Section 80IA – Deductions of post business expenses. Deduction Under Section 80IA, Income Tax Act 1961. All you want to know about section 80IA, Section 80IA is profit based deduction, which actually goes on to exempting the profits generated by a specific class of companies for a specific time period. The objective behind allowing such deduction is to encourage private sector participation within infrastructure sector. This article will try to provide gist of the provision of the section 80IA , its applicability , and recent case laws for better understanding.
What is section 80IA and its applicability
Section 80 IA provides for deduction in respect of profits or gains generated from industrial undertaking engaged in following activities
- Infrastructure facilities
- Telecommunication services
- Undertaking involved in development , operation or maintenance of any industrial park
- Power generation or involved in reconstruction of power generation plant
This deduction is subject to certain conditions which are as follows
- Undertaking availing 80IA deduction is not result of any split off or reconstruction of any existing unit
- Such undertaking is not formed by mere transfer of plant and machinery which is already used
- If the undertaking claims deduction under any assessment year , then no other deduction to be allowed as it will result in double deduction.
- Undertaking which avails the deduction shall be the person making investment and executing the infrastructure development work.
- Deduction is allowed under section 80IA is permitted only if the accounts are audited.
Recent Judgments or case laws
ITO vs Hirananadani Builders (ITAT Mumbai)
This judgement pertains to assessment year 2009-10, which gave a verdict that incomes such as interest on TDS refund, interest from lessee , interest on Fixed Deposit Receipts, as well as interest on tender fees are to be construed as derived form the eligible undertaking with respect to deduction under section 80IA.Hence such all the income are allowed as deduction .however if the such income are not eligible to be set off , then they are to be disallowed for the part which will remain after netting off the expenditure related to them.
Deepi Arora Vs. ITO (ITAT, Mumbai)
It is a Must that the profits of the eligible unit should be computed on a stand alone basis. This judgment adheres to the principle where the eligble unit has other non business income.It says that brought forward unabsorbed depreciation should be set off against eligible profits , after which deduction under section 80IA will be calculated.
CIT vs. Accel Trnsmatic Systems Ltd.
This judgment has outlined the fact that the deduction under section 80IA shall be reduced from total income only after deducting the loss from another unit.Deduction will be restricted to total income where total income is less than the eligible deduction.
Section 80IA is devised for encouraging the private players to enter into infrastructure industry.The section exempts the profits generated from eligible undertaking for almost 10 consecutive assessment years.Hence this section actually intends to provide relief to the person actually investing and executing the infrastructure development subject to certain conditions and recent case laws mentioned above in the article.
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- Deduction for Rent Paid Under Section 80GG
- Deduction from taxable income in respect of certain payments
- Section 43B Deductions Based Actual Payments
- Section 80GGA – Deduction for Donation – Scientific Research