80-IB

ITA 1961 · Section 80-IB

Section 80-IB — Industrial Undertaking: Specified Sectors (Legacy)

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 certain industrial undertakings other than infrastructure development undertakings.

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

business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to

as the eligible business), 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 such percentage and for such number of assessment years as specified in this section.

(2) This section applies to any industrial 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 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;

(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 :

Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or

an industrial undertaking referred to in sub-section (4) shall 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), 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;

(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.

(3) The amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty

per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking

for a period of ten consecutive assessment years (or twelve consecutive assessment years where the assessee

is a co-operative society) beginning with the initial assessment year subject to the fulfilment of the following

conditions, namely :—

(i) it begins to manufacture or produce, articles or things or to operate such plant or plants at any time

during the period beginning from the 1st day of April, 1991 and ending on the 31st day of March,

1995 or such further period as the Central Government may, by notification in the Official Gazette,

specify with reference to any particular undertaking;

(ii) where it is an industrial undertaking being a small scale industrial undertaking, it begins to

manufacture or produce articles or things or to operate its cold storage plant [not specified in

sub-section (4) or sub-section (5)] at any time during the period beginning on the 1st day of April,

1995 and ending on the 31st day of March, 2002.

(4) The amount of deduction in the case of an industrial undertaking in an industrially backward State

specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such

industrial undertaking for five assessment years beginning with the initial assessment year and thereafter

twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived

from such industrial undertaking :

Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve

consecutive assessment years where the assessee is a co-operative society) subject to fulfilment of the

condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or

plants during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2004 :

Provided further that in the case of such industries in the North-Eastern Region, as may be notified by the

Central Government, the amount of deduction shall be hundred per cent of profits and gains for a period of

ten assessment years, and the total period of deduction shall in such a case not exceed ten assessment years :

Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning

on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred to in

sub-section (2) of section 80-IC:

Provided also that in the case of an industrial undertaking in the State of Jammu and Kashmir, the

provisions of the first proviso shall have effect as if for the figures, letters and words "31st day of March,

2004", the figures, letters and words "31st day of March, 2012" had been substituted :

Provided also that no deduction under this sub-section shall be allowed to an industrial undertaking in the

State of Jammu and Kashmir which is engaged in the manufacture or production of any article or thing

specified in Part C of the Thirteenth Schedule.

(5) The amount of deduction in the case of an industrial undertaking located in such industrially backward

districts as the Central Government may, having regard to the prescribed guidelines, by notification in the

Official Gazette, specify in this behalf as industrially backward district of category 'A' or an industrially

backward district of category 'B' shall be,—

(i) hundred per cent of the profits and gains derived from an industrial undertaking located in a

backward district of category 'A' for five assessment years beginning with the initial assessment

year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the

profits and gains of an industrial undertaking :

Provided that the total period of deduction shall not exceed ten consecutive assessment years or

where the assessee is a co-operative society, twelve consecutive assessment years :

Provided further that the industrial undertaking begins to manufacture or produce articles or

things or to operate its cold storage plant or plants at any time during the period beginning on the

1st day of October, 1994 and ending on the 31st day of March, 2004;

(ii) hundred per cent of the profits and gains derived from an industrial undertaking located in a

backward district of category 'B' for three assessment years beginning with the initial assessment

year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the

profits and gains of an industrial undertaking :

Provided that the total period of deduction does not exceed eight consecutive assessment years (or

where the assessee is a co-operative society, twelve consecutive assessment years) :

Provided further that the industrial undertaking begins to manufacture or produce articles or

things or to operate its cold storage plant or plants at any time during the period beginning on the

1st day of October, 1994 and ending on the 31st day of March, 2004.

(6) The amount of deduction in the case of the business of a ship shall be thirty per cent of the profits and

gains derived from such ship for a period of ten consecutive assessment years including the initial

assessment year provided that the ship—

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

it;

(ii) 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) is brought into use by the Indian company at any time during the period beginning on the 1st day of

April, 1991 and ending on the 31st day of March, 1995.

(7) The amount of deduction in the case of any hotel shall be—

(a) fifty per cent of the profits and gains derived from the business of such hotel for a period of ten

consecutive years beginning from the initial assessment year as is located in a hilly area or a rural

area or a place of pilgrimage or such other place as the Central Government may, having regard to

the need for development of infrastructure for tourism in any place and other relevant

considerations, specify by notification in the Official Gazette and such hotel starts functioning at

any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of

March, 1994 or beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001:

Provided that nothing contained in this clause shall apply to a hotel located at a place within the

municipal jurisdiction (whether known as a municipality, municipal corporation, notified area

committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai,

which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st

day of March, 2001:

Provided further that the said hotel is approved by the prescribed authority for the purpose of this

clause in accordance with the rules made under this Act and where the said hotel is approved by

the prescribed authority before the 31st day of March, 1992, shall be deemed to have been

approved by the prescribed authority for the purpose of this section in relation to the assessment

year commencing on the 1st day of April, 1991;

(b) thirty per cent of the profits and gains derived from the business of such hotel as is located in any

place other than those mentioned in sub-clause (a) for a period of ten consecutive years beginning

from the initial assessment year if such hotel has started or starts functioning at any time during the

period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995 or

beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001:

Provided that nothing contained in this clause shall apply to a hotel located at a place within the

municipal jurisdiction (whether known as a municipality, municipal corporation, notified area

committee, town area committee or a cantonment board or by any other name) of Calcutta,

Chennai, Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April,

1997 and before the 31st day of March, 2001;

(c) the deduction under clause (a) or clause (b) shall be available only if—

(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 by the prescribed authority:

Provided that any hotel approved by the prescribed authority before the 1st day of April,

1999 shall be deemed to have been approved under this sub-section.

(7A) The amount of deduction in the case of any multiplex theatre shall be—

(a) fifty per cent of the profits and gains derived, from the business of building, owning and operating a

multiplex theatre, for a period of five consecutive years beginning from the initial assessment year

in any place :

Provided that nothing contained in this clause shall apply to a multiplex theatre located at a place

within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified

area committee or a cantonment board or by any other name) of Chennai, Delhi, Mumbai or

Kolkata;

(b) the deduction under clause (a) shall be allowable only if—

(i) such multiplex theatre is constructed at any time during the period beginning on the 1st

day of April, 2002 and ending on the 31st day of March, 2005;

(ii) the business of the multiplex theatre 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

any building or of any machinery or of plant previously used for any purpose;

(iii) the assessee furnishes the report of audit in such form and containing such particulars, as

may be prescribed, duly signed and verified by an accountant, as defined in the

Explanation below sub-section (2) of section 288, before the specified date referred to in

section 44AB, certifying that the deduction has been correctly claimed.

(7B) The amount of deduction in the case of any convention centre shall be—

(a) fifty per cent of the profits and gains derived, by the assessee from the business of building, owning

and operating a convention centre, for a period of five consecutive years beginning from the initial

assessment year;

(b) the deduction under clause (a) shall be allowable only if—

(i) such convention centre is constructed at any time during the period beginning on the 1st

day of April, 2002 and ending on the 31st day of March, 2005;

(ii) the business of the convention centre 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

any building or of any machinery or plant previously used for any purpose;

(iii) the assessee furnishes the report of audit in such form and containing such particulars, as

may be prescribed, duly signed and verified by an accountant, as defined in the

Explanation below sub-section (2) of section 288, before the specified date referred to in

section 44AB, certifying that the deduction has been correctly claimed.

(8) The amount of deduction in the case of any company carrying on scientific research and development

shall be hundred per cent of the profits and gains of such business for a period of five assessment years

beginning from the initial assessment year if such company—

(a) is registered in India;

(b) has the main object of scientific and industrial research and development;

(c) is for the time being approved by the prescribed authority at any time before the 1st day of April,

1999.

(8A) The amount of deduction in the case of any company carrying on scientific research and development

shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment

years, beginning from the initial assessment year, if such company—

(i) is registered in India;

(ii) has its main object the scientific and industrial research and development;

(iii) is for the time being approved by the prescribed authority at any time after the 31st day of March,

2000 but before the 1st day of April, 2007;

(iv) fulfils such other conditions as may be prescribed.

(9) The amount of deduction to an undertaking shall be hundred per cent of the profits for a period of seven

consecutive assessment years, including the initial assessment year, if such undertaking fulfils any of the

following, namely:—

(i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil

before the 1st day of April, 1997;

(ii) is located in any part of India and has begun or begins commercial production of mineral oil on or

after the 1st day of April, 1997 but not later than the 31st day of March, 2017 :

Provided that the provisions of this clause shall not apply to blocks licensed under a contract

awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy

announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated

the 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or

a State Government in any other manner;

(iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October,

1998 but not later than the 31st day of March, 2012;

(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of

bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under the New

Exploration Licencing Policy announced by the Government of India vide Resolution No.

O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of

natural gas on or after the 1st day of April, 2009 but not later than the 31st day of March, 2017;

(v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of

bidding for award of exploration contracts for Coal Bed Methane blocks and begins commercial

production of natural gas on or after the 1st day of April, 2009 but not later than the 31st day of

March, 2017.

Explanation.—For the purposes of claiming deduction under this sub-section, all blocks licensed under a

single contract, which has been awarded under the New Exploration Licencing Policy announced by the

Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or has

been awarded in pursuance of any law for the time being in force or has been awarded by the Central or a

State Government in any other manner, shall be treated as a single "undertaking"

(10) The amount of deduction in the case of an undertaking developing and building housing projects

approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits

derived in the previous year relevant to any assessment year from such housing project if,—

(a) such undertaking has commenced or commences development and construction of the housing

project on or after the 1st day of October, 1998 and completes such construction,—

(i) in a case where a housing project has been approved by the local authority before the 1st

day of April, 2004, on or before the 31st day of March, 2008;

(ii) in a case where a housing project has been, or, is approved by the local authority on or

after the 1st day of April, 2004 but not later than the 31st day of March, 2005, within four

years from the end of the financial year in which the housing project is approved by the

local authority;

(iii) in a case where a housing project has been approved by the local authority on or after the

1st day of April, 2005, within five years from the end of the financial year in which the

housing project is approved by the local authority.

Explanation.—For the purposes of this clause,—

(i) in a case where the approval in respect of the housing project is obtained more than once,

such housing project shall be deemed to have been approved on the date on which the

building plan of such housing project is first approved by the local authority;

(ii) the date of completion of construction of the housing project shall be taken to be the date

on which the completion certificate in respect of such housing project is issued by the local

authority;

(b) the project is on the size of a plot of land which has a minimum area of one acre:

Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried

out in accordance with a scheme framed by the Central Government or a State Government for

reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any

law for the time being in force and such scheme is notified by the Board in this behalf;

(c) the residential unit has a maximum built-up area of one thousand square feet where such residential

unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the

municipal limits of these cities and one thousand and five hundred square feet at any other place;

(d) the built-up area of the shops and other commercial establishments included in the housing project

does not exceed three per cent of the aggregate built-up area of the housing project or five

thousand square feet, whichever is higher;

(e) not more than one residential unit in the housing project is allotted to any person not being an

individual; and

(f) in a case where a residential unit in the housing project is allotted to a person being an individual,

no other residential unit in such housing project is allotted to any of the following persons,

namely:—

(i) the individual or the spouse or the minor children of such individual,

(ii) the Hindu undivided family in which such individual is the karta,

(iii) any person representing such individual, the spouse or the minor children of such

individual or the Hindu undivided family in which such individual is the karta.

Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-section

shall apply to any undertaking which executes the housing project as a works contract awarded by any

person (including the Central or State Government).

(11) Notwithstanding anything contained in clause (iii) of sub-section (2) and sub-sections (3), (4) and (5),

the amount of deduction in a case of industrial undertaking deriving profit from the business of setting up

and operating a cold chain facility for agricultural produce, shall be hundred per cent of the profits and gains

derived from such industrial undertaking for five assessment years beginning with the initial assessment year

and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and

gains derived from the operation of such facility in a manner that the total period of deduction does not

exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a

co-operative society) and subject to fulfilment of the condition that it begins to operate such facility on or

after the 1st day of April, 1999 but before the 1st day of April, 2004.

(11A) The amount of deduction in a case of an undertaking deriving profit from the business of processing,

preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy

products or from the integrated business of handling, storage and transportation of food grains, shall be

hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning

with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is

a company) of the profits and gains derived from the operation of such business in a manner that the total

period of deduction does not exceed ten consecutive assessment years and subject to fulfilment of the

condition that it begins to operate such business on or after the 1st day of April, 2001:

Provided that the provisions of this section shall not apply to an undertaking engaged in the business of

processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it

begins to operate such business before the 1st day of April, 2009.

(11B) The amount of deduction in the case of an undertaking deriving profits from the business of operating

and maintaining a hospital in a rural area shall be hundred per cent of the profits and gains of such business

for a period of five consecutive assessment years, beginning with the initial assessment year, if—

(i) such hospital is constructed at any time during the period beginning on the 1st day of October,

2004 and ending on the 31st day of March, 2008;

(ii) the hospital has at least one hundred beds for patients;

(iii) the construction of the hospital is in accordance with the regulations, for the time being in force, of

the local authority; and

(iv) the assessee furnishes the report of audit in such form and containing such particulars, as may be

prescribed, duly signed and verified by an accountant, as defined in the Explanation below

sub-section (2) of section 288, before the specified date referred to in section 44AB, certifying that

the deduction has been correctly claimed.

Explanation.—For the purposes of this sub-section, a hospital shall be deemed to have been constructed on

the date on which a completion certificate in respect of such construction is issued by the concerned local

authority.

(11C) The amount of deduction in the case of an undertaking deriving profits from the business of operating

and maintaining a hospital located anywhere in India, other than the excluded area, shall be hundred per

cent of the profits and gains derived from such business for a period of five consecutive assessment years,

beginning with the initial assessment year, if—

(i) the hospital is constructed and has started or starts functioning at any time during the period

beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2013;

(ii) the hospital has at least one hundred beds for patients;

(iii) the construction of the hospital is in accordance with the regulations or bye-laws of the local

authority; and

(iv) the assessee furnishes the report of audit in such form and containing such particulars, as may be

prescribed, duly signed and verified by an accountant, as defined in the Explanation below

sub-section (2) of section 288, before the specified date referred to in section 44AB, certifying that

the deduction has been correctly claimed.

Explanation.—For the purposes of this sub-section—

(a) a hospital shall be deemed to have been constructed on the date on which a completion certificate

in respect of such construction is issued by the local authority concerned;

(b) "initial assessment year" means the assessment year relevant to the previous year in which the

business of the hospital starts functioning;

(c) "excluded area" shall mean an area comprising—

(i) Greater Mumbai urban agglomeration;

(ii) Delhi urban agglomeration;

(iii) Kolkata urban agglomeration;

(iv) Chennai urban agglomeration;

(v) Hyderabad urban agglomeration;

(vi) Bangalore urban agglomeration;

(vii) Ahmedabad urban agglomeration;

(viii) District of Faridabad;

(ix) District of Gurgaon;

(x) District of Gautam Budh Nagar;

(xi) District of Ghaziabad;

(xii) District of Gandhinagar; and

(xiii) City of Secunderabad;

(d) the area comprising an urban agglomeration shall be the area included in such urban agglomeration

on the basis of the 2001 census.

(12) Where any undertaking of an Indian company which is entitled to the deduction under this section is

transferred, before the expiry of the period specified in this section, to another Indian company in a scheme

of amalgamation or demerger—

(a) no deduction shall be admissible under this section to the amalgamating or the demerged company

for the previous year in which the amalgamation or the demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting

company as they would have applied to the amalgamating or the demerged company if the

amalgamation or demerger had not taken place.

(13) 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 business under this section.

(14) For the purposes of this section,—

(a) "built-up area" means the inner measurements of the residential unit at the floor level, including the

projections and balconies, as increased by the thickness of the walls but does not include the

common areas shared with other residential units;

(aa) "cold chain facility" means a chain of facilities for storage or transportation of agricultural produce

under scientifically controlled conditions including refrigeration and other facilities necessary for

the preservation of such produce;

(ab) "convention centre" means a building of a prescribed area comprising of convention halls to be

used for the purpose of holding conferences and seminars, being of such size and number and

having such other facilities and amenities, as may be prescribed;

(b) "hilly area" means any area located at a height of one thousand metres or more above the sea level;

(c) "initial assessment year"—

(i) in the case of an industrial undertaking or cold storage plant or ship or hotel, means 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 cold chain facility or the ship is first brought into use or the business of the hotel starts

functioning;

(ii) in the case of a company carrying on scientific and industrial research and development,

means the assessment year relevant to the previous year in which the company is approved

by the prescribed authority for the purposes of sub-section (8);

(iii) in the case of an undertaking engaged in the business of commercial production or refining

of mineral oil referred to in sub-section (9), means the assessment year relevant to the

previous year in which the undertaking commences the commercial production or refining

of mineral oil;

(iv) in the case of an undertaking engaged in the business of processing, preservation and

packaging of fruits or vegetables or in the integrated business of handling, storage and

transportation of food grains, means the assessment year relevant to the previous year in

which the undertaking begins such business;

(v) in the case of a multiplex theatre, means the assessment year relevant to the previous year

in which a cinema hall, being a part of the said multiplex theatre, starts operating on a

commercial basis;

(vi) in the case of a convention centre, means the assessment year relevant to the previous

year in which the convention centre starts operating on a commercial basis;

(vii) in the case of an undertaking engaged in operating and maintaining a hospital in a rural

area, means the assessment year relevant to the previous year in which the undertaking

begins to provide medical services;

(d) "North-Eastern Region" means the region comprising the States of Arunachal Pradesh, Assam,

Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;

(da) "multiplex theatre" means a building of a prescribed area, comprising of two or more cinema

theatres and commercial shops of such size and number and having such other facilities and

amenities as may be prescribed;

(e) "place of pilgrimage" means a place where any temple, mosque, gurdwara, church or other place of

public worship of renown throughout any State or States is situated;

(f) "rural area" means any area other than—

(i) an area which is comprised within the jurisdiction of a municipality (whether known as a

municipality, municipal corporation, notified area committee, town area committee or by

any other name) or a cantonment board and which has a population of not less than ten

thousand according to the preceding census of which relevant figures have been published

before the first day of the previous year; or

(ii) an area within such distance not being more than fifteen kilometres from the local limits of

any municipality or cantonment board referred to in sub-clause (i), as the Central

Government may, having regard to the stage of development of such area including the

extent of, and scope for, urbanisation of such area and other relevant considerations

specify in this behalf by notification in the Official Gazette;

(g) "small-scale industrial undertaking" means an industrial undertaking which is, as on the last day of

the previous year, regarded as a small-scale industrial undertaking under section 11B of the

Industries (Development and Regulation) Act, 1951 (65 of 1951).

Function in the statutory architecture

Section 80-IB allows a deduction of a stated percentage of the profits and gains derived from each "eligible business" listed in sub-sections (3) to (11C), for a stated number of assessment years. Most of the commencement windows have closed: industrial undertakings (1991 to 1995, small-scale to 2002), backward States and districts (to 31 March 2004, or 31 March 2012 in Jammu and Kashmir), ships (1991 to 1995), hotels (to 2001), multiplexes and convention centres (to 2005), research companies (approval to 2007), mineral oil and natural gas (commercial production to 31 March 2017, refining to 31 March 2012), cold chains (1999 to 2004) and hospitals (to 31 March 2013).

Two heads remain open by their terms. Sub-section (10) allows one hundred per cent of the profits from a housing project approved by a local authority before 31 March 2008, subject to completion dates, a one-acre plot, unit size limits of one thousand square feet (Delhi or Mumbai) and fifteen hundred square feet elsewhere, a cap on commercial area and allotment limits. Sub-section (11A) allows one hundred per cent for five years and twenty-five per cent (thirty per cent for a company) thereafter, within ten years, for food processing and food-grain handling businesses beginning on or after 1 April 2001; meat, poultry, marine and dairy units qualify only if they begin on or after 1 April 2009.

Operative consequences

On an amalgamation or demerger within the period, the amalgamating or demerged company gets no deduction for that year and the section applies to the successor (s. 80-IB(12)).
Sub-sections (5) and (7) to (12) of s. 80-IA apply to computation, audit, market-value transfers and excess profits (s. 80-IB(13)).
A housing project executed as a works contract does not qualify (Explanation to s. 80-IB(10)).
Under s. 80AC, no deduction is allowed unless the return is furnished on or before the due date under s. 139(1).

Status

Operative for assessment year 2026-27 only for undertakings still within a deduction period, mainly under sub-sections (10) and (11A); the other heads are spent on their own dates. The section has no bracketed note of omission. The Finance Act, 2026 does not amend s. 80-IB.

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. 141.

Case Laws & Commentary

SECTION 80-IB — DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS

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 certain industrial undertakings other than infrastructure development undertakings.

Section 80-IB allows a deduction of a percentage of the profits and gains derived from various eligible businesses — small-scale and other industrial undertakings, undertakings in industrially backward States / districts, cold-chain and food-processing units, hospitals in rural areas, scientific research, mineral oil/natural gas, and (under sub-section (10)) the development and building of housing projects — for the prescribed number of years and subject to the new-undertaking and other conditions. The deduction is computed on profits 'derived from' the eligible business and is largely sunset for new undertakings.

A. SECTION COMMENTARY

A.1 Structural position

Section 80-IB is the broad industrial / sectoral deduction (other than infrastructure), the companion to section 80-IA. It is the source of the largest body of modern profit-linked-deduction litigation after section 80HHC — on 'derived from', on the housing-project conditions in sub-section (10), and on the new-undertaking conditions.

A.2 Provision taxonomy

A family of percentage deductions for the listed eligible businesses, each with its own period and conditions, computed on profits 'derived from' the eligible business, subject to the new-undertaking / no-reconstruction / used-machinery conditions and (for housing) the area, completion and commercial-space conditions of sub-section (10).

A.3 Core doctrinal themes

(i) 'Derived from': export incentives (DEPB, duty drawback) are not derived from the undertaking (Liberty India; reaffirmed in Saraf Exports), but Government subsidies that reduce the cost of production (transport, interest, power) are derived from it (Meghalaya Steels). (ii) Housing projects under sub-section (10): the conditions inserted from time to time (e.g. the limit on commercial area) apply prospectively to projects approved after the relevant date, not to earlier-approved projects (Sarkar Builders), and a housing project with a permissible commercial element qualifies within limits (Brahma Associates). (iii) The new-undertaking / reconstruction conditions (Textile Machinery).

A.4 Legislative evolution / FA amendment trail

Inserted by the Finance Act, 1999 (on the recasting of the old section 80-IA). The housing-project conditions in sub-section (10) were tightened by the Finance (No. 2) Act, 2004 (commercial-area limit, w.e.f. 1 April 2005) and by later Finance Acts. Most limbs are sunset for new undertakings. The Finance Act, 2026 makes no change to section 80-IB.

A.5 CA practitioner pointers

(1) Apply Liberty India / Saraf Exports to exclude DEPB and duty drawback, but claim cost-reducing subsidies under Meghalaya Steels. (2) For housing projects, identify the date of approval and apply only the conditions in force then (Sarkar Builders); observe the commercial-area and completion limits (Brahma Associates). (3) Test the new-undertaking / reconstruction condition (Textile Machinery). (4) File Form 10CCB and the return by the section 80AC due date.

B. FA 2026 IMPACT NOTE

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

C. CASE LAW — CLUSTERED BY ISSUE

Cluster C-1 : 'Derived from' — incentives out, cost-reducing subsidies in

Liberty India v. CIT (2009) 317 ITR 218 (SC)

Facts: The assessee credited DEPB and duty-drawback receipts to the profit and loss account and claimed the section 80-IB deduction on the enhanced profit.

Issue: Whether DEPB and duty-drawback profits are 'derived from' the industrial undertaking.

Held: The Supreme Court held that DEPB and duty drawback flow from Government incentive schemes and the Customs / Central Excise Acts, not from the undertaking as a first-degree source, and are not 'derived from' the eligible business.

Ratio: Export-incentive profits lack the first-degree nexus and are excluded; 'derived from' is narrower than 'attributable to'.

Relevance: The leading authority excluding export incentives from section 80-IB profits.

Saraf Exports v. CIT (2023) 453 ITR 625 (SC)

Facts: The assessee again sought the section 80-IB deduction on DEPB and duty-drawback receipts, inviting reconsideration of Liberty India.

Issue: Whether DEPB and duty-drawback receipts qualify as profits 'derived from' the eligible business for section 80-IB.

Held: The Supreme Court reaffirmed Liberty India and held that DEPB and duty-drawback receipts are incentives that do not have the first-degree nexus with the industrial undertaking and are not 'derived from' the eligible business; the deduction is not available on them.

Ratio: The Liberty India principle stands: export incentives are not profits derived from the eligible business.

Relevance: The recent (2023) Supreme Court reaffirmation, settling the question against the assessee and closing the door on renewed challenges.

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

Facts: The assessee included transport, interest and power subsidies (and refund of excise duty) in the profits on which it claimed the deduction; the Revenue treated them as not derived from the undertaking.

Issue: Whether Government subsidies that reduce the cost of production are 'derived from' the eligible business.

Held: The Supreme Court held that transport, interest and power subsidies have a direct nexus with the manufacturing activity because they reimburse costs of production; they are profits derived from the undertaking and qualify for the deduction (under sections 80-IB / 80-IC / 80-IE), distinguishing Liberty India.

Ratio: Subsidies that reduce the cost of production have the first-degree nexus and are 'derived from' the undertaking, unlike export incentives.

Relevance: The essential counterpoint to Liberty India; it carves cost-reducing subsidies into the eligible profits.

Cluster C-2 : Housing projects — sub-section (10)

CIT v. Sarkar Builders (2015) 375 ITR 392 (SC)

Facts: A housing project was approved before 1 April 2005, when the commercial-area restriction in section 80-IB(10)(d) (inserted by the Finance (No. 2) Act, 2004) came into force, but was completed afterwards; the Revenue applied the new restriction to deny the deduction.

Issue: Whether the commercial-area condition inserted with effect from 1 April 2005 applies to housing projects approved before that date.

Held: The Supreme Court held that the condition in section 80-IB(10)(d) is prospective and does not apply to projects approved before 1 April 2005; the eligibility of such projects is governed by the law as it stood at the date of approval, and the later condition cannot be imposed retrospectively.

Ratio: Conditions inserted into section 80-IB(10) apply only to projects approved on or after their effective date; eligibility is tested by the law in force at approval.

Relevance: The leading authority protecting earlier-approved housing projects from later-inserted conditions.

CIT v. Brahma Associates (2011) 333 ITR 289 (Bombay High Court) (Full Bench)

Facts: A 'housing project' under section 80-IB(10) included a commercial component; the question was whether and to what extent the deduction was available to a project that was not purely residential.

Issue: Whether a housing project with a commercial element qualifies under section 80-IB(10), and within what limits.

Held: The Full Bench held that section 80-IB(10) (as it stood before 1 April 2005) allowed the deduction to housing projects having a permissible commercial element, the project being predominantly residential; after the insertion of clause (d) the statutory commercial-area limits apply.

Ratio: A predominantly-residential housing project with a permissible commercial component qualifies; post-amendment, the statutory commercial-area limits govern.

Relevance: The leading authority on mixed housing-and-commercial projects under section 80-IB(10).

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.

Case law on Section 80-IB

ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.

Section 80-IB case laws

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 80-IB(1) to (11C) — deductions for industrial undertakings, ships, hotels, multiplexes, convention centres, research companies, mineral oil and gas, housing projects, cold chains, food processing and hospitals	s. 141 (deduction computed under s. 80-IB of the 1961 Act, for the years it would have been allowed)
s. 80-IB(12) and (13) — amalgamation or demerger; s. 80-IA(5) and (7) to (12) apply	s. 141 read with s. 122