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Special Provision In Respect of Eligible Businesses

APMH Tax & VAT Auditor
Author: CA Charvik Momaya
Posted On: Tuesday 07 February 2017

Tags: startups Sec 80IAC

Clause 36 : Relates to amendments in case of Section 80-IAC of the Income Tax Act which comprises of special provisions provided to specified businesses.

CONDITIONS TO BE FULLFILLED IN ORDER TO QUALIFY FOR THE SAID SPECIFIED BUSINESS :

  • "Eligible business" means a business which involves innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property .

 

  • "Eligible start-up" means a company or a limited liability partnership engaged in eligible business which is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2019 .

 

  • The total turnover of its business should not exceed 25 Crores in any of the previous year beginning on or after 01.04.2016 and ending on 31.03.2021.

       

 DEDUCTION  ALLOWED :

  • When the gross total income of the business includes the profits and gains that arises from the above mentioned eligible business, then 100% deduction is allowed on the said earned income.

 

OPTIONS  GRANTED  FOR  CLIAMING  DEDUCTION :

           Can be claimed consecutively for 3 Assessment Years beginning from the date of incorporation of such Eligible Business .

OR

           Can be claimed consecutively for any 3 Assessment Years amongst the 5 Years .

            

CONDITIONS TO BE COMPILED FOR THE SAID DEDUCTION :

  • The business should not be formed by any split up , reconstruction , re-establishment or revival of a business already in existence.
  • The business should not be formed by the transfer to the new business of machinery or plant previously used for any purpose.

Following plant and machinery will 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 all the following conditions are fulfilled :

  • Such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India .
  • Such machinery or plant is imported into India .
  • 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.

 AMENDED PROVISION :

  • The Amended provision has extended the years for deduction from the said 5 years to 7 years.
  • According to the new amendment the deduction shall be allowed for any 3 consecutive Assessment years out of 7 years , beginning from the year in which such eligible start-up is incorporated.
  • The amendment will take effect from 01.04.2018 and will apply in relation to the AY 2018-19 and subsequent years.

 COMPARISON :

 

Sr.No

Proposed Areas Of Amendment

Existing Provision

Proposed Provision

1

Years allowed for deduction.

Any 3 Consecutive A.Y. amongst 5 years .

Any 3 Consecutive A.Y. amongst 7 years .

Author : Priya Mehta

Email : priya@apmh.in

For any queries on the above blog please free to write to us at priya@apmh.in / charvik@apmh.in    

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