Section 80HHA:
Deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas.
1(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 2
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:
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 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 (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 3
of
each of the ten previous years beginning with the previous year in which the industrial undertaking
begins to manufacture or produce articles:
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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 co-operative 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.
(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 5
under 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 small-scale 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 undertaking
engaged in mining.
Explanation.—For the purposes of this section,—
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(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;
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(b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking which
is, 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).
Notes:
1. Ins. by Act 29 of 1977, s. 18 (w.e.f. 1-4-1978).
2. Ins. by 12 of 1990, s. 21 (w.e.f. 1-4-1990).
3. Subs. by Act 16 of 1981, s. 10, 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” (w.e.f. 1-4-1981).
4. Ins. by s. 10, ibid. (w.e.f. 1-4-1981).
5. Subs. by Act 44 of 1980, s. 35, for “under section 80J” (w.e.f. 1-4-1981).
6. Subs. by Act 4 of 1988, s. 126, for clause (a) (w.e.f. 1-4-1989).
7. Subs. by Act 27 of 1999, s. 44, for clause (b) (w.e.f. 1-4-1978).