Section 84

CHAPTER VII — INCOMES FORMING PART OF TOTAL INCOME ON WHICH NO INCOME-TAX IS PAYABLE

SECTION 84 — INCOME OF NEWLY ESTABLISHED INDUSTRIAL UNDERTAKINGS OR HOTELS (OMITTED)

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

STATUTORY POSITION (Income-tax Act, 1961, as in force)

Marginal heading (as originally enacted): Income Of Newly Established Industrial Undertakings Or Hotels

81. to 85C. [Omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Provisions of sections 81, 82, 83, 84, 85, 85A, 85B and 85C were incorporated from the same date in sections 80P, 80Q, 10(29), 80J (now omitted), 80K (now omitted), 80M (now omitted), 80N (now omitted) and 80-O, respectively.]

A. SECTION COMMENTARY

A.1 Original subject-matter (pre-1968 position)

Section 84 granted the celebrated 'tax holiday' for newly established industrial undertakings, ships and hotels: a defined proportion of the profits and gains (computed by reference to the capital employed) was not charged to tax for the initial assessment years, provided the undertaking was not formed by the splitting up or reconstruction of an existing business or by the transfer of used plant and machinery, and employed the requisite number of workers. It was the central industrial-promotion incentive of the early 1961 Act.

A.2 Insertion and statutory history

Original section 84 of the 1961 Act (w.e.f. 1-4-1962) re-enacted the tax holiday that had stood in section 15C of the Indian Income-tax Act, 1922.

A.3 Omission and migration of the provision

With effect from 1 April 1968 the holiday was recast as the section 80J deduction ('deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business'). Section 80J was itself later omitted by the Finance (No. 2) Act, 1996 (w.e.f. 1-4-1989), the incentive having migrated to the section 80-IA / 80-IB family. The line of authority on 'new undertaking', 'reconstruction' and 'capital employed' runs continuously from section 15C through section 84 and section 80J to the modern provisions.

A.4 Current status

Section 84 does not exist as a live operative provision of the Income-tax Act, 1961. The Chapter VII slot bears only the omission entry reproduced above. Its policy lives on in section 80J (and the provisions that have in turn succeeded it). For an assessment under the 1961 Act there is nothing to apply under section 84 itself; the analysis must proceed under the successor provision and the head of income to which the receipt belongs.

A.5 CA practitioner pointers

(1) Do not cite section 84 in a current return, computation, assessment or appeal — it has stood omitted since the date shown above and any reference to it is liable to be treated as a mistake. (2) Where the receipt in question is of the kind the old section addressed, frame the claim under the successor provision and satisfy its conditions. (3) When relying on older judgments decided on the omitted section, treat them as authority on the underlying concept only, and check that the successor provision has not altered the conditions on which the earlier ruling turned.

B. FA 2026 IMPACT NOTE

The Finance Act, 2026 does not revive or amend section 84; the section remains omitted. FA 2026 makes no change to Chapter VII. (For completeness, the only live section of Chapter VII — section 86 — is also not amended by FA 2026.)

Transition note: the Income-tax Act, 2025 (which commences on 1 April 2026 and replaces the 1961 Act) does not re-enact this omitted provision under its old number; the relief, to the extent it still exists, is found in the corresponding deduction/exemption of the new Act.

C. CASE LAW

No case law subsists under section 84 as a live provision: it was omitted with effect from the date noted above, so no assessment is decided under it today. The jurisprudence on its subject-matter now resides under the successor provision (section 80J). For cross-reference and continuity of doctrine, the leading authorities on the successor provision are set out below; they are noted here as authority on the underlying concept, decided under the successor section and not under section 84.

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

Facts: An engineering company set up new units (a steel-foundry and a jute-mill division) and claimed the tax holiday for newly established industrial undertakings; the Revenue alleged the units were merely a reconstruction/expansion of the existing business.

Held: The Supreme Court held that the true test is whether the new unit is a separate and identifiable undertaking producing articles, not formed by splitting up or reconstruction of the existing business; an undertaking that is integrated yet new and viable on its own qualifies. The holiday was allowed.

Relevance: The locus classicus on what is a 'newly established industrial undertaking' — the concept that ran from section 15C of the 1922 Act through section 84 into section 80J (and later 80-IA/80-IB).

2. Lohia Machines Ltd. v. Union of India (1985) 152 ITR 308 (SC)

Facts: The dispute concerned the computation of 'capital employed' for the section 80J relief and the validity of Rule 19A, which excluded borrowed monies and debts from capital.

Held: The Supreme Court upheld Rule 19A and the retrospective amendment of section 80J(1A), holding that borrowed capital and current liabilities are to be excluded in computing capital employed for the relief; the relief is on the owner's capital, not borrowings.

Relevance: The settled authority on the quantum mechanics of the section 80J relief which succeeded section 84/85; illustrates the strictly conditional nature of the new-undertaking incentive.