As per the provisions of Section 80PA of the Income Tax Act, 1961, the Producer Company can claim a deduction of an amount equal to 100% of the profits and gains attributable to such business for the previous financial year relevant to an assessment year commencing on or after the 1st day of April, 2019, but before the 1st day of April, 2025 after meeting few conditions.
The assessee (Producer Company) can claim deduction under section 80PA if the following conditions are satisfied;
1. The Assessee is a producer company as defined in section 581A(i) of the Companies Act, 1956 (i.e., a body corporate which deals primarily with the produce of its active members. The objects of the producer company shall relate to all or any of the matters specified in section 581B of the Companies Act, 1956).
(a) Production, harvesting, processing, procurement, grading, pooling, handling, marketing, selling, export of *primary produce of the Members or import of goods or services for their benefit.
(b) Rendering technical services, consultancy services, training, education, research and development and all other activities for the promotion of the interests of its Members;
(c) Generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications relatable to primary produce;
(d) Promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce.
2. The total turnover of the company is less than Rs. 100 crores in any previous financial year.
3. Income of the company is inclusive of any profit and gains derived from the eligible business.
4. Eligible business for this purpose is –
(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.
Understand section 80PA with the help of below illustrative;
| Turnover of Eligible Business | Turnover of other business | Total Turnover | Whether eligible to claim deduction | Reason |
|---|---|---|---|---|
| 85 Crores | 14 Crores | 99 Crores | Yes | Total Turnover is less than Rs.100 crores |
| 70 Crores | 32 Crores | 102 Crores | No | Turnover is more than Rs.100 crores |
| 50 Crores | 50 Crores | 100 Crores | No | Turnover is not less than Rs.100 crores |
| NIL | 90 Crores | 90 Crores | No | Turnover does not include profit derived from eligible business |
| 100 Crores | NIL | 100 Crores | No | Turnover is not less than Rs.100 crores |