To provide a push to the economy in the backward states, the government comes up with incentives to the business houses to set up industries in specified backward states. One of this incentive is deduction in case of income tax. This deduction is allowed from profits of certain undertakings or enterprise in certain special category states. (Section 80IC).
1. Eligibility and rate of deduction [Section 80IC(2)]
A. This section applies to any undertaking or enterprise 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 of Theme Park, is notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the state of Sikkim.
Rate of deduction: 100% of such profits and gains for ten assessment years commencing with the initial assessment year.
(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 Individual 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 Uttarakhand.
Rate of deduction: 100% of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty five per cent (thirty per cent where the assessee is a company) of the profits and gains for next 5 assessment years.
(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, is 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.
Rate of deduction: 100% of such profits and gains for ten assessment years commencing with the initial assessment year.
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 or 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
Rate of deduction: 100% of such profits and gains for ten assessment years commencing with the initial assessment year.
(ii) On the 7th day of January 2003 and ending before the 1st day April 2012 in State of Himachal Pradesh or the State of Uttarakhand.
Rate or deduction.:100% of such profits and gains for five assessment year commencing with the initial assessment year and thereafter, twenty five percent. (thirty percent where the assessee is a company) of the profits and gains for next 5 assessment years.
(ii) On the 24th day of December 1997 and ending before the 1st day of April 2007, in any of the North Eastern States.
Rate of deduction: 100% of such profits and gains for ten assessment years commencing with the initial assessment year.
2. Conditions for Claiming of this deduction [Section 80IC (4)]
This section applies to any undertaking or enterprise which fulfill all the following conditions namely :
(i) It is not formed by splitting up, or the reconstruction of a business already in existence. 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 of machinery or plant to new business previously used for any purpose.
(iii) The provisions regarding use of second-hand Plant and Machinery shall be applicable in same manner as are applicable under section 801A(3).
(iv) In computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VI or in Section 10A or section 10B , in relation to the profits and gains of the undertaking or enterprise. [Section 80IC(5)]
(v) No deduction shall be allowed to any undertaking or enterprise under this section where the four period of deduction inclusive of the period of deduction under this section, or under the second provision sub-section (4) or section 80IB or under section 10C, as the case may be, exceeds ten assessment years. [Section 80IC(6)]
(vi) The provisions contained in subsection (5) and subsections (7) to (12) of section 80IAshall, so far as may be, apply to the eligible undertaking or enterprise under this section. [Section 80IC(7)]
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