Income-tax Act : DEDUCTIONS TO BE MADE IN COMPUTINGTOTAL INCOME Indian Bare Acts :

Income-tax Act,1961

Act No : 43

Section : DEDUCTIONS TO BE MADE IN COMPUTINGTOTAL INCOME

1[CHAPTER VIA DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME A.-General 80A. Deductions to be made in computing total income (1)In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 2[80U]. (2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. 3[(3) Where, in computing the total income of an association of persons or a body of individuals, any deduction is admissible under section 80G or section 80GGA or section 80HH or section 80HHA or section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80-IA or section 80J or section 80JJ, no deduction under the same section. shall be made. in computing the total income of a member of the association of persons or body of individuals in relation to the share of such member in the income of the association of persons or body of individuals.] ---------------------------------------------------------------------- 1 This Chapter, consisting of sections 80A, 80B, 80C, 80D, 80E, 80F, 80G, 80H, 80-1, 80J, 80K, 80L, 80M, 80N, 80-0, 80P, 80Q, 80R, 80S and 80T was substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4- 1968. Originally, Chapter VI-A, consisting of sections 80A, 80B, 80C and 80D was inserted by the Finance Act, 1965, w.e.f. 1-4-1965. In that chapter, section 80A was amended by the Finance Act, 1966, w.e.f. 1-4-1966 and section 80E was inserted by the Finance (No. 2) Act, 1966, w.e.f. 1-4-1966. 2 Substituted for "80VV" by the Finance Act, 1985, w.e.f. 1-4-1986. Earlier, "80VV" was substituted for "80U" by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 which was substituted for "80T" by the Finance Act, 1968, w.e.f. 1-4-1969. 3 Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to the substitution, subsection (3), as originally enacted and amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971; Finance (No. 2) Act, 1971, w.e.f. 1-4-1972; Finance Act, 1972, w.e.f. 1-4-1972; Finance Act, 1974, w.e.f. 1-4-1975; Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974; Finance Act, 1975, w.e.f. 1-4-1976; Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976; Finance (No. 2) Act, 1977, w.e.f. 1-4-1978; Finance Act, 1979, w.e.f. 1-4-1980; Finance (No. 2) Act, 1980, w.e.f. 1-4-1981; Finance Act, 1982, w.e.f. 1-4- 1983; Finance Act, 1983, w.e.f. 1-4-1983/1-4-1984; Finance Act, 1985, w.e.f. 1-4-1986; Finance Act, 1986, w.e.f. 1-4-1987; Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989; Finance Act, 1989, w.e.f. 1-4- 1990, read as under: "(3) Where, in computing the total income of a firm, association of persons or body of individuals, any deduction is admissible under section 80G or section 80GGA or section 80HH or section 80HHA or section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80J or section 80JJ, no deduction under the same section shall be made in computing the total income of a partner of the firm or, as the case may be, of a member of the association of persons or body of individuals in relation to the share of such partner in the income of the firm or the share of such member in the income of the association of persons or body of individuals.' Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 but was restored to its original version by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. ---------------------------------------------------------------------- 1.339 1[(4) * * *] 2[80AA. Computation of deduction under section 80M Where any deduction is required to be allowed under section 80M in respect of any income by way of dividends from a domestic company which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, the deduction under that section shall be computed with reference to the income by way of such dividends as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) and not with reference to the gross amount of such dividends.] 3[80AB. Deductions to be made with reference to the income included in the gross total income Where any deduction is required to be made or allowed under any section (except section 80M) included in this Chapter under the heading "C.-Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.] 4[80B. Definitions In this Chapter- 5[(1) * * *] 6[(2) * * *] 7[(3) * * *] ---------------------------------------------------------------------- 1 Omitted by the Finance Act, 1978, w.e.f. 1-4-1979. it was inserted by the Finance Act, 1976, w.e.f. 1-4-1977. 2 Inserted by the Finance (No. 2) Act, 1980, w.r.e.f. 1-4-1968, subject to the savings in section 44 of the said Amendment Act, which read as under: "44. Savings in certain cases.-Where, before the 18th day of June, 1980 [being the date on which the Finance (No. 2) Bill, 1980 was introduced], the Supreme Court has, on an appeal or a reference in respect of the assessment of an assessee for any particular assessment year, held that the deduction under section 80M is to be allowed in a manner different from that provided in section 80AA of the Income-tax Act, as inserted by section 12 of this Act, then, nothing contained in the said section 80AA shall apply to the assessment of such assessee for that particular assessment year." 3 Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. 4 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 in place of original section 80D. 5 Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4- 1976. 6 Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4- 1989. Prior to the omission, sub-section (2) read as under: "(2)"domestic company" means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income;' 7 Omitted by the Finance Act, 1968, w.e.f. 1-4-1969. ----------------------------------------------------------------------- 1.340 1[(4)* * * ] (5) "gross total income" means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter 2[* * * ] 3[* * * ]; 4[(6) * * *] 5[(7) * * *] 6[(8) * * *] 7[(9) * * *] B.-Deductions in respect of certain payments 8[80C. Deduction in respect of life insurance premia, contributions to provident fund, etc.-Omitted by the Finance Act, 1990, w.e.f. 1-4- 1991.] ---------------------------------------------------------------------- 1 Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4- 1989. Prior to the omission, sub-section (4) read as under: "(4) "foreign company' means a company which is not a domestic company as defined in clause (2);" 2 The words "or under section 280-O" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. 3 The words "and without applying the provisions of section 64" omitted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1968. 4 Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4- 1989. Prior to the omission, sub-section (6) read as under: "(6) "income', in relation to a handicapped dependent, means the aggregate income of such person from all sources;" 5 Omitted by the Finance Act, 1972, w.e.f. 1-4-1973. 6 Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4- 1989. Prior to the omission, sub-section (8) read as under: (8) "relative', in relation to an individual, means- (a) the mother, father, husband or wife of the individual, or (b) a son, daughter, brother, sister, nephew or niece of the individual, or (c) a grand-son or grand-daughter of the individual, or (d) the spouse of any person referred to in sub-clause (b); 7 Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4- 1976. 8 Prior to the omission, section 80C, as amended by the Finance Act, 1968, w.e.f. 1-4-1969; Finance Act, 1969, w.e.f. 1-4-1970; Finance Act, 1970, w.e.f. 1-4-1971; Finance (No. 2) Act, 1971, w.e.f. 1-4-1972; Finance Act, 1972, w.e.f. 1-4-1973; Finance Act, 1973, w.e.f. 1-4-1974; Finance Act, 1975, w.e.f. 1-4-1976; Finance Act, 1976, w.e.f. 1-4-1977; Finance Act, 1978, w.e.f. 1-4-1979; Finance Act, 1979, w.e.f. 1-4-1980; Finance (No. 2) Act, 1980, w.e.f. 1-4- 1981; Finance Act, 1982, w.e.f. 1-4-1983; Finance Act, 1983, w.e.f. 1- 4-1984; Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1971; Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1983; Finance Act, 1987, w.e.f. 1-4-1988; Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989; Finance Act, 1989, w.e.f. 1-4-1990 and Direct Tax Laws (Second Amendment) Act, 1989, w.r.e.f. 1-4-1984, w.e.f. 1-4-1990, as under: "80C. Deduction in respect of life insurance premia, contributions to provident fund, etc.-(1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, an amount calculated, with reference to the aggregate of the sums specified in sub-section (2), at the following rates, namely:- (a) where such aggregate does not the whole such aggregate; exceed Rs. 6,000 (b) where such aggregate exceeds Rs. 6,000 plus 50 Per cent of Rs. 6,000 but does not exceed Rs. the amount by which such agg- 12,000 regate exceeds Rs. 6,000; -> ---------------------------------------------------------------------- 1.341 ---------------------------------------------------------------------- -> -> (c) where such aggregate exceeds Rs. 9,000 Plus 40 per Rs. 12,000 cent of the amount by which such aggregate exceeds Rs. 12,000. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) where the assessee is an individual, any sums paid in the previous year by the assessee out of his income chargeable to tax- (i) to effect or to keep in force an insurance on the life of the assessee or on the life of the wife or husband or any child of the assessee; or (ii) to effect or to keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (ii) of sub-section (1) of section 80CCA, on the life of the assessee or on the life of the wife or husband or any child of the assessee: Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity; or (iii) as a contribution to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies; or (iv) as a contribution to any provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette; or (v) as a contribution for participation in the Unit-linked Insurance Plan, 1971 made under section 19(1)(cc) of the Unit Trust of India Act, 1963 (52 of 1963); or (vi) as a contribution for participation in any such Unit- linked Insurance Plan of the LIC Mutual Fund notified under clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf; (b) where the assessee is a Hindu undivided family,- (i) any sums paid in the previous year by the assessee out of its income chargeable to tax- (1) to effect or to keep in force an insurance on the life of any member of the family; or (2) as a contribution to any provident fund refer-red to in sub-clause (iv) of clause (a), where such contribution is to an account standing in the name of any member of the family; or (ii) any sums deposited in the previous year by the assessee out of its income chargeable to tax in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time, where such sums are deposited in an account standing in the name of any member of the family. Explanation.-For the purposes of sub-clause (i) of clause (a) and sub-clause (i) of clause (b) of this sub-section, an insurance on the life of any person referred to therein shall include- (i) a policy of insurance on the life of such person securing the payment of a specified sum on the stipulated date of maturity of the policy, if such person is alive on such date, notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date; (ii) a policy of insurance effected by a person for the benefit of a minor with the object of enabling the minor, after he has attained majority, to secure an insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf; (c) any sum deducted in the previous year from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a -> -> ---------------------------------------------------------------------- 1.342 --------------------------------------------------------------------- -> -> deferred annuity or making provision for his wife or children, in so far as the sum so deducted does not exceed one-fifth of the salary; (d) if the assessee is an employee participating in a recognised provident fund, his own contributions to his individual account in the fund in the previous year, in so far as the aggregate of such contributions does not exceed one-fifth of his salary in that previous year. Explanation.-In clause (d) of this sub-section 'salary" shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule; (e) if the assessee is an employee participating in an approved superannuation fund, any sum paid in the previous year by him by way of contribution towards the superannuation fund; (f) where the assessee is an individual, any sums deposited, in the previous year by the assessee out of his income chargeable to tax, in a ten-year account or a fifteen- year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time; (g) where the assessee is an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu- (i) any sums paid in the previous year by the assessee out of its income chargeable to tax- (1)to effect or to keep in force an insurance on the life of any member of such association or body or on the life of any child of any of the members of such association or body; or (2)to effect or to keep in force a contract for a deferred annuity on the life of any member of such association or body or any child of any of the members of such association or body: Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity; or (3) as a contribution to any provident fund referred to in sub-clause (iv) of clause (a); or (4)as a contribution for participation by any one member of such association or body in the Unit-linked insurance Plan; (ii) any sums deposited in the previous year by such association or body out of its income chargeable to tax in a 10-year account or a 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time; (h) where the assessee is an individual or a Hindu undivided family or where the assessee is an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu, any sums paid in the previous year by such assessee out of his or its income chargeable to tax,- (i) as subscription to any such security of the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf; or (ia) as subscription to any such deposit scheme of the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987), as the Central Government may, by notification in the Official Gazette, specify in this behalf; (ib) as subscription to any such savings certificate as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by notification in the Official Gazette, specify in this behalf; (ii) for the purposes of purchase or construction of a residential - > -> ---------------------------------------------------------------------- 1.343 -> -> house property the construction of which is completed after the 31st day of March, 1987, and the income from which is chargeable to tax under the head 'Income from house property' (or which would, if it had not been used for the assessee's own residence, have been chargeable to tax under that head), where such payments are made towards or by way of-- (a) any instalment or part payment of the amount due under any selffinancing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on owner-ship basis; or (b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or (c) re-payment of the amount borrowed by the assessee from- (1) the Central Government or any State Government, or (2) any bank, including a co-operative bank, or (3) the Life Insurance Corporation, or (3A) the National Housing Bank, or (4)any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is approved for the purposes of clause (viii) of sub- section (1) of section 36, or (5)any company, in which the public are substantially interested or any co-operative society, where such company or co-operative society, is engaged in the business of financing the construction of houses, or (6)the assessee's employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority; (d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee, but shall not include any payment towards or by way of--- (A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co- operative society has to pay for becoming such shareholder or member; or (B) the cost of the land, except where the consideration for the purchase of the house properly is a composite amount and the cost of the land alone cannot be separately ascertained; or (C) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or (D) any expenditure in respect of which deduction is allowable under the provisions of section 24; (i) where the assessee is an individual or a Hindu undivided family or where the assessee is an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu, any sums paid in the previous year by such assessee out of his or its income chargeable to tax as subscription to the National Savings Certificates (VI Issue) and National Savings Certificates (VII Issue) issued under the Government Savings Certificates Act, 1959 (46 of 1959). ---------------------------------------------------------------------- 1.344 -> -> (3) The provisions of clauses (a), (b) and (g) of sub-section (2) shall apply only to so much of any premium or other payment made on a policy other than a contract for a deferred annuity as is not in excess of ten per cent of the actual capital sum assured. Explanation.-In calculating any such capital sum, no account shall be taken- (i) of the value of any premiums agreed to be returned, or (ii) of any benefit by way of bonus or other-wise over and above the sum actually assured, which is to be or may be received under the policy by any person. (4) The aggregate of the sums refer-red to in sub-section (2), which qualifies for the purposes of computing the deduction under sub-section (1), shall not exceed- (i) in the case of an individual, being an author, playwright, artist, musician, actor or sportsman (including an athlete), sixty thousand rupees; (ii) in the case of any other individual or a Hindu undivided family or any such association of persons or a body of individuals as is refer-red to in clause (g) or clause (h) of sub-section (2), forty thousand rupees. (5) If the assessee participating in any Unit-linked Insurance Plan referred to in sub-clause (v) or sub-clause (vi) of clause (a) of sub-section (2), or in the case of an assessee being an association of persons or a body of individuals referred to in clause (g) of sub- section (2), the member thereof participating in any such plan, terminates his participation in that plan (by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation) before contributions in respect of such participation have been paid for five years, then- (a) no deduction shall be allowed to the assessee under this section in respect of the contribution, if any, paid in the previous year in which the participation is so terminated; and (b) the deductions allowed in respect of the contributions paid in the previous years preceding the previous year referred to in clause (a) shall be deemed to be the income of the assessee of that previous year and shall be chargeable to tax accordingly. Explanation.-For the purposes of this sub-section, the deduction allowed under this section in respect of the contribution paid in any previous year shall be the amount by which the deduction allowed under this section for that year exceeds the deduction which would have been allowed for that year if no such contribution had been paid during that year. (6) If the assessee, being- (a) an individual, has effected or kept in force an insurance on the life of the assessee or on the life of the wife or husband or any child of the assessee; or (b) a Hindu undivided family, has effected or kept in force an insurance on the life of any member of the family; or (c) an association of persons or a body of individuals referred to in clause (g) of sub-section (2), has effected or kept in force an insurance on the life of any member of such association or body or on the life of any child of any of the members of such association or body, terminates the contract of insurance (by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premiums, by not reviving the contract of insurance) before premiums have been paid for two years, then- (i) no deduction shall be allowed to the assessee under this section in respect of the premiums, if any, paid in the previous year in which the policy, is so terminated; and (ii) the deduction allowed in respect of the premiums paid in the previous year or years preceding the previous year referred to in clause (i) shall be deemed to be the income of the assessee of such previous year or years and shall be chargeable to tax accordingly. Explanation 1.-For the purposes of this sub-section, the deduction allowed under this section in respect of the premiums paid in any previous year shall be the amount by which the deduction allowed under this section for that year exceeds the deduction which would have been allowed for that year if no such premiums had been paid during that year. -> -> 1.345 -> -> Explanation 2.--In a case where an assessee terminates his participation in any Unit-linked Insurance Plan referred to in sub- clause (v) or sub-clause (vi) of clause (a) of sub-section (2) in any previous year and also terminates a contract of insurance in that year, the deduction allowed under this section in respect of the contribution or premiums paid in any previous year shall, for the purposes of the Explanation to subsection (5) and Explanation 1, be the amount by which the deduction allowed under this section for that year exceeds the deduction which would have been allowed for that year if no such contribution or premiums had been paid during that year. (7) In the case of an assessee referred to in clause (h) of sub- section (2),- (a) where any sums specified in sub-clause (ii) of that clause, with reference to which the deduction under sub- section (1) has been allowed are refunded to or received back by the assessee in any previous year (hereinafter referred to as the relevant previous year), then,- (i) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, specified in that sub-clause, paid in the relevant previous year; and (ii) the aggregate amount of the deductions so allowed in respect of the previous year or previous years preceding the relevant previous year shall be deemed to be the income of the assessee of the relevant previous year and shall be chargeable to tax under the head "Income from other sources"; (b) where the house property referred to in sub-clause (ii) of that clause is transferred by the assessee before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, then- (i) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, specified in that sub-clause, paid in the previous year in which the transfer is so made; and (ii) the aggregate amount of the deductions allowed under sub-section (1) with reference to the sums specified in that sub-clause in respect of the previous year or previous years preceding the previous year referred to in sub-clause (i) of this clause shall be deemed to be the income of the assessee of the previous year in which the transfer is made and shall be chargeable to tax under the head "Income from other sources"; (c) where the aggregate of any sums specified in sub-clause (ii) of that clause exceeds an amount of ten thousand rupees, a deduction under sub-section (1) shall be allowed with reference to so much of the aggregate as does not exceed an amount of ten thousand rupees. (8) In this section,- (a) "Life Insurance Corporation" means the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956); (b) "public company" shall have the same meaning as in section 3 of the Companies Act, 1956 (1 of 1956); (c) "transfer" shall be deemed to include also the transactions referred to in clause (f) of section 269UA; (d) "contribution" to any fund shall not include any sums in repayment of loan." 1.346 1[80cc. Deduction in respect of investment in certain new shares 2 (1) Where an assessee, being- (a) an individual, or (b) a Hindu undivided family, 3[* * *] 4[(C) Omitted by the Finance Act, 1994, w.e.f. 1-4-1978.] has acquired in the previous year (being a previous year relevant to the assessment year, commencing on the 1st day of April, 1979, or any subsequent assessment year), out of his income chargeable to tax, equity shares forming part of any eligible issue of capital, 5[or units of any Mutual Fund specified under clause (23D) of 6 [section 10 or units issued under any scheme of the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), if the amount of subscription to any units, issued by the Mutual Fund or, as the case may be, the Unit Trust of India under such scheme, is subscribed] only to eligible issue of capital,] he shall, in accordance with and subject to the provisions of this section, be allowed a deduction in the computation of his total income of an amount equal to fifty per cent of the cost of such shares to him. Explanation.-Where in any previous year the assessee has acquired any shares referred to in this sub-section and has, within a period of six months from the end of that previous year, paid the whole or a part of the amount, if any, remaining unpaid on such shares, the amount so paid shall be deemed to have been paid by the assessee towards the cost of such shares in that previous year. (2) Where the aggregate cost to the assessee of the shares referred to in sub-section (1) which are acquired by him in the previous year exceeds 7 [twenty] thousand rupees, the deduction under that sub-section shall be allowed only with reference to such of those shares (being shares the aggregate cost whereof to the assessee does not exceed 8[twenty] thousand rupees) as are specified by him in this behalf. (3) For the purposes of this section, "eligible issue of capital" means an issue of equity shares which satisfies the following conditions, namely:- ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1978, w.e.f. 1-4-1978. 2 The deduction under this section is available only for offers for subscriptions made by the company before 1-4-1990. 3 The word 'or' omitted by the Finance Act, 1994, w.r.e.f. 1-4- 1978. 4 Prior to the omission, clause (c) read as under: "(c) an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu," The italicised words and punctuation were inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1978. 5 Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 6 Substituted for 'section 10 if such fund subscribes' by the Finance Act, 1989, w.e.f. 1-4-1990. 7 Substituted for "ten" by the Finance Act, 1982, w.e.f. 1-4-1983. 8 Ibid. ---------------------------------------------------------------------- 1.347 (a) the issue is made by a public company formed and registered in India 1[and the issue is wholly and exclusively for the purposes] of carrying on the business of-- (i) construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule; or (ii) providing long-term finance for construction or purchase of houses in India for residential purposes: Provided that in the case of a public company 2[* carrying on the business referred to in sub-clause (ii), such company is approved' by the Central Government for the purposes of this section; 4[or] 5[(iia) a hospital; or] 6[(iii) a hotel approved by the prescribed7 8[authority; or]] 9[(iv) operation of ships;] (b) the issue is an issue of capital made by the company for the first time: 10[Provided that this clause shall not apply in the case of an issue of equity shares made by a public company formed and registered in India with the main object of carrying on the business of operation of ships;] (c) the shares forming part of the issue are offered for subscription to the public 11[and such offer for subscription is made by the company before the 1st day of April, 12[1990]]; (d) such other conditions as may be prescribed: Provided that in the case of a company which had originally been incorporated as a private company but has become a public company under the provisions of the Companies Act, 1956 (1 of 1956), an issue of equity shares made by it for the first time after it has become a public company shall not be regarded as an eligible issue of capital, if-- (i) such company had declared, distributed or paid any dividend when it was a private company; or ---------------------------------------------------------------------- 1 Substituted for 'with the main object" by the Finance Act, 1985, w.e.f. 1-4-1985. 2 The words 'formed and registered in India with the main object of' omitted by the Finance Act, 1985, w.e.f. 1-4-1985. 3 Dewan Housing Development Finance Ltd and Can Fin Homes Ltd, Bangalore have been notified. For text of notifications, see Bharat's Direct Taxes Circulars, 1991 edn., p. 652. 4 Inserted by the Finance Act, 1989, w.e.f. 1-4-1990. 5 Ibid. 6 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 8 Substituted for "authority' by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990. 9 Inserted, ibid. 10 ibid. 11 Inserted by the Finance Act, 1984, w.e.f. 1-4-1984. 12 Substituted for '1987" by the Finance Act, 1987, w.e.f. 1-4-1987. ------------------------------------------------------------------------ 1.348 (ii) any of the shares forming part of such issue is offered for subscription at a premium. Explanation 1.-If any question arises as to whether any issue of equity shares would constitute an eligible issue of capital for the purposes of this section, the question shall be referred to the Central Government whose decision thereon shall be final. Explanation 2.--In this sub-section and sub-section (4), "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 19561 (1 of 1956). (4) The deduction under sub-section (1) shall not be allowed unless the assessee has- (i) subscribed to the shares in pursuance of an offer for subscription to the public made by the public company or in pursuance of a reservation or an option in his favour by reason of his being a promoter of the company; or (ii) purchased the shares from a person who is specified as an underwriter in respect of the issue of such shares in pursuance of clause (11) of Part I of Schedule II to the Companies Act, 19562 (1 of 1956), and who has acquired such shares by virtue of his obligation as such underwriter. (5) If any equity shares, with reference to the cost of which a deduction is allowed under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a period of 3[three] years from the date of their acquisition, an amount equal to fifty per cent of the cost to the assessee of the shares so sold or otherwise transferred shall be deemed to be the income of the assessee of the previous year in which the shares are so sold or transferred and shall be chargeable to tax accordingly. Explanation.-A person shall be treated as having acquired any shares on the date on which his name is entered in relation to those shares in the register of members of the company. (6) Where a deduction is claimed and allowed under sub-section (1) with reference to the cost of any equity shares, the cost of such shares shall not be taken into account for the purposes of section 54E.] 4[80CCA. Deduction in respect of deposits under National Savings Scheme or payment5 to a deferred annuity plan6 (1) Where an assessee, being- (a) an individual, or (b) a Hindu undivided family, ----------------------------------------------------------------------- 3 Substituted for "five" by the Finance Act, 1987, w.e.f. 1-4-1987. 4 Substituted by the Finance Act, 1988, w.e.f. 1-4-1988. It was originally inserted by the Finance Act, 1987, with effect from the same date. 5 The deduction under this section is available only on amounts deposited or paid before 1-4-1992. 7 The word "or" omitted by the Finance Act, 1994, w.r.e.f. 1-4-1988. ----------------------------------------------------------------------- 1.349 1[(c) Omitted by the Finance Act, 1994, w.re.f. 1-4-1988.] has in the previous year- (i) deposited any amount in accordance with such scheme' as the Central Government may, by notification in the Official Gazette, specify in this behalf 3[* * *]; or (ii) paid any amount to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may, by notification 4 in the Official Gazette, specify, out of his income chargeable to tax, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of the whole of the amount deposited or paid (excluding interest or bonus accrued or credited to the assessee's account, if any) as does not exceed the amount of twenty thousand rupees in the previous year: 5[Provided that in relation to- (a) the assessment years commencing on the 1st day of April, 1989 and the 1st day of April, 1990, this sub-section shall have effect as if for the words "twenty thousand rupees", the words "thirty thousand rupees" had been substituted; (b) the assessment year commencing on the 1st day of April, 1991 and subsequent assessment years, this sub-section shall have effect as if for the words "twenty thousand rupees", the words "forty thousand rupees" had been substituted:] 6[Provided further that no deduction under this sub-section shall be allowed in relation to any amount deposited or paid under clauses (i) and (ii) on or after the 1st day of April, 1992.] (2) Where any amount- (a) standing to the credit of the assessee 7[under the scheme referred to in clause (i) of sub-section (1)] in respect of which a deduction has been allowed under sub- section (1) together with the interest ----------------------------------------------------------------------- 1 Prior to the omission, clause (c), as originally enacted, read as under: "(c) an association of persons or a body of individuals consisting in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu," 3 The words "(hereafter in this section referred to as the National Savings Scheme)" omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 5 Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Prior to the substitution, the proviso read as under: "Provided that in relation to the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years, this sub- section shall have effect as if for the words "twenty thousand rupees", the words "thirty thousand rupees" had been substituted." 6 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. 7 Substituted for "tinder the National Savings Scheme" by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. ----------------------------------------------------------------------- 1.350 accrued on such amount is withdrawn in whole or in part in any previous year, or (b) is received on account of the surrender of the policy or as annuity or bonus in accordance with the annuity plan of the Life Insurance Corporation in any previous year, an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee of that previous year in which such withdrawal is made or, as the case may be, amount is received, and shall, accordingly, be chargeable to tax as the income of that previous year: 1[Provided that nothing contained in this sub-section shall apply to any amount received by the assessee on account of the surrender of the policy in accordance with the terms of the annuity plan of the Life Insurance Corporation where the assessee elects to surrender before the 1st day of October, 1992, the said annuity plan in respect of which he had paid any amount under clause (ii) of sub-section (1) before the 1st day of April, 1992.] 2[(3) Notwithstanding anything contained in any other provision of this Act, where a partition has taken place among the members of a Hindu undivided family or where an association of persons has been dissolved after a deduction has been allowed under sub-section (1), the provisions of sub-section (2) shall apply as if the person in receipt of income referred to therein is the assessee.] Explanation 1.-For the removal of doubts-, it is hereby declared that interest on the deposits made 3[under the scheme referred to in clause (i) of sub-section (1)] shall not be chargeable to tax except in the manner and to the extent specified in sub-section (2). Explanation 2.-For the purposes of this section, "Life Insurance Corporation" shall have the same meaning as in clause (a) of sub- section (8) of section 80. 1 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. 2 Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 3 Substituted for 'under the National Savings Scheme" by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. ---------------------------------------------------------------------- 1.351 for deduction under section 80CCA eventhough such payments might have been made before the date notified by the Government. 1[80CCB. Deduction in respect of investment made under Equity Linked Savings Scheme2 (1) Where an assessee, being-- (a) an individual, or (b) a Hindu undivided family, 4[(C) Omitted by the Finance Act, 1994, w.e.f. 1-4-1991.] has acquired in the previous year, out of his income chargeable to tax, units of any Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf (hereafter in this section referred to as the Equity Linked Savings Scheme), he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of so much of the amount invested as does not exceed the amount of ten thousand rupees in the previous year: 5[Provided that no deduction shall be allowed in relation to any amount invested under this sub-section on or after the 1st day of April, 1992.] (2) Where any amount invested by the assessee in the units issued under a plan formulated under the Equity Linked Savings Scheme in respect of which a deduction has been allowed under sub-section (1) is returned to him in whole or in part either by way of repurchase of such units or on the termination of the plan, by the Fund or the Trust, as the case may be, in any previous year, it shall be deemed to be the income of the assessee of that previous year and chargeable to tax accordingly. (3) Notwithstanding anything contained in any other provision of this Act, where a partition has taken place among the members of a Hindu undivided family or where an association of persons has been dissolved after a deduction has been allowed under sub-section (1), the provisions of sub-section (2) shall apply as if the person in receipt of income referred to therein is the assessee.] ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 2 The deduction under this section is available only in relation to any amount invested before 1-4-1992. 3 The word 'or' omitted by the Finance Act, 1994, w.r.e.f. 1-4- 1991. 4 Prior to the omission, clause (c), as originally enacted, read as under: "(c) an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu," 5 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. ---------------------------------------------------------------------- 1.352 1[80D. Deduction in respect of medical insurance premia (1) In computing the total income of an assessee, there shall be deducted, at the following rates, such sum as is specified in sub- section (2) and paid by him by cheque in the previous year out of his income chargeable to tax, namely:- (i) in a case where such sum does not exceed in the aggregate 2[six thousand rupees], the whole of such sum; and (ii) in any other case, 3[six thousand rupees]. (2) The sum referred to in sub-section (1) shall be the following, namely:- (a) where the assessee is an individual, any sum paid to effect or to keep in force an insurance on the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the assessee; (b) where the assessee is a Hindu undivided family, any sum paid to effect or to keep in force an insurance on the health of any member of the family: ---------------------------------------------------------------------- 1 Inserted by the income-tax (Amendment) Act, 1986, w.e.f. 1-4- 1987. Original section 80D was introduced by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 replacing old section 80B which was inserted by the Finance Act, 1965, w.e.f. 1-4-1965. It was amended by the Finance Act, 1968, w.e.f. 1-4-1969 and the Finance Act, 1981, w.e.f. 1-4-1982 and was omitted by the Finance Act, 1984, w.e.f. 1-4-1985. Prior to the omission, it read as under: "80D. Deduction in respect of medical treatment, etc., of handicapped dependents.(1) Where an assessee who is resident in India, being an individual or Hindu undivided family, who has, during the previous year, incurred out of his or its income chargeable to income- tax, any expenditure for the medical treatment (including nursing) of a person who- (a) is a relative of the individual or, as the case may be, is a member of the Hindu undivided family and is not dependent on any person other than such individual or Hindu undivided family for his support or maintenance, and (b) is suffering from a physical or mental disability which is certified by a registered medical practitioner to have the effect of reducing considerably such person's capacity for normal work or engaging in a gainful employment (hereafter in this section referred to as handicapped dependent), the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of the amount specified in sub-section (2) in the computation of his total income in respect of the previous year. (2) The deduction under sub-section (1) shall be- (i) in a case where the handicapped dependant has, for a period of one hundred and eighty-two days or more during the previous year, been admitted in a hospital or a nursing home or a medical institution or in such other institution as may be notified by the Central Government in the Official Gazette to be an institution for the care of handicapped persons, and fees and charges for his medical treatment (including nursing) are payable to such hospital or nursing home or medical or other institution, as the case may be, a sum of four thousand eight hundred rupees, or (ii) in any other case, a sum of one thousand two hundred rupees." 2 Substituted for "three thousand rupees" by the Finance Act, 1992, w.e.f. 1-4-1993. 3 Ibid. ---------------------------------------------------------------------- 1.353 1[(c) Omitted by the Finance Act, 1994, w.r.e.f 1-4-1987.] Provided that such insurance shall be in accordance with a scheme framed 2 in this behalf by the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf.] 3[80DD. Deduction in respect of medical treatment, etc., of handicapped dependantS4 5 [* * *] Where an assessee who is resident in India, being an individual or a Hindu undivided family has, during the previous year, incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a person who- (a) is a relative of the individual or, as the case may be, is a member of the Hindu undivided family and is not dependant on any person other than such individual or Hindu undivided family for his support or maintenance, and (b) is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability or mental retardation specified in the rules made in this behalf by the Board, which is certified by a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital, and which has the effect of reducing considerably such person's capacity for normal work or engaging in a gainful employment or occupation, the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of a SLIM of 6[fifteen] thousand rupees in respect of the previous year. 7[(2) Omitted by the Finance Act, 1992, w.e.f 1-4-1993.] Explanation.-For the purposes of this section, the expression "Government hospital" includes a departmental dispensary whether full- time or part-time established and run by a Department of the Government --------------------------------------------------------------------- 1 Prior to the omission, clause (c), as originally enacted, read as under: (c) where the assessee is an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, any sum paid to effect or to keep in force an insurance on the health of any member of such association or body or on the health of the dependent children of the members of such an association or body:" 2 The scheme of Hospitalisation and Domiciliary Benefit Policy has been framed under this section. For full text of the scheme, refer Bharat's Income Tax Rules, 1995 edn. 3 Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 5 The figure "(1)" omitted by the Finance Act, 1992, w.e.f. 1-4- 1993. 6 Substituted for "twelve" by the Finance Act, 1993, w.e.f. 1-4- 1994. Earlier, "twelve" was substituted for "six" by the Finance Act, 1992, w.e.f. 1-4-1993. 7 Prior to the omission, sub-section (2), as originally enacted, read as under: "(2) Nothing contained in this section shall apply in a case, where the assessee's total income in respect of the previous year as computed before making any deduction under this section exceeds one lakh rupees." ----------------------------------------------------------------------- 1.354 for the medical attendance and treatment of a class or classes of Government servants and members of their families, a hospital maintained by a local authority and any other hospital with which arrangements have been made by the Government for the treatment of Government servants. 1[80DDA. Deduction in respect of deposit made for maintenance of handicapped dependant (1) In computing the total income of an assessee who is resident in India, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, an amount not exceeding twenty thousand rupees paid or deposited by him in the previous year, out of his income chargeable to tax, under any scheme framed in this behalf by the Life Insurance Corporation or the Unit Trust of India subject to the conditions specified in sub-section (2) and approved by the Board in this behalf. (2) The deduction under sub-section (1) shall be allowed only if the following conditions are fulfilled, namely:- (a) the scheme referred to in sub-section (1) provides for payment of annuity or lump sum amount for the benefit of- a handicapped dependant in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made; (b) the assessee nominates either the handicapped dependant or any other person or a trust to receive the payment on his behalf, for the benefit of the handicapped dependant. (3) If the handicapped dependant predeceases the individual or the member of the Hindu undivided family referred to in sub-section (2), an amount equal to the amount paid or deposited under sub-section (1) shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year. (4) In this section,- (a) "Government hospital" shall. have the meaning assigned to it in the Explanation to section 8ODD; ----------------------------------------------------------------------- 1 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. ----------------------------------------------------------------------- 1.355 (b) "handicapped dependent" shall mean a person who- (i) is a relative of the individual or, as the case may be, is a member of the Hindu undivided family and is not dependant on any person other than such individual or Hindu undivided family for his support or maintenance; and (ii) is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability or mental retardation specified in the rules made by the Board for the purposes of section 8ODD, which is certified by a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital, and which has the effect of reducing considerably such person's capacity for normal work or engaging in a gainful employment or occupation; (c) "Life Insurance Corporation" shall have the same meaning as in clause (iii) of sub-section (8) of section 88; (d) "Unit Trust of India" means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963).] 1[80E. Deduction in respect of repayment of loan taken for higher education2 (1) In computing the total income of an assessee, being an individual, ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. Section 80E originally numbered section 80C was inserted by the Finance Act, 1965, w.e.f. 1-4-1965 and omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to the omission, section 80E, as substituted by the Finance (No. 2) Act, 1967 and amended by the Finance Act, 1968, w.e.f. 1-4-1969 and the Finance Act, 1984, w.e.f. 1-4-1984, read as under: "80E. Deduction in respect of payment for securing retirement annuities.-(1) Where, in the case of an assessee, being an individual who is a citizen of India and is resident in India, his share in the income of a registered firm which renders professional service as chartered accountant, solicitor, lawyer, architect or such other professional service as may be notified in this behalf by the Central Government in the Official Gazette, is chargeable to tax and he has paid, before the 1st day of March, 1984, out of his income chargeable to tax a premium (by whatever name called) in any previous year under an annuity contract for the time being approved by the Chief Commissioner or Commissioner as having for its main object the provision for the individual of a life annuity in old age (hereafter in this section referred to as qualifying premium), then the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of the amount of the qualifying premium in the computation of his total income in respect of the previous year: Provided that the amount which may be so deducted shall not exceed the sum of five thousand rupees, or one-tenth of his gross total income, whichever is less. (2) Subject to sub-section (3) and any rules made by the Board in this behalf, the Chief Commissioner or Commissioner shall not approve a contract unless he is satisfied that it does not- (a) provide for the payment during the life of the individual of any sums except sums payable by way of annuity to the individual; or (b) provide for the annuity payable to the individual to commence before he attains the age of fifty-eight or after he attains the age of sixty-eight; or (c) provide for the payment of any other sums except sums payable by way of annuity to the individual's widow or widower and any sums which, in the event of no annuity becoming payable either to the individual or to a -> -> ----------------------------------------------------------------------- 1.356 -> -> widow or widower of the individual, are payable to the individual's legal representative by way of return of premiums, by way of reasonable interest on premiums and by way of bonus out of profits; or (d) provide for the payment of annuity, if any, payable to a widow or widower of the individual to be of a greater annual amount than that paid or payable to the individual; or (e) provide for the payment of any annuity otherwise than for the life of the annuitant, and that it does include a provision that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment. (3) The Chief Commissioner or Commissioner may, if he thinks fit, and subject to any conditions the Board may, by rules, prescribe and subject to any conditions he thinks proper to impose, approve a contract, notwithstanding that the contract provides for one or more of the following matters, that is to say,- (a) for the payment after the individual's death of an annuity to a dependant other than the widow or widower of the individual; (b) for the payment to the individual of an annuity commencing before he attains the age of fifty-eight, if the annuity is payable on his becoming incapable through infirmity of mind or body of being actively engaged in his profession or any profession of a similar nature for which he is trained or fitted; (c) for the annuity payable to any person to continue for a specified term (not exceeding ten years), notwithstanding his death within that term; (d) in the case of an annuity which is to continue for such specified term, for the annuity to be assignable by will. (4) The foregoing provisions of this section shall apply in relation to a contribution (by whatever name called) to a fund approved by the Chief Commissioner or Commissioner as they apply in relation to any premium under an annuity contract so approved, provided the fund satisfies also the conditions set out below and any other conditions which the Board may, by rules, prescribe, namely:- (a) the fund shall be a fund established in India under an irrevocable trust for the benefit of individuals engaged in any profession referred to in sub-section (1); (b) the fund shall have for its sole purpose the provision of annuities for individuals engaged in such profession on attaining a specified age or on their becoming incapacitated prior to attaining such age, or for the widow, children or dependants of such persons on their death; (c) all annuities, pensions and other benefits granted from the fund shall be payable only in India. (5) The Chief Commissioner or Commissioner may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the persons by and to whom premiums are payable under any contract for the time being approved under this section, or to the trustees of any fund so approved, withdraw the approval. (6) Notwithstanding anything contained in sub-sections (1) and (4), no deduction under this section shall be allowed in the case of any individual- (i) whose gross total income includes income which is chargeable under the head "Interest on securities", or "Income from house property", or "Capital gains", or any income chargeable under the head "Income from other sources" in so far as it is not immediately derived from personal exertion of the individual, and the aggregate amount of all such income is more than ten thousand rupees; or (ii) who is entitled to any pension or is participating in any pension or superannuation scheme. (7) The amount of deduction under this section shall not in any case exceed the amount of the income computed under the head "Profits and gains of business or profession" included in the gross total income. [(8) * * *] ----------------------------------------------------------------------- 1.357 there shall be deducted, in accordance with and subject to the provisions of' this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of repayment of' loan, taken by him from any financial institution or any approved charitable institution for the purpose of' pursuing his higher education, or interest on such loan: Provided that the amount which may be so deducted shall not exceed twenty-five thousand rupees. (2) The deduction specified in subsection (1) shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the loan referred to in subsection (1) together with interest thereon is paid by the assessee in full, whichever is earlier. (3) For the purposes of- this section,- (a) "approved charitable institution" means an institution specified in, or, as the case "may be, an institution established for charitable purposes and notified by the Central Government under clause (23C) of section 10 or an institution referred to in clause (a) of subsection (2) of section 80G; ----------------------------------------------------------------------- -> -> (9) Where any payment by way of annuity or otherwise is made by a person to whom premiums or contributions are payable under sub- section (1) or sub-section (4), such person shall, subject to any rules made by the Board in this behalf, deduct from the total amount so paid during any financial year, tax at such rate or rates in force in that year as would be applicable to such amount, if it were the total income and shall pay the amount so deducted to the credit of the Central Government within the prescribed time and in such manner as the Board may direct and the provisions of section 201 shall, so far as may be, apply to such person if he does not deduct, or after deducting fails to pay, such tax. (10) Where a deduction under this section is claimed and allowed for any assessment year in respect of any payment, relief shall not be given in respect of it under any other provision of this Act for the same or a later assessment year nor (in the case of a payment under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract. (11)(a) The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this section. (b) In particular and without prejudice to the generality of the foregoing power, such rules may- (i) prescribe the statements and other information to be submitted along with an application for approval; (ii) prescribe the returns, statements, particulars or information which the Income-tax Officer may require from a person by and to whom premiums or contributions are payable tinder this section; (iii) provide for the assessment by way of penalty of any consideration received by an individual for an assignment of, or creation of a charge upon, any annuity or other sum receivable by him under any contract or from any fund approved for the time being under this section; and (iv) provide for securing such further control over the approval granted under this section and administration of funds approved under this section as it may deem requisite." 1.358 (b) "financial institution" means a banking company to which the Banking Regulation Act, 1949 1 (10 of 1949) applies (including any batik or banking institution referred to in section 51 of that Act); 0r any other financial institution which the Central Government "may by notification in the Official Gazette, specify in this behalf'; (c) "higher education" means full-time studies for any graduate or postgraduate course in engineering, medicine, management or for postgraduate course in applied sciences or pure sciences including mathematics and statistics; (d) "initial assessment year" means the assessment year relevant to the previous year, in which the assessee starts repaving the loan or interest thereon.] 1[80F. Deduction in respect of educational expenses in certain cases. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986.] [80FF. Deduction in respect of expenses on higher education in certain cases.--Omitted by the Finance (No. 2) Act, 1980, w.e.f. 1-4- 1981. It was inserted by the Finance Act, 1975, w.e.f. 1-4-1976.] 3[80G. Deduction in respect of donations to certain funds, charitable institutions, etc .4 5[(1) In computing the total income of an assessee, there shall be ---------------------------------------------------------------------- 2 Section 8OF was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 in place of section 87A which was inserted by the Finance Act, 1964, w.e.f. 1-4-1964. Prior to the omission, section 80F, as amended by the Finance Act, 1968, w.e.f. 1-4-1968, read as under: "80F. Deduction in respect of educational expenses in certain cases.-(1) Where an individual, being a resident, who is not a citizen of India, has expended any sum in the previous year out of his income chargeable to tax for the full time education of his child wholly or mainly dependant on him and who is not more than twenty-one years of age, at any university, college, school or other educational institution situate in a country outside India, he shall, in accordance with and subject to the provisions of this section, be allowed a deduction of the amount specified in sub-section (2) in the computation of his total income. (2) The amount referred to in sub-section (1) shall be- (i) in the case of an individual who has one such child, one thousand five hundred rupees; and (ii) in the case of an individual who has more than one such child, three thousand rupees." A new section 80F, dealing with deduction in respect of amounts applied for charitable or religious purposes, etc. was inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 but omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 3 Inserted in place of section 88 by the Finance (No. 2) Act, 1967, w.e.f. 1.359 deducted, in accordance with and subject to the provisions of this section,-- 1[(i) in a case where the aggregate of the sums specified in subsection (2) includes any sum or sums of the nature specified in 2[sub-clause (iiia ) 3 [or in sub-clause (iiiaa) 4[or in sub-clause (iiiab)] 4[or in sub-clause (iiie)] 5[or in sub-clause (iiif)] 6[or in sub-clause (iiig)] or 8[sub-clause (iiih) or] in] sub-clause (vii) of clause (a) thereof, an amount equal to the whole of the sum or, as the case may be, sums of such nature plus fifty per cent of the balance of such aggregate; and] (ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2).] (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) any sums paid by the assessee in the previous year as donations to- (i) The National Defence Fund set up by the Central Government; or (ii) the Jawaharlal Nehru Memorial Fund referred to in the Deed of Declaration of Trust adopted by the National Committee at its meeting held on the 17th day of August, 1964; or (iii)the Prime Minister's Drought Relief-Fund; or 9[(iiia)the Prime Minister's National Relief Fund; or] 10[(iiiaa)the Prime Minister's Armenia Earthquake Relief Fund; or] ----------------------------------------------------------------------- 5 Substituted by the Finance Act, 1976, w.e.f. 1-4-1977. -Earlier, it was also substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 1 Substituted by the Finance Act, 1985, w.e.f. 1-4-1986. Prior to the substitution, clause (i) read as under: "(i) in a case where the aggregate of the sums specified in sub-section (2) includes any sum specified in sub-clause (vii) of clause (a) thereof, an amount equal to the whole of such sum plus fifty per cent of the balance of such aggregate; and" 2 Restored to its original version by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was substituted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. 3 Inserted by the Income-tax (Amendment) Act, 1989, w.e.f. 24-1- 1989. 4 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 5 Inserted by the Finance Act, 1993, w.e.f. 1-4-1993. 6 Inserted by the Finance Act, 1993, w.e.f. 1-4-1994. 7 Inserted by the Finance Act, 1994, w.e.f. 1-4-1994. 8 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 9 Inserted by the Income-tax (Amendment) Act, 1976, w.r.e.f. 9-9- 1975. 10 Inserted by the Income-tax (Amendment) Act, 1989, w.e.f. 24-1- 1989. ------------------------------------------------------------------------ 1.360 1[(iiiab)the Africa (Public Contributions-India) Fund; or] 2[ (iiib)the National Children's Fund; or] 3[(iiic)the Indira Gandhi Memorial Trust, the deed of declaration in respect whereof was registered at New Delhi on the 21st day of February, 1985; or] 4[(iiid)the Rajiv Gandhi Foundation, the deed of declaration in respect whereof was registered at New Delhi on the 21st day of June, 1991; or] 5[(iiie)the National Foundation for Communal Harmony; or] 6[(iiif)a University or any educational institution of national eminence as may be approved by the prescribed authority 7 in this behalf; or] 8[(iiig)the Maharashtra Chief Minister's Relief Fund during the period beginning on the 1st day of October, 1993 and ending on the 6th day of October, 1993 or to the Chief Minister's Earthquake Relief Fund, Maharashtra; or] 9[(iiih)any Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district for the purposes of improvement of primary education in villages and towns in such district and for literacy and post-literacy activities. Explanation.-For the purposes of this sub-clause, "town" means a town which has a population not exceeding one lakh according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or] (iv) any other fund or any institution to which this section applies; or (v) the Government or any local authority, to be utilised for any charitable purpose 10[other than the- purpose of promoting family planning; or] 11[(vi) any authority referred to in clause (20A) of section 10; or ---------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 2 Inserted by the Finance Act, 1982, w.e.f. 1-4-1983. 3 Inserted by the Finance Act, 1985, w.e.f. 1-4-1985. 4 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Earlier clause (iiia) was inserted by the Direct Tax Laws (Amendment) Act, 1987 and omitted by the Direct Tax Laws (Amendment) Act, 1989, both w.e.f. 1-4-1989. 5 Inserted by the Finance Act, 1993, w.e.f. 1-4-1993. Earlier, a new sub-clause (iiie) was inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 but it was omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 6 Inserted by the Finance Act, 1993, w.e.f. 1-4-1994. 9 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 10 Inserted by the Finance Act, 1976, w.e.f. 1-4-1977. 11 Ibid. ----------------------------------------------------------------------- 1.361 1[(via) any corporation referred to in clause (26BB) of section 10 ; or] (vii) the Government or to any such local authority, institution or association as may be approved' in this behalf by the Central Government, to be utilised for the purpose of promoting family planning;] (b) any sums paid by the assessee in the previous year as donations for the renovation or repair of an), such temple, mosque, gurdwara, church or other place as is notified' by the Central Government in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States. 4 [(3) Omitted by, the Finance Act, 1994, w.e.f. 1-4-1994.] 5[(4) Where the aggregate of the sums refer-red to in sub- clauses (iv), (v), (vi) 6[(via)] and (vii) of clause (a) and in clause (b) of sub-section (2) exceeds ten per cent of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of ten per cent of the gross total income shall be ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed under sub-section (1)]. (5)This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely:-- ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1995, w.e.f. 1-4-199 4 Prior to the omission, sub-section (3) read as under: "(3) No deduction shall be allowed under sub-section (1) if the aggregate of the sums referred to in sub-section (2) is less than two hundred and fifty rupees." 5 Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to the substitution, sub-section (4), as substituted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, read as under: "(4) Where the aggregate of the sums referred to in sub-clauses (iv), (v), (vi) and (vii) of clause (a) and in clause (b) of sub- section (2) exceeds the smaller of the following amounts, that is to say, (i) ten per cent of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), and (ii) five hundred thousand rupees, then, the amount by which such aggregate exceeds such smaller amount shall be ignored for the purpose of computing the aggregate of the sun-is in respect of which deduction is to be allowed under sub- section (1)." Earlier, the original sub-section (4) was amended by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1968 and the Finance (No. 2) Act, 1977, w.e.f. 1-4-1981. 6 Inserted by the Finance Act, 1995, w.e.f. 1-4-1995. ---------------------------------------------------------------------- 1.362 1[(i)where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (22) 3[or clause (22A)] 3[or clause (23)] 4[or clause (23AA)] 5[or clause (23C)] of section 10: 6[Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 1 1 shall not apply in relation to such income, if,- (a) the institution or fund maintains separate books of account in respect of such business; (b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;]] (ii) the instrument under which the institution or fund is constituted -does not, or the rules governing the institution or fund do not, contain any provision for the transfer of application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; 7[* * *] (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 18608 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 19569 (1 of 1956), or is a university established by law, or is any other educational institution recognised by the Government or by a university established by law, or affiliated to any university established by law, 10[or is an institution approved by the Central ----------------------------------------------------------------------- 1 Restored to its original provision by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was substituted by the Direct Tax Laws (Amendment) Act, 1987 with effect from the same date. 2 Inserted by the Finance Act, 1970, w.e.f. 1-4-1970. 3 Inserted by the Finance Act, 1973, w.e.f. 1-4-1974. 4 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 5 Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4- 1976. 6 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 7 The word "and" omitted by the Finance Act, 1994, w.e.f. 1-4-1994. 9 Ibid. 10 Restored to its original version by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. It was inserted by the Finance Act, 1973, w.e.f. 1-4-1974. ----------------------------------------------------------------------- 1.363 Government for the purposes of clause (23) of section 10,] or is an institution financed wholly or in part by the Government or a local authority; 1[and] 2[(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules 3 made in this behalf: Provided that any approval shall have effect for such assessment year or years, not exceeding 4 [five] assessment years, as may be specified in the approval.] 5[(5A) Where a deduction under this section is claimed and allowed for any assessment year in respect of any sum specified in sub-section (2), the sum in respect of which deduction is so allowed shall not qualify for deduction under any other provisions of this Act for the same or any other assessment year.] Explanation ].-An institution or fund established for the benefit of scheduled castes, backward classes, scheduled tribes or of women and children shall not be deemed to be an institution or fund expressed to be for the benefit of a religious community or caste within the meaning of clause (iii) of sub-section (5). 6[Explanation 2.-For the removal of doubts, it is hereby declared that a deduction to which the assessee is entitled in respect of any donation made to an institution or fund to which sub-section (5) applies shall not be denied merely on either or both of the following grounds, namely:- 7[(i)that, subsequent to the donation, any part of the income of the institution or fund has become chargeable to tax due to noncompliance with any of the provisions of section 1 1, 8[section 12 or section 12A]; (ii) that, under clause (c) of sub-section (1) of section 13, the exemption' under section 11 9[or section 12] is denied to the institution or fund in relation to any income arising to it from any investment referred to in clause (h) of sub-section (2) of section 13 where the ';aggregate of the funds invested by it in a concern referred to in the said clause (h) does not exceed five per cent of the capital of that concern.]] Explanation 3.-In this section, "charitable purpose" does not include any purpose the whole or substantially the whole of which is of a religious nature,. ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f. 1-4-1994. 2 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 4 Substituted for "three" by the Finance Act, 1993, w.e.f. 1-4- 1993. 5 Inserted by the Finance (No. 2) Act, 1980, w.r.e.f. 1-4-1968. 6 Substituted by the Finance Act, 1970, w.e.f. 1-4-1971. 7 Restored to its original provisions by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, they were substituted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. 8 Inserted by the Finance Act, 1972, w.e.f. 1-4-1973. 9 Ibid. ----------------------------------------------------------------------- 1.364 1[Explanation 4.-For the purposes of this section, an association approved by the Central Government for the purposes of clause (23) of section 10 shall also be deemed to be an institution, and every association or institution approved by the Central Government for the purposes of the said clause shall be deemed to be an institution established in India for a charitable purpose.] 2[Explanation 5.-For the removal of doubts, it is hereby declared that no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money.] 3[(6) * * 4[80GG. Deduction in respect of rents paid 5 In computing the total income of an assessee, not being an assessee having any income falling within clause (13A) of section 10, there shall be deducted any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent (by whatever name called) in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, 6[to the extent to which such excess expenditure does not exceed one thousand rupees per month or twenty-five per cent of his total income for the year, whichever is less], and subject to such other conditions or limitations as may be prescribed having regard to the area or place in which such accommodation is situated and other relevant considerations: ---------------------------------------------------------------------- 1 Restored to its original provision by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Explanation 4 was inserted by the Finance Act, 1973, w.e.f. 1-4-1974. 2 Inserted by the Finance Act, 1976, w.e.f. 1-4-1976. 3 Omitted by the Finance Act, 1968, w.e.f. 1-4-1969. 4 Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4- 1976. 6 Substituted for "to the extent to which such excess expenditure does not exceed four hundred rupees per month or fifteen per cent of his total income for the year, whichever is less" by the Finance Act, 1986, w.e.f. 1-4-1987. Earlier, "four" was substituted for "three" by the Finance Act, 1982, w.e.f. 1-4-1983. ----------------------------------------------------------------------- 1.365 1[Provided that nothing in this section shall apply to an assessee in any case where any residential accommodation is,- (i) owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family, by such family, at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession; or (ii) owned by the assessee at any other place, being accommodation in the occupation of the assessee, the value of which is to be determined 2[under sub-clause (i) of clause (a) or, as the case may be, clause (b) of sub-section (2)] of section 23.] Explanation.-In this section, the expressions "ten per cent of his total income" and " 3[twenty-five per cent] of his total income" shall mean ten per cent or 4[twenty-five per cent], as the case may be, of the assessee's total income before allowing deduction for any expenditure under this section.] 5[80GGA. Deduction in respect of certain donations for scientific research or rural development (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2). (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) any sum paid by the assessee in the previous year to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research: Provided that such association, university, college or institution is for the time being approved for the purposes of clause (ii) of sub-section (1) of section 35; ----------------------------------------------------------------------- 1 Substituted by the Finance Act, 1983, w.e.f. 1-4-1984. Prior to the omission, the proviso read as under: "Provided that nothing in this section shall apply to an assessee in any case where any residential accommodation is owned by him or by his spouse or minor child, or, where such assessee is a member of a Hindu undivided family, by such family." 2 Substituted for "under" clause (i) or, as the case may be, clause (ii) of sub-section (2)" by the Finance Act, 1986, w.e.f. 1-4-1987. 3 Substituted for "fifteen per cent" by the Finance Act, 1986, w.e.f. 1-4-1987. 4 Ibid. 5 Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Section 80GGA was originally inserted by the Finance Act, 1979, w.e.f. 1-4-1980. ---------------------------------------------------------------------- 1.366 1[(aa)any sum paid by the assessee in the previous year to a university, college or other institution to be used for research in social science or statistical research: Provided that such university, college or institution is for the time being approved for the purposes of clause (iii) of sub-section (1) of section 35;] (b) any sum paid by the assessee in the previous year- (i) to an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved for the purposes of section 35CCA; or (ii) to an association or institution which has as its object the training of persons for implementing programmes of rural development: 2 [Provided that the assessee furnishes the certificate referred to in sub-section (2) or, as the case may be, sub- section (2A) of section 35CCA from such association or institution;] 3[(bb) any sum paid by the assessee in the previous year to a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme: Provided that the assessee furnishes the certificate referred to in clause (a) of sub-section (2) of section 35AC from such public sector company or local authority or, as the case may be, association or institution. Explanation.-For the purposes of this clause, the expressions "National Committee" and "eligible project or scheme" shall have the meanings respectively assigned to them in the Explanation to section 35AC.] 4[(C any sum paid by the assessee in the previous year to an association or institution, which has as its object the undertaking of any programme of conservation of natural resources 5[or of afforestation], to be used for carrying out any programme of conservation of natural resources 6[or of afforestation] approved for the purposes of section 35CCB: Provided that the association or institution is for the time being approved for the purposes of sub-section (2) of section 35CCB;] ---------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 2 Substituted by the Finance Act, 1983, w.e.f. 1-4-1983. Prior to the substitution, the proviso read as under: "Provided that the association or institution is for the time being approved for the purposes of sub-section (2) of section 35CCA." 3 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 4 Inserted by the Finance Act, 1982, w.e.f. 1-6-1982. 5 Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 6 Ibid. ----------------------------------------------------------------------- 1.367 1[(cc) any sum paid by the assessee in the previous year to such fund for afforestation as is notified by the Central Government under clause (b)of sub-section (1) of section 35CCB;] 2[(d)any sum paid by the assessee in the previous year to a rural development fund set up and notified by the Central Government for the purposes of clause (c) of sub-section (1) of section 35CCA;] 3[(e) any sum paid by the assessee in the previous year to the National Urban Poverty Eradication Fund set tip and notified by the Central Government for the purposes of' clause (d) of sub-section (1) of section 35CCA.] (3) Notwithstanding anything contained in sub-section (1), no deduction under this section shall be allowed in the case of an assessee whose gross total income includes income which is chargeable under the head "Profits and gains of business or profession". (4) Where a deduction under this section is claimed and allowed for any assessment year in respect of any payments of the nature specified in sub-section (2), deduction shall not be allowed in respect of such payments under any other provision of this Act for the same or any other assessment year.] C.-Deductions in respect of certain incomes [80H. Deduction in case of new industrial undertakings employing displaced persons, etc.-Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Originally, it was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.] 4[80HH. Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas5 (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970 6[but before the 1st day of April, 1990], in any backward area; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in any backward area: ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 2 Inserted by the Finance Act, 1983, w.e.f. 1-4-1983. 3 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 4 Inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4- 1974. The deduction under this section is available only upon the fulfilment of certain conditions before 1-4-1990. 6 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. ------------------------------------------------------------------------ 1.368 Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii)it is not formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Explanation.-Where any machinery or plant or any part thereof previously used for any purpose in any backward area is transferred to a new business in that area or in any other backward area and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (iii) of this sub-section, the condition specified therein shall be deemed to have been fulfilled. (3) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely:- (i) the business of the hotel has started or starts functioning after the 31st day of December, 1970 1[but before the 1st day of April, 1990], in any backward area; (ii) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence; (iii)the hotel is for the time being approved for the purposes of this sub-section by the Central Government. (4) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of each of the ten assessment years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or the business of the hotel starts functioning: Provided that,- (i) in the case of an industrial undertaking which has begun to manufacture or produce articles, and (ii) in the case of the business of a hotel which has started functioning, after the 31st day of December, 1970, but before the 1st day of April, 1973, this sub-section shall have effect as if the reference to ten assessment years were a reference to ten assessment years as reduced by the number of assessment years which expired before the 1st day of April, 1974. (5) Where the assessee is a person other than a company or a co- operative society, the deduction under sub-section (1) shall not be admissible unless the accounts of the industrial undertaking or the business of the hotel for the previous year relevant to the assessment year ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. ---------------------------------------------------------------------- 1.369 for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.1 (6) Where any goods held for the purposes of the business of the industrial under-taking or the hotel are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial under-taking or the hotel and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial undertaking or the business of the hotel shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date: Provided that where, in the opinion of the 2 [Assessing] Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel in the manner hereinbefore specified presents exceptional difficulties, the 3 [Assessing] Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, "market value" in relation to any goods means the price that such goods would ordinarily fetch on sale in the open market. (7) Where it appears to the 4 [Assessing] Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel to which this section applies and any other-person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the hotel, the 5[Assessing] Officer shall, in computing the profits and gains of the industrial undertaking or the hotel for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. (8) 6[* * *] (9) In a case where the assessee is entitled also to the deduction under 7 [section 80-I or] section 80J in relation to the profits and gains of an industrial undertaking or the business of a hotel to which this section applies, effect shall first be given to the provisions of this section. --------------------------------------------------------------------- 2 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 6 Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4- 1976. 7 Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. ------------------------------------------------------------------------ 1.370 1[(9A) Where a deduction in relation to the profits and gains of a small-scale industrial undertaking to which section 80HHA applies is claimed and allowed under that section for any assessment year, deduction in relation to such profits and gains shall not be allowed under this section for the same or any other assessment year.] (10)Nothing contained in this section shall apply in relation to any undertaking engaged in mining. 2[(11) For the purposes of this section, "backward area" means such area as the Central Government may, having regard to the stage of development of that area, by notification 3 in the Official Gazette, specify in this behalf: Provided that any notification under this sub-section may be issued so as to have retrospective effect to a date not earlier than the 1st day of April,1983.] 4[80HHA. Deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas' (1)Where the gross total income of an assessee includes any profits and gains derived from a small-scale industrial undertaking to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. (2)This section applies to any small-scale industrial undertaking which fulfils all the following conditions, namely:- (i) it begins to manufacture or produce articles after the 30th day of September, 1977 6[but before the 1st day of April, 1990], in any rural area; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: ---------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 2 Substituted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986. Prior to the substitution, the Explanation read as under: "Explanation.-In this section, 'backward area' means an area specified in the list in the Eighth Schedule. 4 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 5 The deduction under this section is available only if the undertaking begins to manufacture or produce articles after 30-9-1977 but before 1-4-1990. 6 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. ----------------------------------------------------------------------- 1.371 Provided that this condition shall not apply in respect of any small-scale industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Explanation.-Where in the case of a small-scale industrial under- taking, any machinery or plant or any part thereof previously used for any purpose is transfer-red to a new business and the total value of the machinery or plant or part so transfer-red does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (iii) of this sub-section, the condition specified therein shall be deemed to have been fulfilled. (3) The deduction specified in sub-section (1) shall be allowed in computing the total income 1[of each of the ten previous years beginning with the previous year in which the industrial undertaking] begins to manufacture or produce articles: 2[Provided that such deduction shall not be allowed in computing the total income of any of the ten previous years aforesaid in respect of which the industrial undertaking is not a small-scale industrial undertaking within the meaning of clause (b) of the Explanation below sub-section (8).] (4) Where the assessee is a person, other than a company or a cooperative society, the deduction under sub-section (1) shall not be admissible unless the accounts of the small-scale industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. 3 (5) The provisions of sub-sections (6) and (7) of section 80HH shall, so far as may be, apply in relation to the computation of the profits and gains of a small-scale industrial undertaking for the purposes of the deduction under this section as they apply in relation to the computation of the profits and gains of an industrial undertaking for the purposes of the deduction under that section. (6) In a case where the assessee is entitled also to the deduction under ---------------------------------------------------------------------- 1 Substituted for 'in respect of each of the ten assessment years beginning with the assessment year relevant to the previous year in which the small-scale industrial undertaking' by the Finance Act, 1981, w.e.f. 1-4-1981. 2 Inserted, ibid. ---------------------------------------------------------------------- 1.372 1[section 80-I or] section 80J in relation to the profits and gains of a small-scale industrial undertaking to which this section applies, effect shall first be given to the provisions of this section. (7) Where a deduction in relation to the profits and gains of a smallscale industrial undertaking to which section 80HH applies is claimed and allowed under that section for any assessment year, deduction in relation to such profits and gains shall not be allowed under this section for the same or any other assessment year. (8) Nothing contained in this section shall apply in relation to any small-scale industrial under-taking engaged in mining. Explanation.-For the purposes of this section,- 2[(a) "rural area" means any area other than,- (i) an area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (ii) an area within such distance, not being more than fifteen kilometres from the local limits of any municipality or cantonment board referred to in sub- clause (i), as the Central Government may, having regard to the stage of development of such area (including the extent of, and scope for, urbanisation of such area) and other relevant considerations specify in this behalf by notification' in the Official Gazette;] (b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of 4[the business of the undertaking does not exceed,- 5[(1) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees; ----------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. 2 Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to the substitution, clause (a) read as under: "(a) "rural area' shall have the same meaning as in clause (b) of the Explanation to sub-section (1) of section 35CC;" 4 Substituted for 'the business of the undertaking does not exceed ten lakh rupees; and for this purpose the value of any machinery or plant shall be,-" by the Finance Act, 1981, w.e.f. 1-4-1981. 5 Substituted by the Finance Act, 1986, w.r.e.f. 1-4-1985. Prior to the substitution, subclauses (1) and (2) read as under: "(1) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees; and (2) in a case where the previous year ends after the 3 1st day of July, 1980, twenty lakh rupees." ---------------------------------------------------------------------- 1.373 (2) in a case where the previous year ends after the 31st day of July, 1980 but before the 18th day of March, 1985, twenty lakh rupees; and (3) in a case where the previous year ends after the 17th day of March, 1985, thirty-five lakh rupees,] and for this purpose the value of any machinery or plant shall be,- (i) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee; and (ii) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.] 1[80HHB. Deduction in respect of profits and gains from projects outside India2 (1) Where the gross total income of an assessee being an Indian company or a person (other than a company) who is resident in India includes any profits and gains derived from the business of-- (a) the execution of a foreign project undertaken by the assessee in pursuance of a contract entered into by him, or (b) the execution of any work undertaken by him and forming part of a foreign project under-taken by any other person in pursuance of a contract entered into by such other person, with the Government of a foreign State or any statutory or other public authority or agency in a foreign State, or a foreign enterprise, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to 3[fifty] per cent thereof: Provided that the consideration for the execution of such project or, as the case may be, of such work is payable in convertible foreign exchange. (2) For the purposes of this section,- (a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (b) "foreign project" means a project for- (i) the construction of any building, road, dam, bridge or other structure outside India; (ii) the assembly or installation of any machinery or plant outside India; (iii) the execution of such other work (of whatever nature) as may be prescribed. ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1982, w.e.f. 1-4-1983. 3 Substituted for 'twenty-five" by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987. ----------------------------------------------------------------------- 1.374 (3) The deduction under this section shall be allowed only if the following conditions are fulfilled, namely:- (i) the assessee maintains separate accounts in respect of the profits and gains derived from the business of the execution of the foreign project, or as the case may be, of the work forming part of the foreign project undertaken by him and, where the assessee is a person other than an Indian company or a co-operative society, such accounts have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant;1 (ii) an amount equal to 2[fifty] per cent of the profits and gains referred to in sub-section (1) is debited to the profit and loss account of the previous year in respect of which the deduction under this section is to be allowed and credited to a reserve account (to be called the "Foreign Projects Reserve Account") to be utilised by the assessee during a period of five years next following for the purposes of his business other than for distribution by way of dividends or profits; (iii) an amount equal to 3[fifty] per cent of the profits and gains referred to in sub-section (1) is brought by the assessee in convertible foreign exchange into India, in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder, within a period of six months from the end of the previous year referred to in clause (ii), or, where the 4[Chief Commissioner or Commissioner] is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the 5[Chief Commissioner or Commissioner] may allow in this behalf: Provided that where the amount credited by the assessee to the Foreign Projects Reserve Account in pursuance of clause (ii) or the amount brought into India by the assessee in pursuance of clause (iii) or each of the said amounts is less than 6[fifty] per cent of the profits and gains referred to in sub-section (1), the deduction under that sub-section shall be limited to the amount so credited in pursuance of clause (ii) or the amount so brought into India in pursuance of clause (iii), whichever is less. (4) If at any time before the expiry of five years from the end of the previous year in which the deduction under sub-section (1) is allowed, the assessee utilises the amount credited to the Foreign Projects Reserve Account for distribution by way of dividends or profits or for any other purpose which is not a purpose of the business of the assessee, the --------------------------------------------------------------------- 2 Substituted for 'twenty-five' by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987. 3 Ibid. 4 Substituted for "Commissioner" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 5 Ibid. 6 Substituted for 'twenty-five' by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987. ----------------------------------------------------------------------- 1.375 deduction originally allowed under sub-section (1) shall be deemed to have been wrongly allowed, and the 1[Assessing] Officer may, notwithstanding anything contained in this Act, recompute the total income of the assessee for the relevant previous year and make the necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub- section (7) of that section being reckoned from the end of the previous year in which the money was so utilised. (5) Notwithstanding anything contained in any other provision of this Chapter under the heading "C.-Deductions in respect of certain incomes", no part of the consideration or of the income comprised in the consideration payable to the assessee for the execution of a foreign project refer-red to in clause (a) of sub-section (1) or of any work referred to in clause (b) of that sub-section shall qualify for deduction for any assessment year under any such other provision.] 2[80HHC. Deduction in respect of profits retained for export business 3 4[(1) Where an assessee, being an Indian company or a person (other ---------------------------------------------------------------------- 1 Substituted for 'Income-tax' by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 2 Substituted by the Finance Act, 1985, w.e.f. 1-4-1986. Prior to the substitution, section 80HHC, as inserted by the Finance Act, 1983, w.e.f. 1-4-1983, read as under: "80HHC. Deduction in respect of export turnover.--(1) Where the assessee, being an Indian company or a person (other than a company) who is resident in India, exports out of India during the previous year relevant to an assessment year any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, the following deductions, namely:- (a) a deduction of an amount equal to one per cent of the export turnover of such goods or merchandise during the previous year; and (b) a deduction of an amount equal to five per cent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding previous year. (2) (a) This section applies to all goods or merchandise [other than those specified in clause (b)] if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange. (b) The goods or merchandise referred to in clause (a) are the following, namely:- (i) agricultural primary commodities, not being produce of plantations; (ii) mineral oil; -> -> ----------------------------------------------------------------------- 1.376 than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the 1[profits] derived by the assessee from the export of such goods or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate, (hereafter in this section referred to as an Export House or a Trading House, as the case may be,) issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the 2[total profits derived ---------------------------------------------------------------------- (iii)minerals and ores; and (iv) such other goods or merchandise as the Central Government may, by notification in the Official Gazette, specify in this behalf. (3) No deduction under clause (b) of sub-section (1) shall be allowed unless the assessee had, during the immediately preceding previous year, exported out of India goods or merchandise to which this section applies. Explanation.-For the purposes of this section,- (a) convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (b) "export turnover" means the sale proceeds of any goods or merchandise exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962)." 4 Substituted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to the substitution, subsection (1), as amended by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1987, read as under: "(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction equal to the aggregate of- (a) four per cent of the net foreign exchange realisation; and (b) fifty per cent of so much of the profits derived by the assessee from the export of such goods or merchandise as exceeds the amount refer-red to in clause (a): Provided that the deduction under this sub-section shall not exceed the profits derived by the assessee from the export of such goods or merchandise: Provided further that an amount equal to the amount of the deduction claimed under this sub-section is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the business of the assessee." 1 Substituted for 'whole of the income' by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 2 Substituted for "total profits of the export business of the assessee the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee" by the Finance Act, 1992, w.e.f. 1-4-1992. ---------------------------------------------------------------------- 1.377 by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods]. (1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the 1[profits] derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House.] (2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are 2[received in, or brought into, India] by the assessee 3[(other than the supporting manufacturer)] in convertible foreign exchange 4 [within a period of six months from the end of the previous year or, where the Chief Commissioner or Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the Chief Commissioner or Commissioner may allow in this behalf.] (b) This section does not apply to the following goods or merchandise, namely:- (i) mineral oil; and (ii) minerals and ores 5[(other than processed minerals and ores specified in the Twelfth Schedule)]. 6[Explanation 1.-The sale proceeds referred to in clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. Explanation 2.--For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export as referred to in sub-section (1) of section 50 of the Customs Act, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof.] ----------------------------------------------------------------------- 1 Substituted for "whole of the income" by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 2 Substituted by "receivable" by the Finance Act, 1990, w.e.f. 1-4- 1991. 3 Inserted, ibid, w.r.e.f. 1-4-1989. 4 Inserted, ibid, w.e.f. 1-4-1991. 5 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 6 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. ----------------------------------------------------------------------- 1.378 1[(3) For the purposes of sub-section (1),- (a) where the export out of India is of goods or merchandise manufactured 2[or processed] by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee; (b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export; (c) where the export out of India is of goods or merchandise manufactured 3[or processed] by the assessee and of trading goods, the profits derived from such export shall,- (i) in respect of the goods or merchandise manufactured 4[ or processed] by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and ----------------------------------------------------------------------- 1 Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to the substitution, sub-section (3) read as under: "(3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession'), the same proportion as the export turnover bears to the total turnover of the business carried on by the assesses." Earlier, it was substituted for the following by the Finance Act, 1990, w.e.f. 1-4-1991: "(3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be,- (a) in a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which this section applies, the profits of the business as computed under the head "Profits and gains of business or profession'; (b) in a case where the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession") the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." 2 Inserted by the Finance Act, 1992, w.e.f. 1-4-1992. 3 Ibid. 4 Ibid. ---------------------------------------------------------------------- 1.379 (iiic), of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. Explanation.-For the purposes of this sub-section,- (a) "adjusted export turnover" means the export turnover as reduced by the export turnover in respect of trading goods; (b) "adjusted profits of the business' means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3); (c) "adjusted total turnover" means the total turnover of the business as reduced by the export turnover in respect of trading goods; (d) "direct costs" means costs directly attributable to the trading goods exported out of India including the purchase price of such goods; (e) "indirect costs" means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover; (f) "trading goods" means goods which are not manufactured 1[or processed] by the assessee.] 2[(3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be,- (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the profits of the business 3[* * *]; (b) in a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the amount which bears to the profits of the business 4[* * *] the same proportion as the turnover in respect of sale to the respective Export House or Trading House bears to the total turnover of the business carried on by the assessee.] 5[(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form,6 along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1992, w.e.f. 1-4-1992. 2 Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 3 The words "as computed under the head 'Profits and gains of business or profession" omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 4 The words "(as computed under the head "Profits and gains of business or profession.,) omitted, ibid. 5 Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f 1-4-1987. 6 See rule 18BBA(3) and Form No. 10CCAC. ------------------------------------------------------------------------ 1.380 deduction has been correctly claimed 1[in accordance with the provisions of this section.]] 2[(4A) The deduction under sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,- (a) 3the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the 4 [profits] of the supporting manufacturer in respect of his sale of goods or merchandise to the Export House or Trading House; and (b) 5a certificate from the Export House or Trading House containing such particulars as may be prescribed and verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, the Export House or Trading House has not claimed the deduction under this section: Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing the accounts of the Export House or Trading House under the provisions of this Act or under any other law.] Explanation.-For the purposes of this section,- (a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; 6[(aa) "export out of India" shall not include any transaction by way of sale or other-wise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 7 (52 of 1962);] (b) "export turnover" means the sale proceeds 8[, received in, or brought into, India] by the assessee in convertible foreign exchange 9[in accordance with clause (a) of sub- section (2)] of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962);] ---------------------------------------------------------------------- 1 Substituted for "on the basis of the amount of export turnover" by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Earlier, the italicised words were substituted for 'net foreign exchange realisation as determined in accordance with the Import and Export Policy of the Government of India for the relevant period" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 2 Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 4 Substituted for "income" by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 6 Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1986. 8 Substituted for "receivable" by the Finance Act, 1990, w.e.f. 1-4-1991, 9 Inserted, ibid. ------------------------------------------------------------------------ 1.381 1[(ba) "total turnover", shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 2 (52 of 1962): Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression "total turnover" shall have effect as if it also excluded any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28;] 3[(baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;] 4[(bb) Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.] 5[6[(c)] "Export House Certificate" or "Trading House Certificate" means a valid Export House Certificate or Trading House Certificate,. as the case may be, issued by the Chief Controller of Imports and Exports, Government of India; 7[(d)]"supporting manufacturer" means a person being an Indian company or a person (other than a company) resident in India, 8[manufacturing (including processing) goods] or merchandise and selling such goods or merchandise to an Export House or a Trading House for the purposes of export.] 1 Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1987. 3 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 4 Prior to the omission, clause (bb), as inserted by the Finance Act, 1990, w.e.f. 1-4-1991, read as under: "(bb) 'total turnover" shall not include any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28;" 5 Inserted as clause (d) by the Finance Act, 1988, w.e.f. 1-4-1989. 6 Relettered for "(d)" by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. The original clause (c), as inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1987, and omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under: "(c) net foreign exchange realisation' means the total free on board value of exports out of India of goods and merchandise to which this section applies as reduced by the aggregate of the cost, insurance and freight value of all categories of import licences, to be issued by the Chief Controller of Imports and Exports, Government of India, to which the assessee is entitled during the previous year, either against export obligation or against exports as replenishments;' 7 Relettered for "(e)", ibid. 8 Substituted for 'manufacturing goods' by the Finance Act, 1990, w.e.f. 1-4-1991. ---------------------------------------------------------------------- 1.382 granite or other rocks that are cut and exported as raw blocks after being washed and cleaned. The entry in the Twelfth Schedule is very clear and unambiguous and uses the term "cut and polished". 2. The amendment with regard to sales over the counters has retrospective effect from 1st April, 1986 and it would normally apply even to completed assessments. However past cases where assessments have already been completed would not be reopened with a view to check up whether counter-sales have been treated as exports for the purposes of the relief under this section. Where, however, the records of the assessee clearly show that such sales over the counter have been given relief under the section the Assessing Officer will have to take necessary action to rectify the mistake. 3. Deduction under this section is to be allowed after the income chargeable to tax under the head 'profits and gains from business and profession' has been computed under rule 8. 4. The Finance Act, 1990 made a clarificatory amendment by inserting a definition for the term 'total turnover' to exclude cash compensatory support, duty drawback and profit on sale of import entitlements. Since the amendment only clarified the legislative intention as it always existed, the position as regards the past years should be the same as that after coming into force of the amendment. 5. The Finance Act, 1990 has restricted the definition of the term 'export turnover' to mean FOB sale proceeds actually received by the assessee in convertible foreign exchange within six months of the end of the previous year or within such further period as the Chief Commissioner/Commissioner may allow in this regard. In the case of an assessee who is doing export business exclusively 'export turnover' and 'total turnover' would be identical if the entire sale proceeds are brought into India in convertible foreign exchange within the prescribed time limit.. In order to arrive at the amount deductible under the section in the case of an assessee doing export business as well as some other domestic business the fraction of 'export turnover' to 'total turnover' will be applied to his profits computed under the head 'profits and gains from business or profession'. 6. An assessee exporting goods or merchandise under Government to Government credits will also be eligible for claiming the deduction irrespective of the fact that the sale proceeds of such exports are realised in their hands in Indian currency. 7. If any export house/trading house holding a certificate in this regard for the relevant accounting period passes on to the manufacturer part of the amount of the tax benefit derived on account of the deduction under section 80HHC then the amount of actual payment made to the manufacturer for passing on the tax benefit may, subject to the limit laid down be treated as business expenditure and be allowed as deduction in the computation of the total income of the export/trading house. The total amount of the tax benefit on account of the deduction under section 80HHC and the tax benefit on account of the aforesaid deduction shall in no case exceed the maximum amount of tax benefit available under the section to the export/trading house. 8. The provisions of the proviso to section 80HHC will not be infringed if dividends are distributed by the assessee out of the reserve contemplated therein. 9. Export of cut and polished diamonds and gem stones will not amount to export of minerals and ores and hence will qualify for relief under section 80HHC. 1.383 1[80HHD. Deduction in respect of earnings in convertible foreign exchange (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of a hotel or of a tour operator, approved by the prescribed authority' in this behalf or of a travel agent, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of a sum equal to the aggregate of- (a) fifty per cent of the profits derived by him from services provided to foreign tourists; and (b) so much of the amount out of the remaining profits referred to in clause (a) as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the business of the assessee in the manner laid down in sub-section (4): 3[Provided that a hotel or, as the case may be, a tour operator approved by the prescribed authority on or after the 30th day of November, 1989, and before the 1st day of October, 1991, shall be deemed to have been approved by the prescribed authority for the purposes of this section in relation to the assessment year commencing on the 1st day of April, 1989, or the 1st day of April, 1990, or, as the case may be, the 1st day of April, 1991, if the assessee was engaged in the business of such hotel or as such tour operator during the previous year relevant to any of the said assessment years.] (2) This section applies only to services provided to foreign tourists the receipts in relation to which are received 4 [in, or brought into, India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year or, where the Chief Commissioner or Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months or within such further period as the Chief Commissioner or Commissioner may allow in this behalf.] 5[Explanation.-For the purposes of this sub-section, any payment received by an assessee, engaged in the business of a hotel or of a tour operator or of a travel agent, in Indian currency obtained by conversion of foreign exchange brought into India through an authorised dealer 6 [from another hotelier, tour operator or travel agent, as the case may be,] on behalf of a foreign tourist or group of foreign tourists, shall be deemed to have been received by the assessee in convertible foreign exchange if the person making the payment furnishes to the assessee a certificate specified in sub- section (2A). ---------------------------------------------------------------------- 1 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 3 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 4 Substituted for by the assessee in convertible foreign exchange' by the Finance Act, 1990, w.e.f. 1-4-1991. 5 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 6 Substituted for 'from a tour operator or, as the case may be, a travel agent" by the Finance Act, 1994, w.e.f. 1-4-1995. ----------------------------------------------------------------------- 1.384 1(2A) Every person making payment to an assessee referred to in the Explanation to sub-section (2) out of Indian currency obtained by conversion of foreign exchange received from or on behalf of a foreign tourists or a group of foreign tourists shall furnish to that assessee a certificate in the prescribed form indicating the amount received in foreign exchange, its conversion into Indian currency and such other particulars as may be prescribed.] 2[(3) For the purposes of sub-section (1), profits derived from services provided to foreign tourists shall be the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession") the same proportion as the receipts specified in sub-section (2) 3 [[as reduced by any payment, referred to in sub-section (2A), made by the assessee]] bear to the total receipts of the business carried on by the assessee.] (4)The amount credited to the reserve account under clause (b) of sub-section(1), shall be utilised by the assessee before the expiry of a period of five years next following the previous year in which the amount was credited for the following purposes, namely:- (a) construction of new hotels approved by the prescribed authority in this behalf or expansion of facilities in existing hotels already so approved; (b) purchase of new cars and new coaches by tour operators already so approved or by travel agents; (c) purchase of sports equipment for mountaineering, trekking, golf, river-rafting and other sports in or on water; (d) construction of conference or convention centers; (e) provision of such new facilities for the growth of Indian tourism as the Central Government may, by notification in the Official Gazette, specify in this behalf: Provided that where any of the activities referred to in clauses (a) to (e) would result in creation of any asset owned by the assessee outside India, such asset should be created only after obtaining prior approval of the prescribed authority. ----------------------------------------------------------------------- 2 Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Prior to the substitution, subsection (3) read as under: "(3) For the purposes of sub-section (1), profits derived from services provided to foreign tourists shall be,- (a) in a case where the business carried on by the assessee consists exclusively of services provided to foreign tourists resulting in receipts in convertible foreign exchange, the profits of the business as computed under the head "Profits and gains of business or profession"; (b) in a case where the business carried on by the assessee does not consist exclusively of services provided to foreign tourists resulting in receipts in convertible foreign exchange, the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession') the same proportion as the receipts in convertible foreign exchange bear to the total receipts of the business carried on by the assessee." 3 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. ---------------------------------------------------------------------- 1.385 (5) Where any amount credited to the reserve account under clause (b) of sub-section (1),- (a) has been utilised for any purpose other than those referred to in sub-section (4), the amount so utilised; or (b) has not been utilised in the manner specified in sub- section (4), the amount not so utilised, shall be deemed to be the profits,- (i) in a case referred to in clause (a), in the year in which the amount was so utilised; or (ii) in a case referred to in clause (b), in the year immediately following the period of five years specified in sub-section (4), and shall be charged to tax accordingly. 1(6) The deduction under sub-section (1), shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the 2[3[* * *] amount of convertible foreign exchange received by the assessee for services provided by him to foreign tourists 4[, payments made by him to any assessee referred to in sub-section (2A)] and the payments received by him in Indian currency as referred to in the Explanation to sub-section (2)]. Explanation.-For the purposes of this section,- (a) "travel agent" means a travel agent or other person (not being an airline or a shipping company) who holds a valid licence granted by the Reserve Bank of India under section 325 of the Foreign Exchange Regulation Act, 1973 (46 of 1973); (b) "convertible foreign exchange" shall have the meaning assigned to it in clause (a) of the Explanation to section 80HHC; (c) "services provided to foreign tourists" shall not include services by way of sale in any shop owned or managed by the person who carries on the business of a hotel or of a tour operator or of a travel agent;] 6[(d) "authorised dealer", "foreign exchange" and "Indian currency" shall have the meanings respectively assigned to them in clauses (b), (h) and (k) of section 2 of the Foreign Exchange Regulation Act, 19737 (46 of 1973).] -------------------------------------------------------------------- 2 Substituted for "amount of convertible foreign exchange received by the assessee for services provided by him to the foreign tourists" by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 3 The words "aggregate of the" omitted by the Finance Act, 1994, w.e.f. 1-4-1995. 4 Inserted, ibid. 5 Section 32 has been omitted by the Foreign Exchange Regulation (Amendment) Act, 1993. 6 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 1.386 1[80HHE. Deduction in respect of profits from export of computer software, etc. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of,- (i) export out of India of computer software or its transmission from India to a place outside India by any means; (ii) providing technical services outside India in connection with the development or production of computer software, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from such business: 2[Provided that no such deduction shall be allowed in relation to the assessment year commencing on the 1st day of April, 3[1996], or any subsequent assessment year.] (2) The deduction specified in sub-section (1) shall be allowed only if the consideration in respect of the computer software referred to in that sub-section is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, where the Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the Commissioner may allow in this behalf. Explanation.-The said consideration shall be deemed to have been received in India where it is credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. (3) For the purposes of sub-section (1), profits derived from the business referred to in that sub-section shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. 4(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (5) Where a deduction under this section is claimed and allowed in respect of profits of the business referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of this Act for the same or any other assessment year. Explanation.-For the purposes of this section,- (a) "convertible foreign exchange" shall have the meaning assigned to it in clause (a) of the Explanation to section 80HHC; ---------------------------------------------------------------------- 1 Inserted, by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 2 Being omitted by the Finance Act, 1995, w.e.f. 1-4-1996. 3 Substituted for "1995" by the Finance Act, 1994, w.e.f. 13-5- 1994. Earlier "1995" was substituted for "1994" by the Finance Act, 1993, w.e.f. 13-5-1993. ---------------------------------------------------------------------- 1.387 (b) "computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme which is transmitted from India to a place outside India by any means; (c) "export turnover" means the consideration in respect of computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (2), but does not include freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India; (d) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by- (1) ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India; (e) "total turnover" shall not include- (i) any sum referred to in clauses (iiia), (iiib) and (iiic) of section 2 8; (ii) any freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India; and (iii) expenses, if any, incurred in foreign exchange in providing the technical services outside India.] 1[80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel 2[or the business of repairs to ocean-going vessels or other powered craft], to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect 3 [in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel] as if for the words "twenty per cent", the words "twenty-five per cent" had been substituted. 4[(1A) Notwithstanding anything contained in sub-section (1), in ---------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. Earlier, section 80-1 was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and omitted by the Finance Act, 1972, w.e.f. 1-4-1973. 2 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 3 Ibid. 4 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. ---------------------------------------------------------------------- 1.388 relation to any profits and gains derived by an assessee from- (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants; or (ii) a ship which is first brought into use; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990 1[but before the 1st day of April, 1991], there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty-five per cent thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty-five per cent", the words "thirty per cent" had been substituted.] (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of 2[ten] years next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial under-taking; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power: Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section: Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. ---------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 2 Substituted for "fourteen" by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Earlier, "fourteen" was substituted for "nine" by the Finance Act, 1990, w.e.f. 1-4-1990, which was substituted for "four" by the Finance Act, 1985, w.e.f. 1-4-1985. ---------------------------------------------------------------------- 1.389 Explanation 1.-For the purposes of clause (ii) of this sub- section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. Explanation 3.-For the purposes of this sub-section, "small-scale industrial undertaking" shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA. (3) This section applies to any ship, where all the following conditions are fulfilled, namely:- (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) it was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and (iii) it is brought into use by the Indian company at any time within the period of 1[ten] years next following the 1st day of April, 1981. (4) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely:- (i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (ii) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (iii) the hotel is for the time being approved for the purposes of this sub-section by the Central Government; ---------------------------------------------------------------------- 1 Substituted for "fourteen" by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Earlier, "fourteen" was substituted for "nine" by the Finance Act, 1990, w.e.f. 1-4-1990, which was substituted for "four" by the Finance Act, 1985, w.e.f. 1-4-1985. ---------------------------------------------------------------------- 1.390 (iv) the business of the hotel starts functioning after the 31st day of March, 1981, but before the 1st day of April, 1[1991]. 2[(4A) This section applies to the business of repairs to ocean- going vessels or other powered craft which fulfils all the following conditions, namely:- (i) the business is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it is carried on by an Indian company and the work by way of repairs to ocean-going vessels or other powered craft has been commenced by such company after the 31st day of March, 1983, but before the 1st day of April, 1988; and (iv) it is for the time being approved for the purposes of this subsection by the Central Government.] (5) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the- previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning 3[or the company commences work by way of repairs to ocean-going vessels or other powered craft] (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year: Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words "seven assessment years", the words "nine assessment years" had been substituted: 4[Provided further that in the case of an assessee carrying on the business of repairs to ocean-going vessels or other powered craft, the provisions of this sub-section shall have effect as if for the words "seven assessment years", the words "four assessment years" had been substituted:] 5[Provided also that in the case of- (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants; or (ii) a ship which is first brought into use; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990 6[but before the 1st day of April, ------------------------------------------------------------------------ 1 Substituted for "1995" by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Earlier, "1995" was substituted for "1990" by the Finance Act, 1990, w.e.f. 1-4-1990, which was substituted for "1985" by the Finance Act, 1985, w.e.f. 1-4-1985. 2 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 3 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 4 Ibid. 5 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. 6 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. ---------------------------------------------------------------------- 1.391 1991], provisions of this sub-section shall have effect as if for the words "seven assessment years", the words "nine assessment years" had been substituted: Provided also that in the case of an assessee, being a co- operative society, deriving profits and gains from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso shall have effect as if for the words "nine assessment years", the words "eleven assessment years" had been substituted.] (6)Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel 1[or the business of repairs to ocean-going vessels or other powered craft] to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel 2[or the business of repairs to ocean-going vessels or other powered craft] were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. (7)Where the assessee is a person other than a company or a co- operative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below subsection (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.3 (8)Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship 4[or the business of repairs to ocean-going vessels or other powered craft] are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking or the hotel or the operation of the ship 4[or the business of repairs to oceangoing vessels or other powered craft] and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel or the operation of the ship 6[or the business of repairs to ocean-going vessels or other powered craft] does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial undertaking or the ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 4 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. --------------------------------------------------------------------- 1.392 business of the hotel or the operation of the ship 1[or the business of repairs to ocean-going vessels or other powered craft] shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date: Provided that where, in the opinion of the 2[Assessing] Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship 3[or the business of repairs to ocean-going vessels or other powered craft] in the manner hereinbefore specified presents exceptional difficulties, the 4 [Assessing] Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, "market value", in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. (9) Where it appears to the 5[Assessing] Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship 6[or the business of repairs to ocean-going vessels or other powered craft] to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the hotel or the operation of the ship 7[or the business of repairs to ocean-going vessels or other powered craft], the 8[Assessing] Officer shall, in computing the profits and gains of the industrial undertaking or the hotel or the ship 9[or the business of repairs to oceangoing vessels or other powered craft] for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. (10) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertakings with effect from such date as it may specify in the notification.] 10[80-IA. Deduction in respect of profits and gains from industrial undertakings, etc., in certain cases (1) Where the gross total income of an assessee includes any profits ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 2 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 3 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 4 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 5 Ibid. 6 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 7 Ibid. 8 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 9 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 10 Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1991. ------------------------------------------------------------------------ 1.393 and gains derived from any business of an industrial undertaking or a hotel or operation of a ship 1[or developing, maintaining and operating any infrastructure facility] (such business being hereinafter referred to as the eligible business), to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in subsection (5) and for such number of assessment years as is specified in subsection (6). (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial 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 to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: Provided that the condition in this clause shall, in relation to a small scale industrial undertaking 2 [or an industrial undertaking referred to in sub-clause (b) of clause (iv) which begins to manufacture or produce an article or thing during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 1998], apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted; 3[(iv) (a) in the case of an industrial undertaking not specified in subclause (b ) 4 [or sub-clause (c)], it begins to manufacture or produce articles or things or to operate such plant or plants, at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995, or such further period as the Central Government may, by notification ---------------------------------------------------------------------- 1 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 2 Inserted by the Finance Act, 1994, w.e.f. 1-4-1994. 3 Substituted by the Finance Act, 1993, w.e.f. 1-4-1994. Prior to the substitution, clause (iv), as originally enacted, read as under: "(iv) it begins to manufacture or produce articles or things or to operate such plant or plants, at any time during the period beginning on the 1st day of April, 1991, and ending on the 31st day of March, 1995, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking;" 4 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. ----------------------------------------------------------------------- 1.394 in the Official Gazette, specify with reference to any particular industrial undertaking; (b) in the case of an industrial undertaking located in an industrially backward State specified in the Eighth Schedule or set up in any part of India for the generation, or generation and distribution, of power, it begins to manufacture or produce articles or things or to operate its cold storage plant or plants or to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 1998;] 1[(c) in the case of an industrial undertaking located in such industrially backward district as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf, it begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, 1999;] 2[(d) in the case of an industrial undertaking being a small scale industrial undertaking, not specified in sub- clause (b) or in subclause (c), it begins to manufacture or produce articles or things or to operate its cold storage plant at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, 2000;] (v) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Explanation 1.-For the purposes of clause (ii) of this sub- section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. 2 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. ----------------------------------------------------------------------- 1.395 clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. (3) This section applies to any ship, where all the following conditions are fulfilled, namely:- (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) it was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and (iii) it is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991, and ending on the 31st day of March, 1995. (4) This section applies to the business of any hotel, where conditions (i), (ii), (v) and either of the conditions (iii) or (iv), are fulfilled, namely:- (i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (ii) the business of the hotel is owned and carried on by a company. registered in India with a paid-up capital of not less than five hundred thousand rupees; (iii) the business of the hotel, located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations specify for the purpose of this clause, starts functioning at any time during the period beginning on the 1st day of April, 1990, and ending on the 31st day of March, 1994; (iv) the business of the hotel-- (1) located in any place, or (2) located in a place other than a place referred to in clause (iii) of this sub-section, starts functioning at any time during the period beginning on the 1st day of April, 1991, and ending on the 31st day of March, 1995; (v) the hotel is for the time being approved by the prescribed authority.2 3[(4A) This section applies to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfills all the following conditions, namely:- (i) the enterprise is owned by a company registered in India or by a consortium of such companies; (ii) the enterprise has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Central Government, State ----------------------------------------------------------------------- 2 Ibid. 3 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. ---------------------------------------------------------------------- 1.396 Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement; (iii) the enterprise starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995.] (5) The amount referred to in sub-section (1) shall be- 1[(i) (a) in the case of an industrial undertaking referred to in subclause (a) 2[or sub-clause (d)] of clause (iv) of sub-section (2), twenty-five per cent of the profits and gains derived from such industrial undertaking; (b) in the case of an industrial undertaking referred to in subclause (b) 2[or sub-clause (c)] of clause (iv) of sub- section (2), hundred per cent of the profits and gains derived from such industrial undertaking for the initial five assessment years and thereafter twenty-five per cent of the profits and gains derived from such industrial undertaking: Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words "twenty-five per cent", the words "thirty per cent" had been substituted;] 4[ (ia) in the case of an enterprise referred to in sub- section (4A), hundred per cent of the profits and gains derived from such business for the initial five assessment years and thereafter, thirty per cent of' such profits and gains;] (ii) in the case of a hotel referred to in clause (iii) of sub-section (4), fifty per cent of the profits and gains derived from the business of such hotel: Provided that the said hotel is approved by the prescribed authority5 for the purposes of this clause in accordance with the rules made under this Act: Provided further that the said hotel approved by the prescribed authority before the 31st day of March, 1992, shall be deemed to have been approved by the prescribed authority for the purposes of this section in relation to the assessment year commencing on the 1st day of April, 1991; (iii) in the case of a hotel referred to in clause (iv) of sub-section (4), thirty per cent of the profits and gains derived from the business of such hotel; (iv) in the case of a ship, thirty per cent of the profits and gains derived from such ship. ----------------------------------------------------------------------- 1 Substituted by the Finance Act, 1993, w.e.f. 1-4-1994. Prior to the substitution, clause (i) read as under: "(i) in the case of an industrial under-taking, twenty-five per cent of the profits and gains derived from such industrial undertaking: Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words "twenty-five per cent", the words "thirty per cent" had been substituted;" 2 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 3 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. 4 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. ----------------------------------------------------------------------- 1.397 (6) The number of assessment years referred to in sub-section (1) shall, including the initial assessment year, be- (i) twelve in the case of an assessee, being a co-operative society, deriving profits and gains from an industrial undertaking; (ii) ten in the case of any other assessee deriving profits and gains from an industrial undertaking; (iii) ten in the case of any other assessee deriving profits and gains from a ship or the business of a hotel; 1[(iv) any ten consecutive assessment years falling within a period of twelve assessment years beginning with the assessment year in which an assessee begins operating and maintaining infrastructure facility.] (7) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (5) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 2(8) Where the assessee is a person other than a company or a co- operative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless, the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below subsection (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (9) Where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, "market value", in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. ----------------------------------------------------------------------- 1 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. ----------------------------------------------------------------------- 1.398 (10)Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. (11) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertakings with effect from such date as it may specify in the notification. (12) For the purposes of this section,- (a) "hilly area" means any area located at a height of one thousand metres or more above the sea level; (b) "industrial undertaking" shall have the meaning assigned to it in the Explanation to section 33B; (c) "initial assessment year" means the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning; ------------------------------------------------------------------------ The following clauses (c) and (ca) are being substituted for the above clause (c) by the Finance Act, 1995, w.e.f. 1-4-1996: "(c) "initial assessment year"- (1) in the case of an industrial undertaking or cold storage plant or ship or hotel, means the assessment year relevant to the previous year in which; the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage, plant or plants or the ship is first brought into use or the business of the hotel starts functioning; (2) in the case of an enterprise, carrying on the business of developing, operating and maintaining any infrastructure facility, means the assessment year specified by the assessee at his option to be the initial-year, not falling beyond the twelfth assessment year starting from the previous year in which the enterprise begins operating and maintaining the infrastructure facility. (ca) "infrastructure facility" means a road, highway, bridge, airport, port or rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette;" (d) "place of pilgrimage" means a place where any temple, mosque, gurudwara, church or other place of public worship of renown throughout any State or States is situated; (e) "rural area" means any area other than- (i) an area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee or ------------------------------------------------------------------------ 1.399 by any other name) or a cantonment board and which has a population of not less than ten thousand according to the preceding census of which relevant figures have been published before the first day of the previous year; or (ii) an area within such distance not being more than fifteen kilometres from the local limits of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the stage of development of such area (including the extent of, and scope for, urbanisation of such area) and other relevant considerations specify in this behalf by notification in the Official Gazette; 1[(f) "small-scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951).]] 2[80J. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases3 (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains 4 [(reduced by the deduction, if any, admissible to the assessee under section 80HH] 5[or section 80HHA)] of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, [computed in the manner ---------------------------------------------------------------------- 1 Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to the substitution, clause (f), as originally enacted, read as under: "(f) "small scale industrial undertaking" means an industrial undertaking where the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of business of the undertaking does not exceed sixty lakh rupees and for this purpose the value of any machinery or plant shall be,- (i) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee; and (ii) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant." 2 Inserted, in place of section 84 which was omitted, by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. 4 Substituted for "(reduced by the aggregate of the deductions, if any, admissible to the assessee under section 80H and section 80HH)" by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 5 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 6 Substituted for "computed in the prescribed manner" by the Finance (No. 2) Act, 1980, w.r.e.f. 1-4-1972. ------------------------------------------------------------------------ 1.400 specified in sub-section (1A)] in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year): 1[Provided that in relation to the profits and gains derived by an assessee, being a company, from an industrial undertaking which begins to manufacture or produce articles or to operate its cold storage plant or plants after the 31st day of March, 1976, or from a ship which is first brought into use after that date, or from the business of a hotel which starts functioning after that date, the provisions of this sub-section shall have effect as if for the words "six per cent", the words "seven and a half per cent" had been substituted.] 2[(1A) (1) For the purposes of this section, the capital employed in an industrial undertaking or the business of a hotel shall, except as otherwise expressly provided in this section, be computed in accordance with clauses (II) to (IV) and the capital employed in a ship shall be computed in accordance with clause (V). (II) The aggregate of the amounts representing the values of the assets as on the first day of the computation period of the undertaking or of the business of the hotel to which this section applies shall first be ascertained in the following manner:- (i) in the case of assets entitled to depreciation, their written down value; (ii) in the case of assets acquired by purchase and not entitled to depreciation, their actual cost to the assessee; (iii) in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business; (iv) in the case of assets, being debts due to the person carrying on the business, the nominal amount of those debts; (v) in the case of assets, being cash in hand or bank, the amount thereof. Explanation 1.-In this clause, "actual cost" has the same meaning as in clause (1) of section 43. Explanation 2.-In this clause and in clause (III), "computation period" means the period for which profits and gains of the industrial undertaking or business of the hotel are computed under sections 28 to 43A. Explanation 3.-In this clause and in clause (V), "written down value" has the same meaning as in clause (6) of section 43. Explanation 4.-Where the cost of any asset has been satisfied otherwise than in cash, the then value of the consideration actually given for the asset shall be treated as the actual cost of the asset. (III) From the aggregate of the amounts as ascertained under clause (II) shall be deducted the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts owed by the assessee (including amounts due towards any liability in respect of tax). Explanation.-For the purposes of this clause,- ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1975, w.e.f. 1-4-1976. 2 Inserted by the Finance (No. 2) Act, 1980, w.r.e.f. 1-4-1972. ----------------------------------------------------------------------- 1.401 (i) "tax" means- (a) income-tax or super-tax (including advance tax) due under any provision of this Act; (b) wealth-tax due under any provision of the Wealth-tax Act, 1957 (27 of 1957); (c) gift-tax due under any provision of the Gift-tax Act, 1958 (18 of 1958); (d) super profits tax due under any provision of the Super Profits Tax Act, 1963 (14 of 1963); (e) surtax due under any provision of the Companies (Profits) Surtax Act, 1964 (7 of 1964); (ii) any liability in respect of tax shall be deemed to have become due- (a) in the case of advance tax due under any provision of this Act, on the date on which such advance tax is payable; and (b) in the case of any other tax, on the first day of the period within which it is required to be paid. (IV) The resultant sum as determined under clause (III) shall be diminished by the value, as ascertained under clause (II), of any investments the income from which is not taken into account in computing the profits of the business and any moneys not required for the purpose of the business, insofar as the aggregate of such investments or moneys exceed the amount of the borrowed moneys which under clause (III) are required to be deducted in computing the capital. (V) The capital employed in a ship shall be taken to be the written down value of the ship as reduced by the aggregate of the amounts owed by the assessee as on the computation date on account of moneys borrowed or debts. incurred in acquiring that ship. Explanation.-In this clause, "computation date" in relation to a ship, means- (a) in respect of the previous year in which the ship is first brought into use, the date on which it is so brought into use; (b) in respect of any subsequent previous year, the first day of such previous year.] (2) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning (such assessment year being hereafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year: Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words "four assessment years", the words "six assessment years" had been substituted. (3) Where the amount of the profits and gains derived from the industrial undertaking or ship or business of the hotel, as the case may be, ITA-26 1.402 included in the total income (as computed without applying the provisions of section 64 and before making any deduction under Chapter VI-A 1[* * *]) in respect of the previous year relevant to an assessment year commencing on or after the 1st day of April, 1967, (not being an assessment year prior to the initial assessment year or subsequent to the fourth assessment year as reckoned from the end of the initial assessment year) falls short of the relevant amount of capital employed during the previous year, the amount of such shortfall, or, where there are no such profits and gains, an amount equal to the relevant amount of capital employed during the previous year (such amount, in either case, being hereafter, in this section, referred to as deficiency) shall be carried forward and set off against the profits and gains referred to in subsection (1) [as computed after allowing the deductions, if any, admissible under 2[* * *] 3[section 80HH] 4 [or section 80HHA] 5[* * *] and the said sub- section (1)] in respect of the previous year relevant to the next following assessment year and, if there are no such profits and gains for that assessment year, or where the deficiency exceeds such profits and gains, the whole or balance of the deficiency, as the case may be, shall be set off against such profits and gains for the next following assessment year and if and so far as such deficiency cannot be wholly so set off, it shall be set off against such profits and gains assessable for the nexT following assessment year and so on: Provided that- (i) in no case shall the deficiency or any part thereof be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year; (ii) where there is more than one deficiency and each such deficiency relates to a different assessment year, the deficiency which relates to an earlier assessment year shall be set off under this sub-section before setting off the deficiency in relation to a later assessment year: Provided further that in the case of an assessee being a co- operative society, the provisions of this. sub-section shall have effect as if for the words "fourth assessment year",- the words "sixth assessment year" had been substituted. (4) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by the splitting up, or the reconstruction, of. a business already in existence; (ii) it is not formed by the transfer to a new business of 6[* * *] machinery or plant previously used for any purpose; ----------------------------------------------------------------------- 1 The words "or section 280-O" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. 2 The words "section 80H" omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 3 Inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4- 1974. 4 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 5 The words "section 80-I" omitted by the Finance Act, 1972, w.e.f. 1-4-1973. 6 The words "a building (not being a building taken on rent or lease)" omitted by the Finance Act, 1975, w.e.f. 1-4-1976. ----------------------------------------------------------------------- 1.403 (iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of 1[thirty-three] years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power: Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section: 2 [Provided further that, where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking:] 3[Provided also that in the case of an industrial undertaking which manufactures or produces any article specified in the list in the Eleventh Schedule, the provisions of clause (iii) shall have effect as if for the words "thirty-three years", the words "thirty-one years" had been substituted.] 4[Explanation 1.-For the purposes of clause (ii) of this sub- section, any machinery or plant which was used outside India by any per-son other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:-, (a) such machinery or plant was not, at any time, previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant ---------------------------------------------------------------------- 1 Substituted for "twenty-eight" by the Finance Act, 1975, w.e.f. 1-4-1975 which was earlier substituted for "twenty-three" by the Finance Act, 1969, w.e.f 14-1969. 2 Inserted by the Finance Act, 1975, w.e.f. 1-4-1976. 3 Inserted by the Finance Act, 1979, w.e.f. 1-4-1979. 4 Inserted by the Finance Act, 1975,, w.e.f. 1-4-1976. ---------------------------------------------------------------------- 1.404 or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with and the total value of machinery or plant or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking.] (5) This section applies to any ship, where all the following conditions are fulfilled, namely:- (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) it was not, previous to the date of its acquisition by the Indian company, owned and used in Indian territorial waters by a person resident in India; and (iii) it is brought into use by the Indian company at any time within a period of 1[thirty-three] years next following the 1st day of April, 1948. (6) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely:- (a) the business of the hotel 2[* * *] is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (b) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (c) 3[* * *] (d) the hotel is for the time being approved for the purposes of this sub-section by the Central Government; 4[(e)the business of the hotel starts functioning on or after the 1st day of April, 1961, but before the 1st day of April, 1981.] 5[Explanation.-Where in the case of the business of a hotel, any building, or any part thereof, previously used as a hotel, or any machinery or plant, or any part thereof, previously used for any purpose, is transferred to a new business and the total value of the building, machinery or plant or part so transferred does not exceed twenty per cent of the total value of the building, machinery or plant used in the business, then, for the purposes of clause (a) of this sub-section, the condition specified therein shall be deemed to have been complied with and the total value of the building, machinery or plant or part so transferred shall not be taken into account in computing the capital employed in the business of the hotel.] ----------------------------------------------------------------------- 1 Substituted for "twenty-eight" by the Finance Act, 1975, w.e.f. 1-4-1975 which was substituted for "twenty-three" by the Finance Act, 1969, w.e.f. 1-4-1969. 2 The words "starts functioning on or after the 1st day of April, 1961, and" omitted by the Finance Act, 1975, w.e.f. 1-4-1975. 3 Omitted by the Finance Act, 1973, w.e.f 1-4-1974. 4 Inserted by the Finance Act, 1975, w.e.f. 1-4-1975. 5 Substituted by the Finance Act, 1975, w.e.f. 1-4-1976. ------------------------------------------------------------------------ 1.405 1[(6A) Where the assessee is a person other than a company or a cooperative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below subsection (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.2 (6B) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking or the hotel or the operation of the ship and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial under-taking or the hotel or the operation of the ship does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date: Provided that where, in the opinion of the 3[Assessing] Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship in the manner hereinbefore specified presents exceptional difficulties, the 4[Assessing] Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, "market value", in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. (6C) Where it appears to the 5[Assessing] Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the hotel or the operation of the ship, the 6[Assessing] Officer shall, in computing the profits and gains of the industrial undertaking or the hotel or the ship for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom.] ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1975, w.e.f. 1-4-1976. 3 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 6 Ibid. ---------------------------------------------------------------------- 1.406 (7)The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial under-takings with effect from such date as it may specify in the notification.] 1[80JJ. Deduction in respect of profits and gains from business of poultry farming Where the gross total income of an assessee includes any profits and gains derived from business of poultry fanning, there shall be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to thirty-three and one-third per cent thereof.] 2[80JJA. Deduction in respect of profits and gains from business of growing mushrooms.-Omitted by the Finance Act, 1983, w.e.f 1-4- 1984. It was inserted by the Finance Act, 1979, w.e.f. 1-4-1980.] 3[80K. Deduction in respect of dividends attributable to profits and gains from new industrial undertakings or ships or hotel business.Omitted by the Finance Act, 1986, w.e.f 1-4-1987. Original section was ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1989, w.e.f. 1-4-1990. Earlier, section 80JJ, as inserted by the Finance Act, 1975, w.e.f. 1-4-1976; amended by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981 and the Finance Act, 1983, w.e.f. 1-4-1984 and omitted by the Finance Act, 1985, w.e.f. 1-4-1986, read as under: "80JJ. Deduction in respect of profits and gains from business of livestock breeding or poultry or dairy farming.-Where the gross total income of an assessee includes any profits and gains derived from a business of livestock breeding, or poultry or dairy farming, there shall be allowed, in computing the total income of the assessee, a deduction as specified hereunder, namely- (a)in a case where the amount of such profits and gains does not exceed, in the aggregate, fifteen thousand rupees, the whole of for each amount; and (b)in any other case, fifteen per cent of the aggregate amount of such profits and gains or fifteen thousand rupees, whichever is higher: Provided that in computing the aggregate amount of such profits and gains in a case where the profits and gains derived from a business of poultry farming exceed one hundred thousand rupees, such excess shall be ignored." 2 Prior to the omission, section 80JJA read as under: "80JJA. Deduction in respect of profits and gains from business of growing mushrooms.-Where the gross total income of an assessee includes any profits and gains derived from a business of growing mushrooms, not being profits and gains that are in the nature of agricultural income, there shall be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to one-third of such profits and gains or ten thousand rupees, whichever is less." 3 Prior to the omission, section 80K, as substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1968 and amended by the Finance Act, 1975, w.e.f. 1-4-1975, ----------------------------------------------------------------------- 1.407 inserted, in place of section 85 which was deleted, by the Finance (No. 2) Act, 1967, w.e.f 1-4-1968.] 1[80L. Deductions In respect of interest on certain securities, dividends, etc. 2 (1) 3[Where the gross total income of an assessee, being- (a) an individual, or (b) a Hindu undivided family, 4[* * * ] 5[(c) omitted by the Finance Act, 1994, w.re.f. 1-4- 1968.] includes any income by way of-] (i) interest on any security of the Central Government or a State Government 6[* * *]; -> -> read as under: "80K. Deduction in respect of dividends attributable to profits and gains from new industrial undertakings or ships or hotel business.-Where the gross total income of an assessee, being- (a) the owner of any share or shares in a company, or (b) a person who is chargeable to tax under this Act on the income byway dividends on any share or shares in a company owned by any other per-son, includes any income by way of dividends paid or deemed to have been paid by the company in respect of such share or shares, there shall, subject to any rules that may be made by the Board in this behalf, be allowed, in computing his total income, a deduction from such income by way of dividends of an amount equal to such part thereof as is attributable to the profits and gains derived by the company from an industrial undertaking or ship or the business of a hotel, on which no tax is payable by the company under this Act for any assessment year commencing prior to the 1st day of April, 1968, or in respect of which the company is entitled to a deduction under section 80J for the assessment year commencing on the 1st day of April, 1968, or for any subsequent assessment year: Provided that no deduction under this section shall be allowed in respect of any income by way of dividends which is attributable to the profits and gains derived by the company from an industrial undertaking which begins to manufacture or produce articles or to operate its cold storage plant or plants after the 31st day of March, 1976, or from a ship which is first brought into use after that date or from the business of a hotel which starts functioning after that date." 1 Substituted by the Finance Act, 1970, w.e.f. 1-4-1971. Earlier, section 80L was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4- 1968 and substituted by the Finance Act, 1968, w.e.f. 1-4 3 Substituted for "Where the gross total income of an assessee includes any income by way of"- by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. 4 The word "or" omitted by the Finance Act, 1994, w.r.e.f. 1-4-1968. 5 Prior to the omission, clause (c) read as under: "(c) an association of persons or a body of individuals consisting in either case only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu," The italicised words were inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1972. 6 The words "(not being interest payable under section 280D in respect of any annuity deposit made under Chapter XXII-A)" omitted by the Finance Act, 1988. w.e.f. 1-4-1988. ----------------------------------------------------------------------- 1.408 1[(ia) interest on National Savings Certificates (VI Issue) or National Savings Certificates (VII Issue) or National Savings Certificates (VIII Issue) issued under the Government Savings Certificates Act, 1959 (46 of 1959);] 2[(ii) interest on such debentures, issued by any institution or authority or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the Central Government may, by notification 3 in the Official Gazette, specify in this behalf; 4[Explanation.-Omitted by the Finance Act, 1987, w.e.f. 1-4-1987.]] 5[(iia) 6interest on deposits under such National Deposits Scheme as may be framed by the Central Government and notified by it in this behalf in the Official Gazette;] (iii) 7interest on deposits under any 8[other] scheme framed by the Central Government and notified by it in this behalf in the Official Gazette; 9[(iiia) interest on deposits under the Post Office (Monthly Income Account) Rules, 1987;] (iv) dividends from any Indian company; (v) income received in respect of units from the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); 10[(va) income received in respect of units of a Mutual Fund specified under clause (23D) of section 10;] ----------------------------------------------------------------------- 1 Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to the substitution, clause (ia), as inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.r.e.f. 1-4-1988, read as under: "(ia) interest on National Savings Certificates (VI Issue) and National Savings Certificates (VII Issue) issued under the Government Savings Certificates Act, 1959 (46 of 1959);" 2 Substituted by the Finance Act, 1986, w.e.f. 1-4-1987. 4 Prior to the omission, the Explanation, substituted by the Finance Act, 1986, w.e.f. 1-4-1987, read as under: "Explanation.-For the purposes of this clause, "public sector company" means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);" 5 Inserted by the Finance Act, 1984, w.e.f. 1-4-1985. 7 The Scheme of Post Office (Time Deposits) governed by the Post Office (Time Deposits) Rules, 1970 and The Scheme of Post Office (Recurring Deposits) governed by the Post Office (Recurring Deposits) Rules, 1970 [vide Notification No. 2879, dated 1-9-1970] and the National Savings Scheme, 1992 [vide GSR 820(E), dated 21-10-1992] have been notified. 8 Inserted by the Finance Act, 1984, w.e.f. 1-4-1985. 9 Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 10 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. ---------------------------------------------------------------------- 1.409 (vi) interest on deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or a co- operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); 1[* * *] 2[(via) interest on deposits with any such bank, not being a banking company or a co-operative society referred to in clause (vi) but being a bank established by or under any law made by Parliament, as may be approved3 by the Central Government for the purposes of this clause;] 4[(Vii) interest on deposits with a financial corporation which is engaged in providing long-term finance for industrial development in India 5[* * *]: Provided that the corporation 6[* * *] is for the time being approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36;] 7[(viia) interest on deposits with any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning development or improvement of cities, towns and villages, or for both;] 8[(viii) interest on deposits with a co-operative society, not being a cooperative society referred to in clause (vi), made by a member of the society;] 9[or] 10[(ix) dividends from any co-operative society;] 11[(x) interest on deposits with, or dividend received from, any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes: Provided that the company is for the time being approved by the Central Government for the purpose of clause (viii) of subsection (1) of section 36,] ---------------------------------------------------------------------- 1 The word "or" omitted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. 2 Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 4 Substituted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. 5 The words "or with a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes" omitted by the Finance Act, 1988, w.e.f. 1-4- 1989. 6 The words "or, as the case may be, the company" omitted, ibid. 7 Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 8 Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. 9 Inserted by the Finance Act, 1972, w.e.f. 1-4-1973. 10 Ibid. 11 Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. --------------------------------------------------------------------- 1.410 there shall, in accordance with and subject to the provisions of this section be allowed, in computing the total income of the assessee, a deduction as specified hereunder, namely:- 1[(1)] in a case where the amount of such income does not exceed in the aggregate 2[ten] thousand rupees, the whole of such amount; and 3F(2)] in any other case, 4[ten] thousand rupees: 5[Omitted by the Finance Act, 1983, w.e.f 1-4-1984.] 6[Omitted by the Finance Act, 1992, w.e.f 1-4-1993.] ----------------------------------------------------------------------- 1 Substituted for "(a)" by the Finance Act, 1982, w.e.f. 1-4- 1983. 2 Being substituted by "thirteen" by the Finance Act, 1995, w.e.f. 1-4-1996. Earlier "ten" was substituted for "seven" by the Finance Act, 1993, w.e.f. 1-4-1994; "seven" was substituted for "four" by the Finance Act, 1983, w.e.f. 1-4-1984 which was substituted for "three" by the Finance Act, 1982, w.e.f. 1-4-1983. 3 Substituted for "(b)" by the Finance Act, 1982, w.e.f. 1-4- 1983. 4 Being substituted by "thirteen" by the Finance Act, 1995, w.e.f. 1-4-1996. Earlier, "ten" was substituted for "seven" by the Finance Act, 1993, w.e.f. 1-4-1994; "seven" was substituted for "four" by the Finance Act, 1983, w.e.f. 1-4-1984 which was substituted for "three" by the Finance Act, 1982, w.e.f. 1-4-1983. 5 Prior to the omission, the proviso, as inserted by the Finance Act, 1982, w.e.f. 1-4-1983, read as under: "Provided that where the gross total income of the assessee includes any income by way of interest on any security referred to in clause (i) or interest on any deposits referred to in clause (vi) (being deposits for a period of one year or more), there shall be allowed in computing the total income of the assessee a further deduction of an amount equal to so much of the income by way of such interest as has not been allowed by way of deduction under the foregoing provisions of this sub-section; so, however, that the amount of such further deduction shall not exceed two thousand rupees:" 6 Prior to the omission, the first and second provisos, as substituted by the Finance Act, 1988, w.e.f. 1-4-1989, read as under: "Provided that where the gross total income of the assessee includes any income by way of interest on any deposits referred to in clause (iia), or income in respect of units referred to in clause (v) or clause (va), or income by way of interest or dividend referred to in clause (x), there shall be allowed in computing the total income of the assessee, a further deduction of an amount equal to so much of such income as has not been allowed by way of deduction under the foregoing provisions of this sub-section; so, however, that the amount of such further deduction shall not exceed three thousand rupees: Provided further that where any income by way of interest on any deposits referred to in clause (iia) or any dividends referred to in clause (iv) remains unallowed after the deduction under the foregoing provisions of this section, there shall be allowed in computing the total income of the assessee, an additional deduction of an amount equal to so much of such income as has remained unallowed; so, however, that the amount of such additional deduction shall not exceed three thousand rupees." Prior to the substitution, the provisos, as inserted by the Finance Act, 1984, w.e.f. 1-4-1985, read as under: "Provided that where the gross total income of the assessee includes any income by way of interest on any deposits referred to in clause (iia), or income in respect of units referred to in clause (v), there shall be allowed in computing the total income of the assessee a further deduction of an amount equal to so much of such income as has not been allowed by way of deduction under the foregoing provisions of this sub-section; so, however, that the amount of such further deduction shall not exceed three thousand rupees: ---------------------------------------------------------------------- 1.411 1[Explanation.-For the purposes of this sub-section, the expression "security" means a Government security as defined in clause (2) of section 22 of the Public Debt Act, 1944 3 (18 of 1944).] 4 [(2) Omitted by the Finance Act, 1986, w.e.f 1-4-1987.] 5 [(3) For the removal of doubts, it is hereby declared that where the income referred to in sub-section (1) is derived from any asset held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under the said sub- section in respect of such income in computing the total income of any partner of the firm or any member of the association or body.] ---------------------------------------------------------------------- -> -> Provided further that where any income by way of interest on any deposits referred to in clause (iia) remains unallowed after the deduction under the foregoing provisions of this section, there shall be allowed in computing the total income of the assessee, an additional deduction of an amount equal to so much of such income as has remained unallowed; so, however, that the amount of such additional deduction shall not exceed two thousand rupees." 1 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. 2 Section 2(2) of the Public Debt Act, 1944 defines government security as under: "(2) "Government security" means- (a) a security, created and issued, by the Government for the purpose of raising a public loan, and having one of the following forms, namely:- (i) stock transferable by registration in the books of the Bank; or (ii) a promissory note payable to order; or (iii)a bearer bond payable to bearer, or (iv) a form prescribed in this behalf; (b) any other security created and issued by the Government in such form and for such of the purposes of this Act as may be prescribed." 4 Prior to the omission, sub-section (2) read as under: "(2) In a case where the assessee is entitled also to the deduction under section 80K in relation to the whole or any part of the income by way of dividends referred to in clause (iv) of sub- section (1), only so much of such income by way of dividends as may remain after the deduction under section 80K shall be taken into account for the purpose of allowing the deduction under sub-section (1)." 5 Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1976. ---------------------------------------------------------------------- 1.412 1[80M. Deduction in respect of certain inter-corporate dividends2 (1) Where the gross total income of a domestic company, in any previous year, includes any income by way of dividends from another domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of such domestic company, a deduction of an amount equal to,- (i) in the case of a scheduled bank or a public financial institution or a State financial corporation or a State industrial investment corporation or a company registered under section 25 of the Companies Act, 1956 (1 of 1956), sixty per cent of the income by way of dividends from another domestic company; (ii) in the case of any other domestic company, so much of the amount of income by way of dividends from another domestic company as does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date: 3[Provided that where any domestic company receives any income by way of dividend from the units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), such domestic company shall, subject to the aforesaid provisions, be eligible for deduction to the extent of- (a) four-fifth of such income in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1994; (b) two-fifth of such income in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1995, and no deduction shall be allowed on such income in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1996 and any subsequent previous year.] (2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under clause (ii) of sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year. (3) Where the dividend distributed is in respect of any period comprised in the previous year ending on the 31st day of March, 1990, no deduction shall be allowed in respect of such dividend. ----------------------------------------------------------------------- 1 Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Prior to the substitution, section 80M, as substituted by the Finance Act, 1986, w.e.f. 1-4-1987, read as under: "80M. Deduction in respect of certain inter-corporate dividends.-Where the gross total income of an assessee, being a domestic company, includes any income by way of dividends from a domestic company, there shall be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to sixty per cent of such income." Earlier, section 80M was inserted in place of section 85A (inserted by the Finance Act, 1965, w.e.f. 1-4-1965) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. It was amended by the Finance Act, 1968, w.e.f. 1-4-1968; Finance Act, 1970, w.e.f. 1-4-1971; Finance (No. 2) Act, 1971, w.e.f. 1-4-1972; Finance Act, 1975, w.e.f. 1-4-1976; Finance Act, 1976, w.e.f. 1-4-1977; Finance Act, 1981, w.e.f. 1-4- 1982; Finance Act, 1982, w.e.f. 1-4-1983 and Finance Act, 1984, w.e.f. 1-4-1985. 3 Inserted by the Finance Act, 1993, w.e.f. 1-4-1994. --------------------------------------------------------------------- 1.413 Explanation.-For the purposes of this section, the expressions- (i) "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 1 (40 of 1980), or any other bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) and which is a domestic company; (ii) "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 2 (1 of 1956); (iii) "State financial corporation" and "State industrial investment corporation" shall have the same meanings as in section 43B; (iv) "due date" means the date for furnishing the return of income under sub-section (1) of section 139.] 3 [80MM. Deduction in the case of an Indian company in respect of royalties, etc., received from any concern in India.-Omitted by the Finance Act 1983, w.e.f 1-4-1984. It was inserted by the Finance Act, 1969, w.e.f 1-4-1970.] -------------------------------------------------------------------- 2 Ibid. 3 Prior to the omission, section 80MM, as amended by the Finance Act, 1970, w.e.f. 1-4-1970; the Finance (No. 2) Act, 1971, w.e.f. 1-4- 1972 and the Finance Act, 1974, w.e.f. 1-4-1975, read as under: "80MM. Deduction in the case of an Indian company in respect of royalties, etc. received from any concern in India.-(1) Where the gross total income of an assessee, being an Indian company, includes any income by way of royalty, commission, fees or any other payment (not being income chargeable under the head "Capital gains"), received by the assessee from any person carrying on a business in India in consideration for- (i) the provision of technical know-how which is likely to assist in the manufacture or processing of goods or materials, or in the installation or erection of machinery or plant for such manufacture or processing, or in the working of a mine, oil well or other source of mineral deposits, or in the search for, or discovery or testing of, mineral deposits or the winning of access to them, or in carrying out any operation relating to agriculture, animal husbandry, dairy or poultry farming, forestry or fishing, or (ii) rendering services in connection with the provision of such technical know how, under an agreement entered into by the assessee with such person on or after the 1st day of April, 1969, and approved by the Board in this behalf, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction from such income of an amount equal to forty per cent thereof, in computing the total income of the assessee: -> -> ------------------------------------------------------------------------ 1.414 1[80N. Deduction in respect of dividends received from certain foreign companies.-Omitted by the Finance Act, 1985, w.e.f 1-4-1986. It was inserted by the Finance (No. 2) Act, 1967, w.e.f 1-4-1968 in place of section 85B which was inserted by the Finance Act, 1966, w.e.f 1-4-1966.] ----------------------------------------------------------------------- -> -> Provided that the application for such approval is made to the Board before the 1st day of October of the relevant assessment year: Provided further that approval of the Board shall not be necessary in the case of any such agreement which has been approved for the purposes of the deduction under this sub-section by the Central Government before the 1st day of April, 1972, and every application for such approval of any such agreement pending with the Central Government immediately before that day shall stand transferred to the Board for disposal. (2) For the purposes of this section "provision of technical know-how" means,- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or similar property; (iv) the imparting of any information concerning industrial, commercial or scientific knowledge, experience or skill. (3) The provisions of sub-section (1) shall not apply in relation to any income in respect of which the assessee is entitled to the deduction specified in section 80-O." 1 Prior to the omission, section 80N, as amended by the Finance Act, 1968, w.e.f. 1-4-1969; the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972; the Finance Act, 1974, w.r.e.f. 1-4-1969/w.e.f. 1-4-1975 and the Finance Act, 1984, w.e.f. 1-4-1985, read as under: "80N. Deduction in respect of dividends received from certain foreign companies.Where shares in a foreign company have been allotted to an assessee, being an Indian company, in consideration of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to the foreign company by the assessee, or in consideration of technical services rendered or agreed to be rendered to the foreign company by the assessee, under an agreement approved by the Board in this behalf, and any income by way of dividend on such shares included in the gross total income of the assessee is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed a deduction of an amount equal to fifty per cent of the income so received in, or brought into, India, in computing the total income of the assessee: Provided that the application for such approval is made to the Board before the 1st day of October of the relevant assessment year: Provided further that the approval of the Board shall not be necessary in the case of any such agreement which has been approved for the purposes of the deduction under this section by the Central Government before the 1st day of April, 1972, and every application for such approval of any such agreement pending with the -> -> ---------------------------------------------------------------------- 1.415 1[80-O. Deduction in respect of royalties, etc., from certain foreign enterprises2 3[Where the gross total income of an assessee, being an Indian company 4[or a person (other than a company) who is resident in India],] includes any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of technical 5[or professional] services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee, 6[* * *]; 7 Land such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there ----------------------------------------------------------------------- -> ->Central Government immediately before that day shall stand transferred to the Board for disposal. Explanation.-For the purposes of this section,- (i) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange; (ii) any income used by the assessee outside India in the manner permitted by the Reserve Bank of India shall be deemed to have been brought into India in accordance with the law for the time being in force for regulating payments and dealings in foreign exchange, on the date on which such permission is given." 1 Substituted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. Earlier, it was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4- 1968 in place of section 85C which was inserted by the Finance Act, 1966, w.e.f. 1-4-1966. Section 80-0 was also amended by the Finance Act, 1968, w.e.f. 1-4-1969. 3 Substituted for "(1) Where the gross total income of an assessee, being an Indian company or a person (other than a company) who is resident in India," by the Finance Act, 1974, w.e.f. 1-4-1975. 4 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 5 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 6 The words "under an agreement approved in this behalf by the Chief Commissioner or the Director General" omitted, ibid. Earlier, these words were substituted for "under an agreement approved by the Board in this behalf" by the Finance Act, 1988, w.e.f. 1-4-1989. 7 Substituted for "and such income is received in convertible foreign exchange in India, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent of the income so received in India in computing the total income of the assessee" by the Finance Act, 1988, w.e.f. 1-4-1988. These words restore the provision as it stood prior to the substitution by the Finance Act, 1987, w.e.f. 1-4-1988. Earlier, it was amended by the Finance Act, 1974, w.r.e.f. 14-1972 and the Finance Act, 1984, w.e.f. 1-4-1985. ---------------------------------------------------------------------- 1.416 shall be allowed, in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent of the income so received in, or brought into, India, in computing the total income of the assessee]: 1[Provisos omitted by the Finance (No. 2) Act, 1991, w.e.f 1-4-1992.] 2[Provided 3[* * *] that such income is received in India within a period of six months from the end of the previous year, or where the 4[Chief Commissioner or Commissioner] is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the 5[Chief Commissioner or Commissioner] may allow in this behalf.] 6[Explanation.-For the purposes of this section,- (i) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange; 7[(ii) "foreign enterprise" means a person who is a non- resident.]] 8[(iii) services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India.] ----------------------------------------------------------------------- 1 Prior to the omission, the first and second provisos, as substituted by the Finance Act, 1988, w.e.f. 1-4-1989, read as under: "Provided that the application for the approval of the agreement referred to in this section is made to the Chief Commissioner or, as the case may be, the Director General in the prescribed form and verified in the prescribed manner before the 1st day of October of the assessment year in relation to which the approval is first sought: Provided further that the approval of the Chief Commissioner or, as the case may be, the Director General shall not be necessary in the case of any such agreement which has been approved for the purposes of the deduction under this section by the Central Government before the 1st day of April, 1972, or by the Board before the 1st day of April, 1989, and every application for such approval of any such agreement pending with the Board immediately before the 1st day of April, 1989 shall stand transferred to the Chief Commissioner or the Director General for disposal:" 2 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 3 The word "also" omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 4 Substituted for "Commissioner" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 5 Ibid. 6 Substituted by the Finance Act, 1985, w.e.f. 1-4-1986. Prior to the substitution, the Explanation, as inserted by the Finance Act, 1974, w.r.e.f. 1-4-1972, read as under: "Explanation.-The provisions of the Explanation to section 8ON shall apply for the purposes of this section as they apply for the purposes of that section." 7 Substituted by the Finance Act, 1987, w.e.f. 1-4-1988. Prior to the substitution, clause (ii) read as under: "(ii)any income used by the assessee outside India in the manner permitted by the Reserve Bank of India shall be deemed to havebeen brought into India in accordance with the law for the time being in force for regulating payments and dealings in foreign exchange, on the date on which such permission is given." 8 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. --------------------------------------------------------------------- 1.417 1[(2) * * * 2[80P. Deduction in respect of income of co-operative societies (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- 3(i)carrying on the business of banking or providing credit facilities to its members, or (ii)a cottage industry, or (iii)the marketing of the agricultural produce of its members, or (iv)the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members 4 [or] ----------------------------------------------------------------------- 1 Omitted by the Finance Act, 1974, w.e.f. 1-4-1975. 2 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 in place of section 81 which was simultaneously deleted. 4 Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. ----------------------------------------------------------------------- 1.418 Sec. 80P 1[(vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members,] the whole of the amount of profits and gains of business attributable to any one or more of such activities: 2[Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:- (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government;] 3[(b) in the case of a co-operative society, being a primary society engaged in supplying milk, oil seeds, fruits or vegetables raised or grown by its members to- (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii)a Government company as defined in section 617 of the Companies Act, 1956 4 ( 1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business;] (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so ----------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. 2 Ibid. 3 Substituted by the Finance Act, 1983, w.e.f. 1-4-1984. Prior to the substitution, clause (b), as substituted by the Finance Act, 1978, w.e.f. 1-4-1979, read as under: "(b) In the case of a co-operative society, being a primary society engaged in Supplying milk raised by its members to- (i)a federal milk co-operative society; or (ii)the Government or a local authority; or (iii)a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk to the public), the whole of the amount of profits and gains of such busin 1.419 specified), so much of its profits and gains attributable to such activities as 1[does not exceed,- (i) where such co-operative society is a consumers' co-operative society, forty thousand rupees; and (ii) in any other case, twenty thousand rupees. Explanation.-In this clause, "consumers" co-operative society" means a society for the benefit of the consumers;] (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities 2[* * *1 or any income from house property chargeable under section 22. Explanation.-For the purposes of this section an "urban consumers' co-operative society" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction under 3[* * *] 4 [section 80HH] 5[or section 80HHA] 6[or section 80HHB] 7[or section 80HHC] 2[or section 80HHD] 9[or section 80-1] 10[or section 80IA] or section 80J 11[or section 80JJ] 12[* * *], the deduction under subsection (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub- section (2), shall be allowed with reference to the income, if any, as referred to in those clause included in ----------------------------------------------------------------------- 1 Substituted for "does not exceed twenty thousand rupees" by the Finance Act, 1979, w.e.f. 1-4-1980. The italicised words were substituted for "fifteen thousand" by the Finance Act, 1969, w.e.f 1-4-1970. 2 The words "chargeable under section 18" omitted by the Finance Act, 1988, w.e.f. 1-4-1989. 3 The words "section 80H or" omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 4 Inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974. 5 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 6 Inserted by the Finance Act, 1982, w.e.f. 1-4-1983. 7 Inserted by the Finance Act, 1983, w.e.f. 1-4-1983. 8 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4- 1989. 9 Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. 10 Inserted by the Finance Act, 1993, w.r.e.f. 1-4-1991. 11 Inserted by the Finance Act, 1989, w.e.f. 1-4-1990. Earlier, the words "or section 80JJ" were Inserted by the Finance Act, 1975, w.e.f. 1-4-1976 and omitted by the Finance Act, 1985, w.e.f. 1-4-1986. 12 The words "or section 80JJA" omitted by the Finance Act, 1983, w.e.f. 1-4-1984. They were inserted by the Finance Act, 1979, w.e.f. 1-4-1980. --------------------------------------------------------------------- 1.420 the gross total income as reduced by the deductions under 1[* * *] 2[section 80HH,] 3[section 80HHA,] 4 [section 80HHB,] 5[section 80HHC,] 6[section 80HHD,] 7[section 80-1,] 8[section 80-IA,] 9[10[section 80J and 80JJ]].] 11[(4) * * *] 12[80Q. Deduction in respect of profits and gains from the business of publication of books 13 (1) Where in the case of an assessee the gross total income of the previous year relevant to the assessment year commencing on the 1st day of April, 1992, or to any one of the four assessment years next following that assessment year, includes any profits and gains derived from a business carried on in India of printing and publication of books or publication of books, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. ---------------------------------------------------------------------- 1 The words "section 80H," were omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 2 Inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974. 3 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 4 Inserted by the Finance Act, 1982, w.e.f. 1-4-1983. 5 Inserted by the Finance Act, 1983, w.e.f. 1-4-1983. 6 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4- 1989. 7 Inserted by the Finance Act, 1981, w.e.f.1-4-1981. 8 Inserted by the Finance Act, 1993, w.r.e.f. 1-4-1991. 9 Substituted for "section 80J and section 80JJ" by the Finance Act, 1985, w.e.f. 1-4-1986. Earlier, these words were substituted for "section 80J, section 80JJ and section 80JJA" by the Finance Act, 1983, w.e.f. 1-4-1984 which were substituted for "section 80J and section 80JJ" by the Finance Act, 1979, w.e.f. 1-4-1980 and these were substituted for land section 80J" by the Finance Act, 1975, w.e.f. 1-4-1976. 10 Substituted for "and section 80J" by the Finance Act, 1989, w.e.f. 1-4-1990. 11 Omitted by the Finance Act, 1969, w.e.f. 1-4-1970. 12 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Earlier, section 800 was inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 in place of section 82. It was omitted by the Finance Act, 1972, w.e.f. 1-4-1972. 1.421 (2)In a case where the assessee is entitled also to the deduction under section 80HH or section 80HHA or section 80HHC or section 80-1 or section 80-IA or section 80J or section 80P, in relation to any part of the profits and gains referred to in sub-section (1), the deduction under subsection (1) shall be allowed with reference to such profits and gains included in the gross total income as reduced by the deductions under section 80HH, section 80HHA, section 80HHC, section 80-1, section 80IA, section 80J and section 80P. (3)For the purposes of this section, "books" shall not include newspapers, journals, magazines, diaries, brochures, tracts, pamphlets and other publications of a similar nature by whatever name called.] 1[80QQ. Deduction in respect of profits and gains from the business of publication of books.-Omitted, by the Direct Tax Laws (Amendment) Act, 1987, w.e.f 1-4-1989. It was inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f 1-4-1971.] 2 [80QQA. Deduction in respect of professional income of authors of text books in Indian languages (1) Where, in the case of an individual resident in India, being an author, the gross total income of the previous year relevant to the assessment year 3[commencing on- (a) the 1st day of April, 1980, or to any one of the nine assessment years next following that assessment year; or (b) the 1st day of April, 1992, or to any one of the four assessment years next following that assessment year, ----------------------------------------------------------------------- 1 Prior to the omission, section 800Q, as amended by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974; Finance Act, 1975, w.e.f. 1-4- 1975; Taxation Laws (Amendment) Act, 1975, W.e.f. 1-4-1976; Finance (No. 2) Act, 1977, w.e.f. 1-4-1978; Finance Act, 1979, w.e.f. 1-4-1980 and Finance Act, 198 1, w.e.f. 1-4-198 1, read as under: "80QQ. Deduction in respect of profits and gains from the business of publication of books.-(1) Where in the case of an assessee the gross total income of the previous year relevant to the assessment year commencing on the 1st day of April, 1971, or to any one of the fourteen assessment years next following that assessment year, includes any profits and gains derived from a business carried on in India of printing and publication of books or publication of books, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. (2) In a case where the assessee is entitled also to the deduction under section 80HH or section 80HHA or section 80-1 or section 80J or section 80P, in relation to any part of the profits and gains referred to in sub-section (1), the deduction under section (1) shall be allowed with reference to such profits and gains included in the gross total income as reduced by the deductions under section 80HH, section 80HHA, section 80-1, section 80J and section 80P. (3) For the purposes of this section, "books" shall not include newspapers, journals, magazines, diaries, brochures, tracts, pamphlets and other publications of the similar nature, by whatever name called.] 2 Inserted by the Finance Act, 1979, w.e.f. 1-4-1980. 3 Substituted for "commencing on the 1st day of April, 1980, or to any one of the nine assessment years next following that assessment year, includes" by the Finance (No.- 2) Act, 1991, w.e.f. 1-4-1992. Earlier, "nine" was substituted for "four" by the Finance Act, 1985, w.e.f. 1-4-1985. ----------------------------------------------------------------------- 1.422 includes] any income derived by him in the exercise of his profession on account of any lump sum consideration for the assignment or grant of any of his interests in the copyright of any book, or of royalties or copyright fees (whether receivable in lump sum or otherwise) in respect of such book, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income of an amount equal to twenty-five per cent thereof. (2) No deduction under sub-section (1) shall be allowed unless- (a) the book is either in the nature of a dictionary, thesaurus or encyclopaedia or is one that has been prescribed or recommended as a text book, or included in the curriculum, by any University, for a degree or post- graduate course of that University; and (b) the book is written in any language specified in the Eighth Schedule to the Constitution or in any such other language as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the need for promotion of publication of books of the nature referred to in clause (a) in that language and other relevant factors. Explanation.-For the purposes of this section,- (i) "author" includes a joint author; (ii) "lump sum", in regard to royalties or copyright fees, includes an advance payment on account of such royalties or copyright fees which is not returnable; (iii)"University" shall have the same meaning as in the Explanation to clause (ix) of section 47.] 1[80R. Deduction in respect of remuneration from certain foreign sources in the case of professors, teachers, etc. Where the gross total income of an individual who is a citizen of India includes any remuneration received by him outside India from any University or other educational institution established outside India or 2[any other association or body established outside India], for any service rendered by him during his stay outside India in his capacity as a professor, teacher or research worker in such University, institution, association or body, there shall be 3[allowed, in computing the total income of the individual, a deduction from such remuneration of an amount equal to,- (i) fifty per cent of the remuneration; or (ii) seventy-five per cent of such remuneration as is brought into India by, or on behalf of, the assessee in accordance with the Foreign ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1967, w.e.f. 1-4-1968 in place of section 80F which was deleted. 2 Substituted for "such other association or body established outside India as may be notified in this behalf by the Central Government in the Official Gazette" by the Finance Act, 1983, w.e.f. 1-4-1984. 3 Substituted for the words "allowed a deduction from such remuneration of an amount equal to fifty per cent thereof, in computing the total income of the individual:" by the Finance Act, 1990, w.e.f. 1-4-1991. ----------------------------------------------------------------------- 1.423 Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder, whichever is higher). 1[Omitted by the Finance Act, 1990, w.e.f 1-4-1991.] 2[80RR. Deduction in respect of professional income from foreign sources in certain cases3 Where the gross total income of an individual resident in India, being an author, playwright, artist, 4 [musician, actor or sportsman (including an athlete)] includes any income derived by him in the exercise of his profession from the Government of a foreign State or any person not resident in India, 5[there shall be allowed, in computing the total income of the individual, a deduction from such income of an amount equal to,- (i) fifty per cent of the income; or (ii) seventy-five per cent of such income as is brought into India by, or on behalf of, the assessee in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any rules made thereunder, whichever is higher.] 6 [80RRA. Deduction in respect of remuneration received for services rendered outside India7 (1) Where the gross total income of an individual who is a citizen of India includes any remuneration received by him in foreign currency from ---------------------------------------------------------------------- 1 Prior to the omission, the proviso read as under: "Provided that where the individual renders continuous service outside India in such University, institution, association or body for a period exceeding thirty-six months, no deduction under this section shall be allowed in respect of the remuneration for such service relating to any period after the expiry of the thirty-six months aforesaid." 2 Inserted by the Finance Act, 1969, w.e.f. 1-4-1970. 4 Substituted for "musician or actor" by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980. 5 Substituted for "and such income is received in, or brought into, India by him or on his behalf in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947), and any rules made thereunder, there shall be allowed a deduction from such income of an amount equal to twenty-five per cent of the income so received or brought, in computing the total income of the individual" by the Finance Act, 1990, w.e.f. 1-4-1991. 6 Substituted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. It was inserted by the Finance Act, 1973, w.e.f. 1-4-197 1.424 any employer (being a foreign employer or an Indian concern) for any service rendered by him outside India, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the individual, a deduction from such remuneration 1[of an amount equal to,- (i) fifty per cent of the remuneration; or (ii) seventy-five per cent of such remuneration as is brought into India by, or on behalf of, the assessee in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder, whichever is higher]: 2[Omitted by the Finance Act, 1990, w.e.f 1-4-1991.) (2) The deduction under this section shall be allowed- (i) in the case of an individual who is or was, immediately before undertaking such service, in the employment of the Central Government or any State Government, only if such service is sponsored by the Central Government; (ii) in the case of any other individual, only if he is a technician and the terms and conditions of his service outside India are approved in this behalf by the Central Government or the prescribed authority. Explanation.-For the purposes of this section,- (a) "foreign currency" shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 3 (46 of 1973); (b) "foreign employer" means,- (i) the Government of a foreign State; or (ii) a foreign enterprise; or (iii) any association or body established outside India; (c) "technician" means a person having specialised knowledge and experience in- (i) constructional or manufacturing operations or mining or the generation or distribution of electricity or any other form of power; or (ii) agriculture, animal husbandry, dairy farming, deep sea fishing or ship building; or (iii)public administration or industrial or business management; or (iv) accountancy; or ---------------------------------------------------------------------- 1 Substituted for "of an amount equal to fifty per cent thereof" by the Finance Act, 1987, w.e.f. 1-4-1988. 2 Prior to the omission, it read as under: "Provided that where the individual renders continuous service outside India under or for such employer for a period exceeding thirty-six months, no deduction under this section shall be allowed in respect of the remuneration for such service relating to any period after the expiry of the thirty-six months aforesaid." 1.425 (v) any field of natural or applied science (including medical science) or social science; or (vi) any other field which the Board may prescribe in this behalf, who is employed in a capacity in which such specialised knowledge and experience are actually utilised.] The relationship of employer-employee/master-servant should exist between the assessee and the payer of the remuneration. Individuals who render service outside India in the capacity of independent contractors or consultants are not eligible for the deduction. Seamen working as marine engineers, radio officers masters, mates, pursers or captains are to be regarded as technicians. Helpers to masons who assist in concrete mixing, RCC work, etc. and other persons similarly placed will be regarded as technicians. If the service is for a period not exceeding 36 months there is no bar to the same individual claiming the deduction in respect of any subsequent employment after he had served the same employer-. Where the services outside India are performed under different employers the period of service under these employers cannot be clubbed together so as to deny the benefit of deduction-as the services under different employers would be under different agreements. Remuneration received by seamen outside India in foreign exchange for services rendered outside India would qualify for the deduction. 1[80S. Deduction in respect of compensation for termination of managing agency, etc., in the case of assessees other than companies.- Omitted by the Finance Act, 1986, w.e.f 1-4-1987. It was introduced in place of old section 112 by the Finance (No. 2) Act, 1967, w.e.f 1- 4-1968.] ----------------------------------------------------------------------- 1 Prior to the omission, section 80S, as amended by the Finance Act, 1973, w.r.e.f. 1-4-1972, read as under: "80S. Deduction in respect of compensation for termination of managing agency, etc., in the case of assessees other than companies.- Where the gross total income of an assessee not being a company includes any income by way of compensation or other payment which is chargeable as the profits and gains of business or profession in accordance with the provisions of sub-clause (a) or sub-clause (b) or sub-clause (c) of clause (ii) of section 28, there shall be allowed, in computing the total income of the assesses, a deduction from such income of an amount equal to twenty-five per cent thereof, so, however, that the amount of the deduction under this section shall not, in any case, exceed one hundred thousand rupees." ----------------------------------------------------------------------- 1.426 1[80T. Deduction in respect of long-term capital gains in the case of assessees other than companies.-Omitted by the Finance Act, 1987, w.e.f 1-4-1988. It was inserted by the Finance (No. 2) Act, 1967, w.e.f 1-41968 in place of section 114.] 2[80TT. Deduction in respect of winnings from lottery.-Omitted by the ---------------------------------------------------------------------- 1 Prior to the omission, section 80T, as amended by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972; Finance (No. 2) Act, 1974, w.e.f. 1-4-1975; Finance (No. 2) Act, 1980, w.e.f. 1-4-1981; Finance Act, 1982, w.e.f. 1-4-1983 and the Finance Act, 1986, w.e.f. 1-4-1987, read as under: "80T. Deduction in respect of long-term capital gains in the case of assessees other than companies.-Where the gross total income of an assessee not being a company includes any income chargeable under the head "Capital gains" relating to capital assets other than short-term capital assets (such income being, hereinafter, referred to as long-term capital gains), there shall be allowed, in computing the total income of the assessee, a deduction from such income of an amount equal to,- (a) in a case where the long-term capital gains do not exceed ten thousand rupees, the whole of such long-term capital gains; (b) in any other case, ten thousand rupees as increased by a sum equal to- (A) fifty per cent of the amount by which the long- term capital gains relating to capital assets, being buildings or lands or any rights in buildings or lands or gold, bullion or jewellery, exceed ten thousand rupees; (B) sixty per cent of the amount by which the long- term capital gains relating to any other capital assets exceed ten thousand rupees: Provided that where the long-term capital gains relate to- (i)buildings or lands or any rights in buildings or lands; (ii)gold, bullion or jewellery; and (iii) any other capital asset, or to any two of the categories of capital assets mentioned in the foregoing clauses of this proviso (the assets falling under each clause being treated as a separate category), the deduction of ten thousand rupees referred to in this clause shall be allowed in the following order, namely:- (1) the deduction shall first be allowed against long- term capital gains relating to the assets mentioned in clause (i); (2) next, where the amount of the long-term capital gains relating to the assets mentioned in clause (i) is less than ten thousand rupees, a deduction equal to the amount of the difference between ten thousand rupees and such capital gains shall be allowed against the long- term capital gains relating to the assets mentioned in clause (ii); and (3) thereafter, the balance, if any, of the said ten thousand rupees shall be allowed as a deduction against the long-term capital gains relating to the assets mentioned in clause (iii), and the provisions of sub-clause (A) and sub-clause (B) of this clause shall apply as if the references to ten thousand rupees therein were references to the amount of deduction allowed in accordance with clauses (1), (2) and (3) of this proviso." 2 Prior to the omission, section 80TT, as amended by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, read as under: "80TT. Deduction in respect of winnings from lottery Where the gross total income of an assessee, not being a company, includes any income by way of winnings from any lottery (such income being hereafter in this section referred to as winnings), there shall be allowed, in computing the total income of the assessee, a deduction from the winnings of an amount equal to,- (a) in a case where the winnings do not exceed five thousand rupees, the whole of such winnings; (b) in any other case, five thousand rupees as increased by a sum equal to fifty per cent of the amount by which the winnings exceed five thousand rupees." ----------------------------------------------------------------------- 1.427 Finance Act, 1986, w.e.f 1-4-1987. It was inserted by the Finance Act, 1972, w.e.f 1-4-1972.] 1[D.-Other deductions [80U. Deduction in the case of permanent physical disability (including blindness)3 In computing the total income of an individual, being a resident, who, at the end of the previous year, is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability or mental retardation specified in the rules made in this behalf by the Board, which is certified by a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital, and which has the effect of reducing considerably such individual's capacity for normal work or engaging in a gainful employment or occupation, there shall be allowed a deduction of a sum of 4 [twenty] thousand rupees: ---------------------------------------------------------------------- 1 The sub-chapter 'D' comprising of the only section 80U was inserted by the Finance Act, 1968, w.e.f. 1-4-1969. 2 Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to the substitution, section 80U, as substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971 and amended by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981; Finance Act,1984, w.e.f. 1-4-1985; Finance Act, 1987, w.e.f. 1-4-1988; Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and Finance Act, 1989, w.e.f. 1-4-1990, read as under: "80U. Deduction in the case of totally blind or physically handicapped resident persons.-4 1) In computing the total income of an individual, being a resident, who, as at the end of the previous year,- (i) is totally blind, or (ii) is subject to or suffers from a permanent physical disability (other than blindness) being a permanent physical disability specified in the rules made in this behalf by the Board, and which has the effect of reducing substantially his capacity to engage in a gainful employment or occupation, or (iii)is subject to mental retardation to the extent specified in the rules made in this behalf by the Board, and which has the effect of reducing substantially his capacity to engage in a gainful employment or occupation, there shall be allowed a deduction of a sum of fifteen thousand rupees: Provided that such individual produces before the Assessing Officer, in respect of the first assessment year for which deduction is claimed under this section,- (a) in a case referred to in clause (i), a certificate as to his total blindness from, a registered medical practitioner being an oculist,, (b) in a case referred to in clause (ii), a certificate as to the permanent physical disability refer-red to in the said clause from a registered medical practitioner; and (c) in a case referred to in clause (iii), a certificate as to the mental retardation from a psychiatrist working in a Government hospital. (2) The Board shall, in making any rules for specifying any disability or mental retardation for the purposes of clause (ii) or clause (iii), as the case may be, of subsection (1), have regard to the nature of such disability or mental retardation and the effect which such disability or menial retardation is likely to have on the capacity of a person subject thereto, or suffering therefrom, to engage in a gainful employment or occupation." 4 Being substituted by "forty" by the Finance Act, 1995, w.e.f. 1-4-1996. ----------------------------------------------------------------------- 1.428 Provided that such individual produces the aforesaid certificate before the Assessing Officer in respect of the first assessment year for which he claims deduction under this section: Provided further that the requirement of producing the aforesaid certificate from a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital shall not apply to an individual who has already produced a certificate before the Assessing Officer under the provisions of this section as they stood immediately before the 1st day of April, 1992. Explanation.-For the purposes of this section, the expression "Government hospital" shall have the meaning assigned to it in the Explanation to section 80DD. 1[80V. Deduction from gross total income of the parent in certain cases.-Omitted by the Finance Act, 1994, w.e.f 1-4-1995. It was inserted by the Finance Act, 1993, w.e.f 1-4-1994.] ----------------------------------------------------------------------- 1 Prior to the omission, it read as under: "80V Deduction from gross total income of the parent in certain cases.-Where a minor child, whose income is included in the total income of one of his parents under sub-section (1A) of section 64, is suffering from any disability of the nature specified in section 80U, then, in computing the total income of such parent, there shall be allowed from the gross total income of such parent a deduction of a sum to which such minor child would have been entitled under section 80U had the total income of such minor child been computed separately." Earlier, section 80V, as inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and omitted by the Finance Act, 1985, w.e.f. 1-4-1986, read as under: "80V. Deduction of interest on moneys borrowed to pay taxes.-In computing the total income of an assessee, there shall be allowed by way of deduction any interest paid by him in the previous year on any money borrowed for the payment of any tax due from him under this Act." ----------------------------------------------------------------------- 1.429 1[80VV. Deduction in respect of expenses incurred in connection with certain proceedings under the Act.-Omitted by the Finance Act, 1985, w.e.f 1-4-1986. It was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f 1-4-1976.] ---------------------------------------------------------------------- 1 Prior to the omission, it read as under: "80VV. Deduction in respect of expenses incurred in connection with certain proceedings under the Act.-In computing the total income of an assessee, there shall be allowed by way of deduction any expenditure incurred by him in the previous year in respect of any proceedings before any income-tax authority or the Appellate Tribunal or any court relating to the determination of any liability under this Act, by way of tax, penalty or interest: Provided that no deduction under this section shall, in any case, exceed in the aggregate five thousand rupees." ---------------------------------------------------------------------- 1.430

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