80-IC

ITA 1961 · Section 80-IC

Section 80-IC — Specified States Industrial Undertaking

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

Special provisions in respect of certain undertakings or enterprises in certain special category States.

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

undertaking or an enterprise from any business referred to in sub-section (2), 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, as specified in sub-section (3).

(2) This section applies to any undertaking or enterprise,—

(a) which has begun or begins to manufacture or produce any article or thing, not being any article or

thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing,

not being any article or thing specified in the Thirteenth Schedule and undertakes substantial

expansion during the period beginning—

(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2007, 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 Area or Theme Park, as notified by the Board in accordance with the scheme

framed and notified by the Central Government in this regard, in the State of Sikkim; or

(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, 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 Area or Theme Park, as notified by the Board in accordance with the scheme

framed and notified by the Central Government in this regard, in the State of Himachal

Pradesh or the State of Uttaranchal; or

(iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, 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 Area or Theme Park, as notified by the Board in accordance with the scheme

framed and notified by the Central Government in this regard, in any of the North-Eastern

States;

(b) which has begun or begins to manufacture or produce any article or thing, specified in the

Fourteenth Schedule or commences any operation specified in that Schedule, or which

manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences

any operation specified in that Schedule and undertakes substantial expansion during the period

beginning—

(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2007, in the

State of Sikkim; or

(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State

of Himachal Pradesh or the State of Uttaranchal; or

(iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of

the North-Eastern States.

(3) The deduction referred to in sub-section (1) shall be—

(i) in the case of any undertaking or enterprise referred to in sub-clauses (i) and (iii) of clause (a) or

sub-clauses (i) and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and

gains for ten assessment years commencing with the initial assessment year;

(ii) in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause

(ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five

assessment years commencing 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.

(4) This section applies to any undertaking or enterprise 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 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.

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.

(5) 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 10B, in relation to the profits and gains of the undertaking or enterprise.

(6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or

enterprise under this section, where the total period of deduction inclusive of the period of deduction under

this section, 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.

(7) 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 or enterprise under this section.

(8) For the purposes of this section,—

(i) "Industrial Area" means such areas, which the Board, may, by notification in the Official Gazette,

specify in accordance with the scheme framed and notified by the Central Government;

(ii) "Industrial Estate" means such estates, which the Board, may, by notification in the Official

Gazette, specify in accordance with the scheme framed and notified by the Central Government;

(iii) "Industrial Growth Centre" means such centres, which the Board, may, by notification in the

Official Gazette, specify in accordance with the scheme framed and notified by the Central

Government;

(iv) "Industrial Park" means such parks, which the Board, may, by notification in the Official Gazette,

specify in accordance with the scheme framed and notified by the Central Government;

(v) "Initial assessment year" means the assessment year relevant to the previous year in which the

undertaking or the enterprise begins to manufacture or produce articles or things, or commences

operation or completes substantial expansion;

(vi) "Integrated Infrastructure Development Centre" means such centres, which the Board, may, by

notification in the Official Gazette, specify in accordance with the scheme framed and notified by

the Central Government;

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

Mizoram, Nagaland and Tripura;

(viii) "Software Technology Park" means any park set up in accordance with the Software Technology

Park Scheme notified by the Government of India in the Ministry of Commerce and Industry;

(ix) "Substantial expansion" means increase in the investment in the plant and machinery by at least

fifty 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;

(x) "Theme Park" means such parks, which the Board, may, by notification in the Official Gazette,

specify in accordance with the scheme framed and notified by the Central Government.

Function in the statutory architecture

Section 80-IC allowed a deduction for undertakings or enterprises in special category States that began, or undertook substantial expansion, within fixed windows: from 23 December 2002 to before 1 April 2007 in Sikkim; from 7 January 2003 to before 1 April 2012 in Himachal Pradesh or Uttaranchal; and from 24 December 1997 to before 1 April 2007 in the North-Eastern States. Clause (a) covers manufacture of articles not in the Thirteenth Schedule in notified zones, parks and estates; clause (b) covers articles or operations in the Fourteenth Schedule anywhere in those States.

The deduction was one hundred per cent of the profits for ten assessment years in Sikkim and the North-Eastern States. In Himachal Pradesh and Uttaranchal it was one hundred per cent for five assessment years and thereafter twenty-five per cent (thirty per cent for a company). "Substantial expansion" means an increase of at least fifty 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 or s. 10B is allowed on the same profits (s. 80-IC(5)).
The total period, including any period under the second proviso to s. 80-IB(4) or s. 10C, cannot exceed ten assessment years (s. 80-IC(6)).
The undertaking must not be formed by splitting up or reconstruction, or by transfer of used plant and machinery (s. 80-IC(4)).
Sub-sections (5) and (7) to (12) of s. 80-IA apply (s. 80-IC(7)).

Status

Expired. There is no bracketed note of omission, but the latest commencement date is before 1 April 2012 and the period cannot exceed ten assessment years, so no deduction period reaches assessment year 2026-27. The Finance Act, 2026 does not amend s. 80-IC.

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-IC — SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKINGS IN CERTAIN SPECIAL CATEGORY 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 or enterprises in certain special category States.

Section 80-IC allows a deduction in respect of the profits and gains derived by an undertaking from an eligible business set up in the notified areas of Sikkim, Himachal Pradesh, Uttarakhand and the North-Eastern States, which begins manufacture/production (or undertakes substantial expansion) within the qualifying window. The deduction is 100 per cent for ten assessment years for undertakings in Sikkim and the North-Eastern States (section 80-IC(3)(i)); in Himachal Pradesh and Uttarakhand it is 100 per cent for five assessment years and thereafter 25 per cent (30 per cent for companies) (section 80-IC(3)(ii)), within an overall ten-year cap, subject to the new-undertaking and manufacture conditions and the negative list. It is sunset for new undertakings.

A. SECTION COMMENTARY

A.1 Structural position

Section 80-IC is the special-category-State area incentive (Himachal, Uttarakhand, the North-East, Sikkim). It carried a generous 100-per-cent structure (reduced after five years in Himachal Pradesh and Uttarakhand) within a ten-year cap and generated significant litigation on 'substantial expansion' and the 'initial assessment year'.

A.2 Provision taxonomy

A deduction of 100 per cent for ten years in Sikkim and the North-East or, in Himachal Pradesh and Uttarakhand, 100 per cent for five years and then 25 / 30 per cent, within a ten-year cap, for an eligible undertaking in a notified area beginning manufacture or undertaking substantial expansion within the window, subject to the manufacture, new-undertaking and negative-list conditions.

A.3 Core doctrinal themes

(i) 'Substantial expansion' and the 'initial assessment year': whether an undertaking that has enjoyed five years at 100 per cent can, on carrying out substantial expansion within the ten-year window, obtain a fresh 'initial assessment year' and a further 100-per-cent period — answered in the affirmative in Aarham Softronics, which overruled Classic Binding Industries — always subject to the overall ten-year cap. (ii) 'Derived from' and the inclusion of cost-reducing subsidies (Meghalaya Steels). (iii) The new-undertaking / manufacture conditions.

A.4 Legislative evolution / FA amendment trail

Inserted by the Finance Act, 2003 (w.e.f. assessment year 2004-05). The qualifying window for commencement / substantial expansion has closed; the deduction is sunset for new undertakings. Not amended by the Finance Act, 2026.

A.5 CA practitioner pointers

(1) Where a 100-per-cent period has expired, examine whether a substantial expansion within the ten-year window opens a fresh initial assessment year and a further 100-per-cent period (Aarham Softronics), subject to the ten-year cap. (2) Claim cost-reducing subsidies (Meghalaya Steels) but exclude export incentives (Liberty India). (3) Verify the negative-list and manufacture conditions. (4) Observe the section 80AC due-date condition.

B. FA 2026 IMPACT NOTE

Section 80-IC 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 : 'Substantial expansion' and a fresh initial assessment year

Pr. CIT v. Aarham Softronics (2019) 412 ITR 623 (SC)

Facts: An undertaking in a special-category State had availed the 100-per-cent deduction for the first five years and then, within the ten-year window, carried out a substantial expansion, claiming a fresh 100-per-cent period from the year of expansion.

Issue: Whether substantial expansion within the ten-year window creates a fresh 'initial assessment year', entitling the undertaking to a further 100-per-cent deduction (within the overall ten-year cap).

Held: The Supreme Court held that, on a correct reading of the definition of 'initial assessment year' in section 80-IC itself, an undertaking that completes substantial expansion within the ten-year window obtains a fresh initial assessment year and is entitled to 100 per cent deduction again from that year, subject to the overall ten-year cap. It held that the earlier decision in Classic Binding Industries — which had wrongly applied the definition in section 80-IB — did not lay down the correct law and overruled it.

Ratio: Substantial expansion within the ten-year period gives a fresh initial assessment year and a renewed 100-per-cent deduction, capped at ten years in all.

Relevance: The leading and controlling authority on substantial expansion under section 80-IC; it overruled CIT v. Classic Binding Industries (2018) 407 ITR 429 (SC).

Cluster C-2 : Cost-reducing subsidies are 'derived from' the undertaking

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

Facts: The assessee, in a special-category / North-Eastern State, included transport, interest and power subsidies in its eligible profits under sections 80-IB / 80-IC / 80-IE.

Issue: Whether such subsidies are profits 'derived from' the undertaking.

Held: The Supreme Court held that subsidies reimbursing the cost of production (transport, interest, power) have a direct nexus with the manufacturing activity and are profits derived from the undertaking, qualifying for the deduction.

Ratio: Cost-reducing Government subsidies are 'derived from' the eligible business, unlike export incentives.

Relevance: Directly applicable to section 80-IC undertakings in the special-category States that receive such subsidies.

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-IC

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

Section 80-IC case laws

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 80-IC — undertakings in Sikkim, Himachal Pradesh, Uttaranchal and the North-Eastern States	No corresponding provision in the Income-tax Act, 2025
s. 80-IE(5) — periods under s. 80-IC count towards the ten-year cap	s. 143(6) counts only periods under the second proviso to s. 80-IB(4) of the 1961 Act