Section 80-IC: Deductions For Certain Undertakings in Special States

What is Section 80-IC?

Similar to section 80IA, section 80IC of the Income Tax Act offers deduction to businesses operating in specific industries and locations. This section provides deductions to businesses engaged in infrastructural development that are located in underdeveloped areas. Section 80IC provides deduction upto 100% of the business profits.

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Which are the States Covered under Section 80-IC?

S.No. Name of state

1. Sikkim
2. Himachal Pradesh
3. Uttarakhand
4. North Eastern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura )

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What are the Conditions to Claim Deduction u/s 80IC?

• New Enterprise:
  It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction or a business already in existence.
  Exception: Any undertaking discontinued due to extensive damage or destruction(any building, machinery, plant or furniture owned and used for such business) due to any natural calamity or other unforeseen circumstances such as:-
  • Flood, typhoon, hurricane, cyclone, earthquake or other natural calamity, or
  • Riot or civil disturbance, or
  • Accidental fire or explosion, or
  • Enemy action or action taken in combat
• New plants & Machineries:
  It should not be formed by transferring old plant & machinery which was previously used for any other purpose.
  Exception:
  
  • Value of old plant & machinery is allowed upto 20% of the total value of plant & machinery.
  • Second-hand imported machine will also be treated as new plant & machine under this section provided:
    • Such plant or machinery was not used in India prior to its installation for this purpose.
    • Plant or machinery is imported into India.
    • Deduction of depreciation on such plant or machinery will not be allowed for prior period of installation.
• Period of commencement:
  The undertaking must start its operation or substantial expansion** as given in table:
  

  Name of state	Time limit
  Sikkim	23 December, 2002 - 31 March, 2007
  Himachal Pradesh or Uttaranchal	07 January 2003 - 31 March, 2012
  North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura )	24 December, 1997 - 31 March, 2007

• Substantial Expansion:
  Substantial expansion occurs when the investment in plant & machinery is at least 50% of the book value at the beginning of the year when the expansion occurs.
  Example:
  For example, if A Ltd. makes a 51% investment in expansion over 2 years. It qualifies for section 80IC deduction. Similarly, B Ltd. spends (28%+23%) on two smaller expansions over two years. B Ltd. would not qualify for this exemption as each deduction is less than 50%.
• Audit Report:
  This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.
• Production of specified goods:
  

  State	Article to be produced by undertaking in the Industrial Zone**	Article to be produced by undertaking in any area
  Sikkim	Any article but other than those given in the thirteenth schedule (Part A)	Any article given in Fourteenth Schedule (Part B)
  Himachal Pradesh or Uttaranchal	Any article but other than those given in the thirteenth schedule (Part B)	Any article given in Fourteenth Schedule (Part C)
  North Eastern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura )	Any article other than those given in the thirteenth schedule	Any article given in the Fourteenth Schedule (Part A)

  
  **List of Industrial zones
  
  • Export processing Zone
  • Integrated Infrastructure Development Centre
  • Industrial Growth Centre
  • Industrial Estate
  • Industrial Park
  • Software Technology Park
  • Industrial Area
  • Theme Park
• Income Tax Return:
  One of the conditions given in this section is that the assessee needs to file their Income Tax Return on time and should also claim the amount of deduction in return. You cannot claim a deduction in case belated return.

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What is the Amount of Deduction Available under Section 80-IC?

** Initial Assessment Year: In which the undertaking starts to manufacture or produce articles or things, or commence operation, or completes substantial expansion.

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