Section 80-IA of the Income Tax Act
Income-tax Act, 2025: s.138
Section 80-IA of the Income-tax Act, 1961 corresponds to section 138 (Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc) of the Income-tax Act, 2025.
Read section 138 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 80-IA is Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT (340 ITR 477), cited in 213 of the 612 judgments on BharatTax that turn on this section.
Leading authorities on Section 80-IA
If unabsorbed depreciation or losses from years prior to the initial assessment year for Section 80-IA claim have already been set off against other income, they cannot be notionally carried forward again to reduce the profits of the eligible unit for computing deduction under Section 80-IA. The notional carry forward provision under Section 80-IA(5) applies only to unabsorbed depreciation or losses that have not yet been absorbed.
No disallowance under Section 14A can be made when no exempt income has been earned by the assessee, and investments made for business purposes in subsidiaries do not warrant disallowance under Section 14A, even if no dividend income is earned.
When computing deduction under Section 80IA, specifically for inter-unit transfer of power, the benefit cannot be claimed based on rates chargeable by distribution licensees to consumers. The deduction must be computed based on the rate fixed by the Tariff Regulation Commission for sale by electricity generating companies.
Extraction and processing of iron ore constitutes "production" for the purpose of claiming tax benefits like investment allowance under Section 32A and additional depreciation under Section 32(1)(iia), even if it does not amount to "manufacture".
Disallowance under Section 14A read with Rule 8D(2)(iii) does not apply to long-term investments, including those in subsidiary/group concerns or strategic investments, and such investments should be excluded from the calculation.
The Gujarat High Court holds that the explanation to Section 80-IA(4) of the Income-tax Act, regarding works contracts for infrastructure facilities, is clarificatory and explanatory in nature, not an amendment with retrospective effect. Its vires are upheld as it does not levy tax retrospectively.
A taxpayer is eligible for deduction under Section 80IA for developing and operating infrastructure facilities, with the decision clarifying the distinction between a contractor and a developer for this purpose.
For Section 80IA deductions, the market value of electricity supplied by a captive power plant (eligible unit) to its industrial unit (non-eligible unit) must be computed by comparing prices in the open market and those charged by State Electricity Boards to industrial consumers.
A Special Bench decision of the ITAT, as reported in 135 ITD 165, must be followed by lower benches and appellate authorities due to judicial discipline.
Deduction under Section 80-IA or 80-IB is computed by setting it off against the gross total income to arrive at the total income of an assessee.
