Meghalaya Steels). (2) Verify the manufacture / eligible-service and negative-list conditions. (3) For substantial-expansion questions, the section 80-IC authority (Aarham Softronics) is instructive. (4) Observe the section 80AC due-date condition.

B. FA 2026 IMPACT NOTE

Section 80-IE is NOT amended by the Finance Act, 2026 and is sunset for new undertakings; the digested authorities continue to govern open / legacy assessments.

C. CASE LAW — CLUSTERED BY ISSUE

Cluster C-1 : Cost-reducing subsidies are 'derived from' the undertaking

CIT v. Meghalaya Steels Ltd. (2016) 383 ITR 217 (SC)

Facts: A North-Eastern-State undertaking included transport, interest and power subsidies in its eligible profits under section 80-IE (and sections 80-IB / 80-IC).

Issue: Whether such cost-reducing subsidies are profits 'derived from' the undertaking under section 80-IE.

Held: The Supreme Court held that transport, interest and power subsidies reimburse the cost of production, have a direct nexus with the manufacturing activity and are profits derived from the undertaking, eligible for the deduction under section 80-IE (and 80-IB / 80-IC).

Ratio: Cost-reducing subsidies have the first-degree nexus and are 'derived from' the eligible business.

Relevance: The controlling authority on subsidies for North-Eastern-State undertakings claiming section 80-IE.

Editorial note on sourcing

Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. Digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR). Several deductions in this cluster are sunset for new undertakings but carry substantial pending litigation and remain the governing law for open assessments.

← ITA 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 80-IE(1) and (2) — one hundred per cent for ten years, North-Eastern undertakings beginning 1 April 2007 to before 1 April 2017	s. 143(1) and (2)
s. 80-IE(3) to (6) — conditions, exclusivity, ten-year cap, s. 80-IA machinery	s. 143(3) to (7)
s. 80-IE(7) — definitions	s. 143(8)