Before incentives like Section 80-IA or Section 10AA became the backbone of India’s tax-benefit regime, there existed a different kind of relief — something raw, simple, and built for a newly industrialising nation.
Section 84 of the Income Tax Act has been omitted (repealed) since April 1, 1968, by the Finance (No. 2) Act, 1967. But in its time, it carried an idea that shaped decades of India’s industrial policy.
It primarily offered a “tax holiday” or partial exemption for the profits of newly established industrial undertakings & hotels, encouraging entrepreneurs to dream bigger during a time when resources were scarce and risks were enormous.
What Was Section 84?
The original tax boost for new industries. Section 84 was essentially an incentive.
Its purpose was simple:
To support newly established industrial undertakings & hotels by giving them partial tax exemptions on their profits."
The logic was:
If businesses get breathing room in the initial years, they could reinvest more, grow faster, and create jobs.
This tax holiday became extremely meaningful for industries trying to find their footing in post-independence India.
How Section 84 Worked
Section 84 allowed new industrial undertakings to exempt income up to 6% of the capital employed in the business.
So if a company had:
- Paid-up capital reserves borrowed capital (qualifying amounts)
- Totaling ₹50 lakhs
They could claim a tax exemption up to:
6% of ₹50 lakhs = ₹3 lakhs
For those days, that was a generous relief. And this exemption wasn’t limited to just manufacturers — hotels were also included because they were seen as an essential part of attracting tourism & building economic infrastructure.
Also Read: Tax Deductions for SEZ Units
Why Section 84 Mattered in Its Era
To understand its importance, imagine starting a factory in the 1960s.
You would face:
- Limited access to capital
- Government-controlled licensing
- High import duties on machinery
- Scarcity of skilled manpower
- Heavy reliance on bank loans
Profit margins were thin, and the gestation period for industrial plants was long.
A factory owner once described the early years of his father’s steel business to me: "For three years, every paisa went into running the machines. A tax break back then meant survival."
That’s exactly what Section 84 provided — survival & breathing room.
Section 84 and Industrial Growth
The provision supported:
- Manufacturing units
- Engineering industries
- Textile mills
- Food processing units
- Chemical industries
- Early private-sector hotels
These sectors played a major role in strengthening the nation’s industrial backbone. Many family-owned enterprises that later became large corporations benefited from this incentive.
Link to Capital Employed
One interesting feature of Section 84 was its focus on capital employed, not profits earned.
This meant:
- A company investing more capital would get a higher tax exemption
- The government encouraged reinvestment
- Industrial growth wasn’t tied to immediate profitability
This made sense because early-stage businesses often reinvested everything into operations rather than showing huge profits.
Also Read: Capital Gain Exemption on Compulsory Acquisition of Urban Agricultural Land
Section 84 and Compulsory Acquisition
The provision also connected to situations involving:
Capital gains on compulsory acquisition of lands & buildings.
If land or property of an industrial undertaking was compulsorily acquired, certain benefits linked to Section 84 could interact with the capital gains rules to ensure relief for the business. This offered businesses a cushion in case of government acquisition — quite relevant during periods of rapid public infrastructure expansion.
Why Section 84 Was Repealed
With changing economic realities, Section 84 eventually became outdated. It was repealed and replaced by Section 80J, which introduced a more structured approach to tax exemptions for new industries.
Later, Section 80-IA, 80-IB, SEZ exemptions, and other modern incentive schemes took over.
Still, Section 84 laid the foundation for India’s industrial tax incentive framework.
A Small Real Moment From Modern Times
I once met a hotel owner who showed me papers from his grandfather’s time. Among them was a handwritten note referring to “tax relief under Section 84.”
He smiled and said, "This section practically helped our family build its second property."
It’s fascinating how a repealed tax law can still create ripples in family histories.
Section 84’s Legacy
Even though it no longer exists, Section 84 shaped:
- How tax holidays are structured today
- The philosophy behind industrial incentives
- India’s approach to boosting capital-intensive sectors
- The balance between growth & tax revenue
It also highlighted the government’s intention to ensure that paid-up capital can be returned to shareholders after allowing industries a fair chance to grow.
Also Read: TDS on Compensation for Compulsory Acquisition of Property
Key Takeaways About Section 84
- Section 84 has been omitted since April 1, 1968, by Finance (No. 2) Act, 1967.
- It provided a tax holiday for newly established industrial undertakings & hotels.
- It allowed exemption of income up to 6% of capital employed."
- Connected with matters like capital gains on compulsory acquisition.
- It offered one of the earliest tax exemptions to new industrial undertakings.
- Although repealed, it influenced modern incentive structures like 80-IA, 80-IB, and SEZ regimes.
Conclusion
Section 84 may no longer exist, but its spirit remains alive in the way India continues to support new industries, infrastructure, and tourism. It was one of the earliest attempts at nurturing business growth through tax incentives, and many enterprises owe their stability & expansion to this provision.
If you ever need help understanding old or new business tax incentives, or planning your company’s tax strategy, the experts at CallMyCA.com are always just one message away.
