Section 205 — Conditions for tax on income of certain companies and co-operative societies

(1) For the purposes of sections 199(1)( c)(i)(C), 200(1)(a)(iii), 201(3)(a)(iii),
203(1)(a)(ii) and 204(3)( a)(ii), the total income shall be computed without
any deduction or exemption, under the following provisions:—
( a) section 33(8);
( b) section 45(3)(a) or (b) or (c);
( c) section 46;
( d) section 47(1)(a);
( e) section 48;
( f) section 49; and
( g) section 144.
(2) For the purposes of section 201 or 204, the following conditions shall apply to
the assessee:—
( a) its business is not formed by splitting up, or the reconstruction, of
a business already in existence, unless it is formed as a result of the
re-establishment, reconstruction or revival of the business of any such
undertaking as is referred to in section 140(4)in the circumstances and
within the period specified in the said section;
( b) it does not use any machinery or plant, previously used for any purpose,
other than—
( i) permitted machinery or plant used outside India;
( ii) machinery or plant or any part thereof previously used for any
purpose and the total value of such machinery or plant or any part
thereof put to use by the assessee does not exceed 20% of the total
value of the machinery or plant used by such assessee;
( c) in case of a domestic company, it does not use any building previously
used as a hotel or a convention centre, in respect of which deduction
under section 80-ID of the Income-tax Act, 1961 (43 of 1961) has been
claimed and allowed;
( d) it is not engaged in any business other than the business of manufacture
or production of any article or thing and research in relation to, or dis-
tribution of, such article or thing manufactured or produced by it,
and, if any difficulty arises in fulfilling any of the conditions contained in clause
(b) or (c) or (d), the Board may, with the previous approval of the Central Govern-
ment, issue guidelines for the purpose of removing the difficulty and to promote
manufacturing or production of article or thing using new plant and machinery.
(3) Every guideline issued by the Board under sub-section (2) shall be laid before
each House of Parliament while it is in session for a total period of thirty days which
may be comprised in one session or in two or more successive sessions, and if,
before the expiry of the session immediately following the session or the successive
sessions aforesaid, both houses agree in making any modification in such guideline
or both Houses agree that the guideline, should not be issued, the guideline shall
thereafter have effect only in such modified form or be of no effect, as the case may
be; so, however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that guideline.
(4) For the purposes of sections 201 and 204,—
( a) where it appears to the Assessing Officer that, owing to the close connec-
tion between the person to which the said section applies and any other
person, or for any other reason, the course of business between them
is so arranged that the business transacted between them produces to
the assessee more than the ordinary profits which might be expected to
arise in such business, then the Assessing Officer shall, in computing the
profits and gains of such business for the purposes of this section, take
profits as may be reasonably deemed to have been derived therefrom,
and where the said arrangement involves a specified domestic transac-
tion referred to in section 164, profits from such transaction shall be
determined having regard to the arm’s length price as defined in section
173(a); and
( b) the amount, being profits in excess of the profits determined by the
Assessing Officer under clause (a), shall be deemed to be the income of
the person and shall be chargeable at the rates specified in section 201(1)
[Table: Sl. No. 1.C(d)] or 204(1) [Table: Sl. No. 1.A(d)], as the case may
be.
(5) For the purposes of this Part,—
( a) the business of manufacture or production of any article or thing shall
include the business of generation of electricity but shall not include
business of—
( i) development of computer software in any form or in any media;
or
( ii) mining; or
( iii) conversion of marble blocks or similar items into slabs; or
( iv) bottling of gas into cylinder; or
( v) printing of books or production of cinematograph film; or
( vi) any other business as may be notified by the Central Government
in this behalf; and
( b) the expressions,—
( i) “hotel” and “convention centre” shall have the meanings respectively
assigned to them in clause (b) and clause (a) of section 80-ID(6) of
the Income-tax Act, 1961 (43 of 1961);
( ii) “permitted machinery and plant used outside India” means the
machinery or plant, which was previously used outside India by
any other person, if the following conditions are fulfilled:—
( A) such machinery or plant was not, at any time previous to the
date of the installation, used in India;
( B) such machinery or plant is imported into India from any
country outside India; and
( C) 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 before the date of installation of
machinery or plant by the person;
( iii) “unabsorbed depreciation” shall have the meaning assigned to it
in section 116(13)(e); and
( iv) “Unit”shall have the same meaning as assigned to it in section 2(zc)
of the Special Economic Zones Act, 2005 (28 of 2005).
D.—Special provisions relating to minimum
alternate tax and alternate minimum tax