Applicability under Deductions in respect of profits and gains from undertakings or enterprises engaged in infrastructure development, etc. [Section 80-IA] :
Section 80-IA(1) provides a ten year tax holiday to an assessee, whose gross total income includes any profits and gains derived by an undertaking or enterprise from an eligible business i.e., business referred to in sub-section (4), namely :
(1) Infrastructure facility – Any enterprise carrying on the business of :
(a) developing
(b) operating and maintaining; or
(c) developing, operating and maintaining any infrastructure facility.
Conditions: However, such enterprise must fulfill the following conditions :
(i) It must be 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.
(ii) It has entered into an agreement with the Central or a State Government or a local authority or statutory body for (i) developing or (ii) operating and maintaining, or (iii) developing, operating and maintaining a new infrastructure facility.
(iii) It starts operating and maintaining such infrastructure facility on or after 1-4-1995.
(iv) However, where an enterprise which developed such infrastructure facility transfers it to another enterprise on or after 1-4-1999, and such transferee enterprise operates and maintains it according to the agreement drawn up with the Government, etc., this section will apply to the transferee enterprise for the unexpired period of deduction (which was available to the first enterprise).
Meaning of “infrastructure facility”: For this purpose, ‘infrastructure facility‘ means :
(i) a road, including toll road, a bridge or a rail system;
(ii) a highway project including housing or other activities being an integral part of the highway project;
(iii) a water supply project, water treatment system, irrigation project, sani tation and sewerage system or solid waste management system; and
(iv) a port, airport, inland waterway or inland port or navigational channel in the sea.
Note – 1. Structures at the ports for storage, loading and unloading etc. will be included in the definition of port for the purpose of section 80-IA, if the concerned port authority has issued a certificate that the said structures form part of the port.
2. Effluent treatment and conveyance system is a part of water treatment system and would accordingly, qualify as an infrastructure facility for the purpose of section 80-IA.
3. The CBDT has, vide Circular No. 4/2010 dated 18.5.2010, clarified that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose.
(2) Telecom undertakings: Any undertaking providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service or network of trunking (NOT), broadband network and internet services on or after 1 April, 1995 but on or befor e 31 March, 2005.
Meaning of “domestic satellite”: ‘Domestic satellite‘ has been defined by sub -section (12)(a) as “a satellite owned and operated by an Indian company for providing telecommunication services.”
(3) Industrial parks / Special Economic Zones: Any undertaking which develops, develops and operates, or maintains and operates an industrial park or develops, or develops and operates, or maintains and operates, a special economic zone.
Conditions:
(i) The undertaking begins to operate an industrial park or special economic zone in accordance with the scheme framed and notified by the Central Government.
(ii) The scheme is notified by the Government for the period beginning on 1-4-1997 and ending on (i) 31-3-2011 for industrial parks and (ii) 31.3.2006 for SEZs. Rule 18C lays down the following eligibility criteria for Industrial Parks to claim benefit under section 80-IA (4)(iii) –
(1) The undertaking should begin to develop, develop and operate or maintain and operate an industrial park any time during the period from 1.4.2006 to 31.3.2009.
(2) The undertaking and the Industrial Park should be notified by the Central Government under the Industrial Park Scheme, 2008.
(3) The undertaking should continue to fulfill the conditions envisaged in the Industrial Park Scheme, 2008.
(iii) However, where an undertaking develops an industrial park on or after 1.4.1999 or a special economic zone on or after 1.4.2001 and transfers the operation and maintenance to another undertaking (transferee undertaking), the deduction to the transferee undertaking shall be available for the remaining period in the ten consecutive assessment years, in such a manner as would have been available to the transferor undertaking, as if the operation and maintenance were not so transferred to the transferee undertaking.
(4) Power undertakings: Any undertaking which
(i) is set up in any part of India for the generation or generation and distribution of power. However, such undertaking must begin to generate power at any time during the period between 1.4.1993 and 31.3.2017.
(ii) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period from 1.4.1999 and 31.3.2017. However, the deduction shall be allowed only in respect of profits derived from the laying of such network of new lines for transmission or distribution.
(iii) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on 1.4.2004 and ending on 31.3.2017.
‘Substantial renovation and modernisation‘ means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on 1st April, 2004.
Telecom and Power undertakings should fulfill the following conditions:
(a) It is not formed by splitting up or reconstruction of a business already in existence. However, this condition shall not apply in the case of an undertaking which is formed as a result of reconstruction, re-establishment or revival of the business of any undertaking which has been discontinued in any previous year due to extensive damage or destruction of any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business. Further, the reason for damage or destruction is due to any natural calamity or other unforeseen circumstances such as the following:
(i) Flood, typhoon, hurricane, cyclone, earthquake or other natural calamity, or
(ii) riot or civil disturbance, or
(iii) accidental fire or explosion, or
(iv) enemy action or action taken in combat,
and such business is re-established or revived within 3 years from the end of such previous year.
(b) The undertaking should not be formed by the transfer of machinery or plant previously used for any purpose.
However, these conditions do not apply in case of transfer, either in whole or in part, of machinery or plant previously used by a State Electricity Board. This is irrespective of whether or not such transfer is in pursuance of the splitting up or reconstruction of such State Electricity Board or reorganisation of the State Electricity Board under Part XIII of the Electricity Act, 2003.
Also, this condition shall not apply to second-hand machinery or plant imported by the assessee if the following conditions are fulfilled:
(i) Such machinery or plant was not used in India prior to the date of installation by the assessee.
(ii) No deduction on account of depreciation was allowed to any person prior to the date of installation by the assessee.
Further, where the total value of any plant or machinery previously used and now transferred to the new business does not exceed 20% of the total value of the machinery or plant used in the new business, such plant or machinery will be considered as new for this purpose.
(5) Undertakings owned by an Indian company and set up for reconstruction or revival of a power generating plant
(i) Clause (v) provides that the benefit under this section is available to an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant.
(ii) Such Indian company should be formed 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.
(iii) Such Indian company should have been notified before 31.12.2005 by the Central Government for the purposes of this clause.
(iv) Such undertaking should begin to generate or transmit or distribute power before 31.3.2011.