Section 80HHA allowed a deduction of twenty per cent of the profits and gains derived from a small-scale industrial undertaking that began to manufacture or produce articles after 30 September 1977 but before 1 April 1990 in a rural area. The undertaking had to be new (not formed by splitting up, reconstruction or transfer of used machinery, subject to a twenty per cent tolerance) and employ ten or more workers with power or twenty or more without. A "rural area" excluded municipal and cantonment areas with a population of ten thousand or more and notified areas up to fifteen kilometres around them. Mining was excluded.
Operative consequences
The deduction ran for ten previous years from commencement, but not for any year in which the undertaking was not a small-scale industrial undertaking (s. 80HHA(3)).
A non-corporate, non-co-operative assessee needed an audit report in the prescribed form with the return (s. 80HHA(4)).
The same profits could not be relieved under both this section and s. 80HH (s. 80HHA(7)).
Status
Expired. The section has no bracketed note of omission, but the latest start date is before 1 April 1990 and the period is ten years, so it does not reach assessment year 2026-27. The Finance Act, 2026 does not amend s. 80HHA.
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 80HHA — DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM NEWLY ESTABLISHED SMALL-SCALE INDUSTRIAL UNDERTAKINGS IN CERTAIN AREAS
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 newly established small-scale industrial undertakings in certain areas.
Section 80HHA allowed a deduction of 20 per cent of the profits and gains derived from a newly established small-scale industrial undertaking in a rural area, for ten assessment years from commencement, subject to conditions parallel to those in section 80HH (new undertaking, manufacture/production, employment, audit). It is the small-scale / rural-area counterpart of section 80HH and is spent for new undertakings.
A. SECTION COMMENTARY
A.1 Structural position
Section 80HHA mirrored section 80HH for small-scale industrial undertakings in rural areas. It shares the same statutory architecture and the same 'derived from' / 'profits and gains' jurisprudence.
A.2 Provision taxonomy
A 20-per-cent, ten-year deduction for a new small-scale industrial undertaking in a rural area, with the section-80HH-type conditions, computed on profits 'derived from' the undertaking.
A.3 Core doctrinal themes
The 'derived from' nexus (Sterling Foods; Pandian Chemicals) and the gross-profits quantum (Vijay Industries) apply identically; the additional questions are the small-scale and rural-area qualifications.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance (No. 2) Act, 1977; spent for new undertakings as the regime moved to sections 80-IA / 80-IB. Not amended by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Apply the section 80HH 'derived from' and quantum principles. (2) Confirm the small-scale and rural-area qualifications for the relevant years. (3) Relevant only for open legacy assessments.
B. FA 2026 IMPACT NOTE
Section 80HHA is NOT amended by the Finance Act, 2026 and is spent for new undertakings.
Facts: Section 80HHA uses the same 'profits and gains derived from' formula as section 80HH.
Issue: How the nexus and quantum questions are resolved for section 80HHA.
Held: The 'derived from' nexus test (Sterling Foods / Pandian Chemicals) and the gross-profits-and-gains quantum (Vijay Industries) apply to section 80HHA exactly as to section 80HH; ancillary receipts are excluded and the deduction is on gross profits before depreciation/investment allowance for the pre-80AB years.
Ratio: Section 80HHA is governed by the section 80HH line of authority on nexus and quantum.
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. These sections are spent / phased out for current assessment years but carry heavy legacy litigation; the digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR) and remain the governing law for the open assessments and for the cognate 'derived from' / netting principles applied across Chapter VIA.
Function in the statutory architecture
Section 80HHA allowed a deduction of twenty per cent of the profits and gains derived from a small-scale industrial undertaking that began to manufacture or produce articles after 30 September 1977 but before 1 April 1990 in a rural area. The undertaking had to be new (not formed by splitting up, reconstruction or transfer of used machinery, subject to a twenty per cent tolerance) and employ ten or more workers with power or twenty or more without. A "rural area" excluded municipal and cantonment areas with a population of ten thousand or more and notified areas up to fifteen kilometres around them. Mining was excluded.
Operative consequences
Status
Expired. The section has no bracketed note of omission, but the latest start date is before 1 April 1990 and the period is ten years, so it does not reach assessment year 2026-27. The Finance Act, 2026 does not amend s. 80HHA.
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 80HHA — DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM NEWLY ESTABLISHED SMALL-SCALE INDUSTRIAL UNDERTAKINGS IN CERTAIN AREAS
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 newly established small-scale industrial undertakings in certain areas.
Section 80HHA allowed a deduction of 20 per cent of the profits and gains derived from a newly established small-scale industrial undertaking in a rural area, for ten assessment years from commencement, subject to conditions parallel to those in section 80HH (new undertaking, manufacture/production, employment, audit). It is the small-scale / rural-area counterpart of section 80HH and is spent for new undertakings.
A. SECTION COMMENTARY
A.1 Structural position
Section 80HHA mirrored section 80HH for small-scale industrial undertakings in rural areas. It shares the same statutory architecture and the same 'derived from' / 'profits and gains' jurisprudence.
A.2 Provision taxonomy
A 20-per-cent, ten-year deduction for a new small-scale industrial undertaking in a rural area, with the section-80HH-type conditions, computed on profits 'derived from' the undertaking.
A.3 Core doctrinal themes
The 'derived from' nexus (Sterling Foods; Pandian Chemicals) and the gross-profits quantum (Vijay Industries) apply identically; the additional questions are the small-scale and rural-area qualifications.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance (No. 2) Act, 1977; spent for new undertakings as the regime moved to sections 80-IA / 80-IB. Not amended by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Apply the section 80HH 'derived from' and quantum principles. (2) Confirm the small-scale and rural-area qualifications for the relevant years. (3) Relevant only for open legacy assessments.
B. FA 2026 IMPACT NOTE
Section 80HHA is NOT amended by the Finance Act, 2026 and is spent for new undertakings.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Shared 'derived from' / quantum jurisprudence
Applied authorities: Sterling Foods (1999) 237 ITR 579 (SC); Vijay Industries (2019) 412 ITR 1 (SC)
Facts: Section 80HHA uses the same 'profits and gains derived from' formula as section 80HH.
Issue: How the nexus and quantum questions are resolved for section 80HHA.
Held: The 'derived from' nexus test (Sterling Foods / Pandian Chemicals) and the gross-profits-and-gains quantum (Vijay Industries) apply to section 80HHA exactly as to section 80HH; ancillary receipts are excluded and the deduction is on gross profits before depreciation/investment allowance for the pre-80AB years.
Ratio: Section 80HHA is governed by the section 80HH line of authority on nexus and quantum.
Relevance: Avoids duplicating settled law: the section 80HH authorities control section 80HHA.
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. These sections are spent / phased out for current assessment years but carry heavy legacy litigation; the digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR) and remain the governing law for the open assessments and for the cognate 'derived from' / netting principles applied across Chapter VIA.