Deduction in respect of inter-corporate dividends: – As per section 80M of Income-tax Act, 1961, a domestic company is allowed to get deduction from gross total income if it receives any dividend income from any domestic company or a foreign company, or a business trust.
Least of the following would be deduction: –
- Dividend received.
- OR
- Dividend distributed by domestic company before the due date.
Example:- XYZ Ltd. a domestic company received dividend of ₹ 12 Lakhs from ABC Ltd., a domestic company [100% subsidiary of XYZ Ltd.] during the previous year 2022-23. on 15th may, 2023, XYZ Ltd. declares and distributed dividend of ₹ 6 lakhs.
In above example, XYZ Ltd. would receive deduction under Section 80M in respect of dividend received from ABC Ltd. to the extent ₹ 6 lakhs.
Note: – No deduction will get by domestic company in any other previous year, if domestic company has already received deduction under this section in any previous year.
Note: – Meaning of due date– Due date means the date which comes prior to the date for furnishing the return of income under section 139(1).
Deduction in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone Section 80-IAB
As per section 80-IAB of Income-tax Act, 1961, a developer whose gross total income includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after 01.04.2005 under the SEZ Act, 2005.
Further, the eligible assessee is the developer.
In addition, Developer means a person who has been granted a letter of approval by the Central Government or a State Government which has been granted a letter of approval by the Central Government under SEZ Act, 2005.
And, a developer includes an authority and a Co-developer [a person or State Government who has a letter of approval of Central Government under SEZ Act, 2005].
Deduction: – 100 % of the profits and gains derived from any business of developing a Special Economic Zone for 10 consecutive assessment years.
Lastly, Important note:- The assessee has option to claim deduction for any ten consecutive assessment years out of fifteen years beginning from the year in which a Special Economic Zone has been notified by the Central Government. And, If the developer transfers the operation and maintenance of such Special Economic Zone to another developer, then deduction shall allow to transferee developer for the remaining period in the 10 consecutive assessment years.
Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. [Section 80-IA]
As per Section 80-IA of the Income-tax Act,1961, an assessee whose gross total income includes any profits and gains derived by an undertaking or an enterprise from the business mentioned below is eligible to avail the deduction of 100% of profits and gains from the gross total income for 10 consecutive assessment years
Infrastructure facility: – Any enterprise carrying on the business of: –
- developing or
- operates and maintains or
- develops, operates and maintains any infrastructure facility.
However, the enterprise must fulfill the following conditions: –
- it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act.
- it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i)developing or (ii)operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.
- it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995
Provided that where an infrastructure facility is transferred on or after 01.04.1999 by an enterprise which developed such infrastructure facility to another enterprise in accordance with the agreement with the Central Government, State Government, local authority or statutory body, then transferee company can avail deduction for remaining period.
Further, Infrastructure facility means: –
(a) a road including toll road, a bridge or a rail system.
(b) a highway project including housing or other activities being an integral part of the highway project.
(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system.
(d) a port, airport, inland waterway, inland port or navigational channel in the sea.
Note: – Lastly, no deduction to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 01.04.2017.
Industrial Parks: –
Any undertaking which which develops, develops and operates or maintains and operates an industrial park after 31.03.1997 but before 01.04.2011 or special economic zone notified by the Central Government in accordance with the scheme framed and notified after 31.03.1997 but before 01.04.2006.
Further, where an undertaking develops an industrial park on or after 01.04.1999 or a special economic zone on or after 01.04.2001 and transfers the operation and maintenance of such industrial park or such special economic zone to another undertaking, then the transferee will get deduction for remaining period.
Generation and distribution of power: –
An undertaking which: –
(1) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power after 31.03.1993 but before 01.04.2017.
(2) starts transmission or distribution by laying a network of new transmission or distribution lines after 31.03.1999 but before 01.04.2017
(3) undertakes substantial renovation and modernization of the existing network of transmission or distribution lines after 31.03.2004 but before 01.04.2017.
Furthermore, substantial renovation and modernization” means an increase in the plant and machinery in the network of transmission or distribution lines by at least 50% of the book value of such plant and machinery as on 01.04.2004.
an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant is eligible for deduction if: –
- The Indian company forms before 30.11.2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and notified by the Central Government before 31.12.2005.
- The undertaking begins to generate transmit or distribute power before 31.03.2011
Quantum of deduction and period: – 100% of profits and gains for 10 consecutive assessment years and option to claim such deduction for 10 consecutive assessment years out of 15 years [20 years in case of infrastructure facility].
The deduction from profits and gains is allowed in respect of housing and other activities which are integral part of a highway project but the following conditions should be fulfilled.
- The profits has transferred to special reserve account.
- The profit is utilized for the highway project excluding housing and other activities before the expiry of 3 years from the year in which amount transferred to reserve account.
- The amount remaining unutilized is chargeable to tax as income.
Moreover,
Audit of accounts: – The undertaking is eligible to avail deduction only if accounts have audited by a chartered accountant and assessee furnishes the audit report in the prescribed form duly signed and verified one month prior to due date for filing return of income under section 139(1).
Lastly, the Central Government has power to deny any class of industrial undertaking or enterprise for deduction under this section.