Introduction
The Indian Income Tax Act, 1961 (ITA) allows eligible assesses /tax payers to get a certain amount of deduction from their gross total income, towards their taxable income. This incentive is provided to encourage and promote certain investments or profits which would otherwise not be made or earned, but for the said incentive. One such incentive provided by the ITA is the deduction 80PA which is applicable in respect of income of Producer Companies.
Background
Deduction under Section 80PA of the ITA is provided in the form of exemption for income of Producer Companies, which are registered under Section 465 of the Companies Act, 1956, or specified in section 581B and registered as a Producer Company under the Companies Act, 2013 as well as companies which are declared as Producer Companies by the Central Government. The deduction is provided from the gross total income, and is available in respect of profits and gains earned from any industry or business which is related to the primary purpose of Producer Companies. It should be noted here that the deduction is provided subject to certain conditions, as set out herein.
Bare Act provisions of Section 80PA
Deduction in respect of certain income of Producer Companies.
80PA. (1) Where the gross total income of an assessee, being a Producer Company having a total turnover of less than one hundred crore rupees in any previous year, includes any profits and gains derived from eligible business, 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 of an amount equal to one hundred per cent of the profits and gains attributable to such business for the previous year relevant to an assessment year commencing on or after the 1st day of April, 2019, but before the 1st day of April, 2025.
(2) In a case where the assessee is entitled also to deduction under any other provision of this Chapter, the deduction under this section shall be allowed with reference to the income, if any, as referred to in this section included in the gross total income as reduced by the deductions under such other provision of this Chapter.
Explanation.—For the purposes of this section,—
(i) “eligible business” means—
(a) the marketing of agricultural produce grown by the members; or
(b) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the members; or
(c) the processing of the agricultural produce of the members;
(ii) “member” shall have the meaning assigned to it in clause (d) of section 581A of the Companies Act, 1956 (1 of 1956);
(iii) “Producer Company” shall have the meaning assigned to it in clause (l) of section 581A of the Companies Act, 1956 (1 of 1956).
Key Provisions of Section 80PA
1. Section 80PA of the Income Tax Act, 1961, allows a 100% deduction of profits and gains attributable to an eligible business to a Producer Company with a turnover of less than one hundred crore rupees in the previous year.
2. This deduction is applicable to assessment years commencing on or after 1st April, 2019 and before 1st April, 2025.
3. Eligible business as referred to in Section 80PA of the Income Tax Act 1961 includes farming, dairy, processing of agricultural produce, pisciculture, poultry and hatcheries, manufacturing, trading, sale, marketing, and other related activities in relation to such items as specified by the Central Government.
4. Section 80PA of the Income Tax Act, 1961 allows a deduction to Producer Companies from their gross total income. To avail this benefit, the company should have a total turnover of less than one hundred crore rupees in the previous year.
5. The deduction amount is equal to one hundred percent of the profits and gains derived from the eligible business for the previous year relevant to the assessment year 2019 to 2025.
6. The benefits of this tax break can be availed by all the Producer Companies. Eligible Businesses include farming activities, agricultural operations, manufacturing, sale and export of produce of the Producer Company, trading of produce and services, income from value-added produce and any other activity specified in the rules made by the Central Government.
7. The deduction is allowed subject to the provisions of this section, which means that in order to avail the deduction benefit, the Producer Company must fulfill various conditions specified in this section such as filing of return in accordance with the rules and regulations of the Income Tax Act, 1961 and concentration limits of producer companies specified by the Central Government.
8. In addition to this, the Producer Company should furnish information regarding the business activities, nature of business, turnover, profits, etc. within the specified time frame in order to avail the deduction benefit.
9. It is also important for the Producer Company to obtain a certificate from the Chartered Accountant for claiming this deduction. This deduction will help in reducing the corporate income tax liability and will ultimately help in improving the business activities of the Producer Companies.
In conclusion, it can be said that Section 80PA of the Income Tax Act 1961 provides for deduction in respect of certain income of Producer Companies. This deduction is allowed for the purpose of promoting socio-economic development of agricultural, horticultural, animal husbandry and fishery operations. This deduction is not available to individual producers but only to registered Producer Companies. It is thus an important tool to promote the socio-economic development of the farmers.
(Author can be reached at email address casharma.sharad2000@gmail.com or on Mobile No. 9990365673)
Disclaimer : “Neither this article nor the information contained herein shall in any way be construed as forming a contract or shall constitute professional advice required before acting upon any matter. CA Sharad Kumar Sharma has taken all due care in the preparation of this article for accuracy in its contents at the time of publication. However, no liability shall be accepted by him in the event of any direct, indirect or consequential damages arising out of or in any way connected with the use of this article or its contents. “
Author Bio
is MAT applicable for the companies claiming deduction 80PA