80-I

ITA 1961 · Section 80-I

Section 80-I — Industrial Undertaking (Legacy 80-I)

Chapter VI-A — Deductions To Be Made in Computing Total IncomeITA 1961Up to AY 2026-27

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Deduction in respect of profits and gains from industrial undertakings after a certain date, etc.

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

industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or

other powered craft, to which this section applies, there shall, in accordance with and subject to the

provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such

profits and gains of an amount equal to twenty per cent thereof :

Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have

effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a

hotel as if for the words "twenty per cent", the words "twenty-five per cent" had been substituted.

(1A) Notwithstanding anything contained in sub-section (1), in relation to any profits and gains derived by

an assessee from—

(i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its

cold storage plant or plants; or

(ii) a ship which is first brought into use; or

(iii) the business of a hotel which starts functioning,

on or after the 1st day of April, 1990, but before the 1st day of April, 1991, there shall, in accordance with

and subject to the provisions of this section, be allowed in computing the total income of the assessee, a

deduction from such profits and gains of an amount equal to twenty-five per cent thereof :

Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have

effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a

hotel as if for the words "twenty-five per cent", the words "thirty per cent" had been substituted.

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

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

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

purpose;

(iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in

the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India,

and begins to manufacture or produce articles or things or to operate such plant or plants, at any

time within the period of ten years next following the 31st day of March, 1981, or such further

period as the Central Government may, by notification in the Official Gazette, specify with

reference to any particular industrial undertaking;

(iv) in a case where the industrial undertaking manufactures or produces articles or things, the

undertaking employs ten or more workers in a manufacturing process carried on with the aid of

power, or employs twenty or more workers in a manufacturing process carried on without the aid

of power :

Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is

formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any

such industrial undertaking as is referred to in section 33B, in the circumstances and within the period

specified in that section :

Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking,

apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been

omitted.

Explanation 1.—For the purposes of clause (ii) of this sub-section, 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, namely :—

(a) such machinery or plant was not, at any time previous to the date of the installation by the

assessee, 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 in respect of such machinery or plant has been allowed or

is allowable under the provisions of this Act in computing the total income of any person for any

period prior to the date of the installation of the machinery or plant by the assessee.

Explanation 2.—Where in the case of an industrial undertaking, any machinery or plant or any part thereof

previously used for any purpose is transferred to a new business and the total value of the machinery or

plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used

in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall

be deemed to have been complied with.

Explanation 3.—For the purposes of this sub-section, "small-scale industrial undertaking" shall have the

same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA.

(3) This section applies to any ship, where all the following conditions are fulfilled, namely :—

(i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by

it;

(ii) it was not, previous to the date of its acquisition by the Indian company, owned or used in Indian

territorial waters by a person resident in India; and

(iii) it is brought into use by the Indian company at any time within the period of ten years next

following the 1st day of April, 1981.

(4) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely

:—

(i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business

already in existence or by the transfer to a new business of a building previously used as a hotel or

of any machinery or plant previously used for any purpose;

(ii) the business of the hotel is owned and carried on by a company registered in India with a paid-up

capital of not less than five hundred thousand rupees;

(iii) the hotel is for the time being approved for the purposes of this sub-section by the Central

Government;

(iv) the business of the hotel starts functioning after the 31st day of March, 1981, but before the 1st day

of April, 1991.

(4A) This section applies to the business of repairs to ocean-going vessels or other powered craft which

fulfils all the following conditions, namely :—

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

existence;

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

purpose;

(iii) it is carried on by an Indian company and the work by way of repairs to ocean-going vessels or

other powered craft has been commenced by such company after the 31st day of March, 1983, but

before the 1st day of April, 1988; and

(iv) it is for the time being approved for the purposes of this sub-section by the Central Government.

(5) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of

the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture

or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use

or the business of the hotel starts functioning or the company commences work by way of repairs to

ocean-going vessels or other powered craft (such assessment year being hereafter in this section referred to

as the initial assessment year) and each of the seven assessment years immediately succeeding the initial

assessment year :

Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall

have effect as if for the words "seven assessment years", the words "nine assessment years" had been

substituted :

Provided further that in the case of an assessee carrying on the business of repairs to ocean-going vessels

or other powered craft, the provisions of this sub-section shall have effect as if for the words "seven

assessment years", the words "four assessment years" had been substituted:

Provided also that in the case of—

(i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its

cold storage plant or plants; or

(ii) a ship which is first brought into use; or

(iii) the business of a hotel which starts functioning,

on or after the 1st day of April, 1990 but before the 1st day of April, 1991, provisions of this sub-section

shall have effect as if for the words "seven assessment years", the words "nine assessment years" had been

substituted :

Provided also that in the case of an assessee, being a co-operative society, deriving profits and gains from

an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso

shall have effect as if for the words "nine assessment years", the words "eleven assessment years" had been

substituted.

(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an

industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or

other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining

the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial

assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or

the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the

only source of income of the assessee during the previous years relevant to the initial assessment year and to

every subsequent assessment year up to and including the assessment year for which the determination is to

be made.

(7) Where the assessee is a person other than a company or a co-operative society, the deduction under

sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless

the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the

deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section

(2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the

prescribed form duly signed and verified by such accountant.

(8) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the

operation of the ship or the business of repairs to ocean-going vessels or other powered craft are transferred

to any other business carried on by the assessee, or where any goods held for the purposes of any other

business carried on by the assessee are transferred to the business of the industrial undertaking or the hotel

or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft and, in

either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the

industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going

vessels or other powered craft does not correspond to the market value of such goods as on the date of the

transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial

undertaking or the business of the hotel or the operation of the ship or the business of repairs to ocean-going

vessels or other powered craft shall be computed as if the transfer, in either case, had been made at the

market value of such goods as on that date :

Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the

industrial undertaking or the business of the hotel or the operation of the ship or the business of repairs to

ocean-going vessels or other powered craft in the manner hereinbefore specified presents exceptional

difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may

deem fit.

Explanation.—In this sub-section, "market value", in relation to any goods, means the price that such goods

would ordinarily fetch on sale in the open market.

(9) Where it appears to the Assessing Officer that, owing to the close connection between the assessee

carrying on the business of the industrial undertaking or the hotel or the operation of the ship or the business

of repairs to ocean-going vessels or other powered craft to which this section applies and any other person,

or for any other reason, the course of business between them is so arranged that the business transacted

between them produces to the assessee more than the ordinary profits which might be expected to arise in

the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs

to ocean-going vessels or other powered craft, the Assessing Officer shall, in computing the profits and gains

of the industrial undertaking or the hotel or the ship or the business of repairs to ocean-going vessels or other

powered craft for the purposes of the deduction under this section, take the amount of profits as may be

reasonably deemed to have been derived therefrom.

(10) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the

Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial

undertakings with effect from such date as it may specify in the notification.

Function in the statutory architecture

Section 80-I allowed a deduction of twenty per cent (twenty-five per cent for a company) of the profits and gains derived from a qualifying industrial undertaking, ship, hotel or business of repairs to ocean-going vessels or other powered craft. For undertakings, ships and hotels that began operating on or after 1 April 1990 but before 1 April 1991, sub-section (1A) raised the rate to twenty-five per cent (thirty per cent for a company).

The qualifying windows were closed by the section itself. An industrial undertaking had to begin manufacture or production, or operation of a cold storage plant, within ten years after 31 March 1981; a ship had to be brought into use within ten years after 1 April 1981; a hotel had to start functioning after 31 March 1981 but before 1 April 1991; and ship-repair work had to begin after 31 March 1983 but before 1 April 1988. The undertaking could not be formed by splitting up or reconstruction, or by transfer of used machinery (subject to a twenty per cent tolerance), and had to employ the stated number of workers.

Operative consequences

The deduction ran for the initial assessment year and the seven following years, extended to nine (co-operative societies, and 1990-91 starters) or eleven years, and cut to four for ship repairs (s. 80-I(5)).
Profits were computed as if the eligible business were the only source of income from the initial year (s. 80-I(6)).
A non-corporate, non-co-operative assessee needed an audit report in the prescribed form with the return (s. 80-I(7)).
Inter-unit transfers were taken at market value, and excessive profits from close connections could be reduced by the Assessing Officer (s. 80-I(8), (9)).

Status

Expired. The section has no bracketed note of omission, but on its own dates no deduction period can extend to assessment year 2026-27. The Finance Act, 2026 does not amend s. 80-I.

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, there is no corresponding provision.

Case Laws & Commentary

SECTION 80-I — DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS, ETC. AFTER A CERTAIN DATE

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: Deduction in respect of profits and gains from industrial undertakings after a certain date, etc.

Section 80-I allowed a deduction (generally 20 per cent, 25 per cent for companies) of the profits and gains derived from a new industrial undertaking, ship, hotel business or repair of ocean-going vessels, which began to manufacture or operate within the qualifying dates, for the prescribed number of assessment years, subject to the new-undertaking conditions (not formed by splitting up or reconstruction, not by transfer of used machinery beyond the permitted limit, manufacture/production, etc.). It is the bridge provision between the old section 80J relief and the modern section 80-IA / 80-IB regime, and is spent for new undertakings.

A. SECTION COMMENTARY

A.1 Structural position

Section 80-I succeeded the omitted section 80J as the principal new-industrial-undertaking deduction and was in turn succeeded by sections 80-IA and 80-IB. Its jurisprudence on 'derived from', on the new-undertaking / reconstruction conditions, and on the quantum overlaps with sections 80HH and 80-IA.

A.2 Provision taxonomy

A percentage deduction (20 / 25 per cent), time-limited, conditioned on a genuinely new undertaking meeting the splitting-up/reconstruction, used-machinery, and manufacture conditions, computed on profits 'derived from' the undertaking.

A.3 Core doctrinal themes

(i) The 'new undertaking' condition — the unit must not be formed by the reconstruction or splitting up of an existing business; a genuinely new and identifiable undertaking, even if set up by an existing concern, qualifies (Textile Machinery Corporation). (ii) 'Derived from' — only first-degree industrial profits qualify (Sterling Foods; Pandian Chemicals). (iii) Quantum — the deduction is on gross profits and gains before depreciation/investment allowance for the pre-section-80AB years (Vijay Industries).

A.4 Legislative evolution / FA amendment trail

Re-introduced by the Finance (No. 2) Act, 1980 (succeeding section 80J); applicable to undertakings within the qualifying dates and now spent, the regime having moved to sections 80-IA and 80-IB. Not amended by the Finance Act, 2026.

A.5 CA practitioner pointers

(1) Test the new-undertaking / reconstruction condition by the Textile Machinery test — a new and separate identifiable unit qualifies even if set up by an existing assessee. (2) Apply the 'derived from' nexus. (3) Quantum on gross profits before depreciation for pre-80AB years. (4) Relevant only for open legacy assessments.

B. FA 2026 IMPACT NOTE

Section 80-I is NOT amended by the Finance Act, 2026 and is spent for new undertakings; its jurisprudence informs sections 80-IA and 80-IB.

C. CASE LAW — CLUSTERED BY ISSUE

Cluster C-1 : The 'new undertaking' / reconstruction condition

Textile Machinery Corporation Ltd. v. CIT (1977) 107 ITR 195 (SC)

Facts: An existing concern set up new manufacturing units and claimed the new-undertaking relief; the Revenue contended the units were merely a reconstruction or expansion of the existing business.

Issue: When is an undertaking 'formed by the reconstruction of a business already in existence' so as to be disqualified, and when is it a genuinely new undertaking eligible for the relief.

Held: The Supreme Court held that a new and identifiable undertaking, separate and distinct from the existing business, set up with new capital and capable of producing on its own, is eligible even if it is established by an assessee already carrying on business; it is not disqualified merely because it arises in the course of expansion. Reconstruction connotes the same business being reorganised, not the setting up of a distinct new unit.

Ratio: The new-undertaking relief is available to a genuinely new, separate and identifiable unit; 'reconstruction' does not cover the establishment of a distinct new undertaking by an existing business.

Relevance: The foundational authority on the new-undertaking / reconstruction condition, applied across sections 80-I, 80-IA and 80-IB.

Cluster C-2 : 'Derived from' and quantum (cross-reference)

Applied authorities: Sterling Foods (1999) 237 ITR 579 (SC); Vijay Industries (2019) 412 ITR 1 (SC)

Facts: Section 80-I uses the same 'profits and gains derived from' formula as sections 80HH and 80-IA.

Issue: How the nexus and quantum questions are resolved for section 80-I.

Held: The 'derived from' nexus (Sterling Foods / Pandian Chemicals) excludes ancillary and incentive receipts; and for the pre-section-80AB years the deduction is on gross profits and gains before depreciation/investment allowance (Vijay Industries, which expressly addressed section 80-I).

Ratio: Section 80-I follows the section 80HH line on nexus and the gross-profits quantum.

Relevance: Settled law controls; the section 80HH authorities apply to section 80-I.

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.

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 80-I — deduction for industrial undertakings, ships, hotels and ship-repair businesses (commencement windows of the 1980s and 1990-91)	No corresponding provision in the Income-tax Act, 2025
s. 80-IA and s. 80-IB — later profit-linked deductions	s. 138 and s. 141 (grandfathered deductions; not counterparts of s. 80-I)