Special provision in respect of newly established undertakings in free trade zone, etc is defined under section 10A of Income Tax Act 1961. Provision under this section is:
Section 10A of Income Tax Act "Special provision in respect of newly established undertakings in free trade zone, etc"
10A. (1) Subject to the provisions of this section, a
deduction of such profits and gains as are derived by an
undertaking from the export of articles or things or
computer software for a period of ten consecutive assessment
years beginning with the assessment year relevant to the
previous year in which the undertaking begins to manufacture
or produce such articles or things or computer software, as
the case may be, shall be allowed from the total income of
the assessee :
Provided that where in computing the total income of the
undertaking for any assessment year, its profits and gains
had not been included by application of the provisions of
this section as it stood immediately before its substitution
by the Finance Act, 2000, the undertaking shall be entitled
to deduction referred to in this sub-section only for the
unexpired period of the aforesaid ten consecutive assessment
years :
Provided further that where
an undertaking initially located in any free trade zone
or export processing zone is subsequently located in a
special economic zone by reason of conversion of such
free trade zone or export processing zone into a special
economic zone, the period of ten consecutive assessment
years referred to in this sub-section shall be reckoned
from the assessment year relevant to the previous year
in which the undertaking began to manufacture or produce
such articles or things or computer software in such
free trade zone or export processing zone :
Provided also that for the assessment year beginning on
the 1st day of April, 2003, the deduction under this
sub-section shall be ninety per cent of the profits and
gains derived by an undertaking from the export of such
articles or things or computer software :
Provided also that no deduction under this section shall be
allowed to any undertaking for the assessment year beginning on the
1st day of April, 2012 and subsequent years.
(1A) Notwithstanding anything contained in sub-section (1),
the deduction, in computing the total income of an undertaking,
which begins to manufacture or produce articles or things or
computer software during the previous year relevant to any
assessment year commencing on or after the 1st day of April, 2003,
in any special economic zone, shall be,-
(i) hundred per cent of profits and gains derived from the
export of such articles or things or computer software for a period
of five consecutive assessment years beginning with the assessment
year relevant to the previous year in which the undertaking begins
to manufacture or produce such articles or things or computer
software, as the case may be, and thereafter, fifty per cent of such
profits and gains for further two consecutive assessment years, and
thereafter;
(ii) for the next three consecutive assessment years, so
much of the amount not exceeding fifty per cent of the profit as is
debited to the profit and loss account of the previous year in
respect of which the deduction is to be allowed and credited to a
reserve account (to be called the "Special Economic Zone
Re-investment Allowance Reserve Account") to be created and utilised
for the purposes of the business of the assessee in the manner laid
down in sub-section (1B) :
Provided that no deduction under this section shall be
allowed to an assessee who does not furnish a return of his income
on or before the due date specified under sub-section (1) of section
139.
(1B) The deduction under clause (ii) of sub-section (1A)
shall be allowed only if the following conditions are fulfilled,
namely:-
(a) the amount credited to the Special Economic Zone
Re-investment Allowance Reserve Account is to be utilised-
(i) for the purposes of acquiring new machinery or plant
which is first put to use before the expiry of a period of three
years next following the previous year in which the reserve was
created; and
(ii) until the acquisition of new machinery or plant as
aforesaid, for the purposes of the business of the undertaking other
than for distribution by way of dividends or profits or for
remittance outside India as profits or for the creation of any asset
outside India;
(b) the particulars, as may be prescribed78 in this behalf,
have been furnished by the assessee in respect of new machinery or
plant along with the return of income for the assessment year
relevant to the previous year in which such plant or machinery was
first put to use.
(1C) Where any amount credited to the Special Economic Zone
Re-investment Allowance Reserve Account under clause (ii) of
sub-section (1A),-
(a) has been utilised for any purpose other than those
referred to in sub-section (1B), the amount so utilised; or
(b) has not been utilised before the expiry of the period
specified in sub-clause (i) of clause (a) of sub-section (1B), the
amount not so utilised,
shall be deemed to be the profits,-
(i) in a case referred to in clause (a), in the year in
which the amount was so utilised; or
(ii) in a case referred to in clause (b), in the year
immediately following the period of three years specified in
sub-clause (i) of clause (a) of sub-section (1B),
and shall be charged to tax accordingly.
(2) This section applies to any undertaking which fulfils
all the following conditions, namely :-
(i) it has begun or begins to manufacture or produce
articles or things or computer software during the previous year
relevant to the assessment year-
(a) commencing on or after the 1st day of April, 1981, in
any free trade zone; or
(b) commencing on or after the 1st day of April, 1994, in
any electronic hardware technology park, or, as the case may be,
software technology park;
(c) commencing on or after the 1st day of April, 2001 in any
special economic zone;
(ii) it is not formed by the splitting up, or the
reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of
any undertaking which is formed as a result of the re-establishment,
reconstruction or revival by the assessee of the business of any
such undertakings as is referred to in section 33B, in the
circumstances and within the period specified in that section;
(iii) it is not formed by the transfer to a new business of
machinery or plant previously used for any purpose.
Explanation.-The provisions of Explanation 1 and Explanation
2 to sub-section (2) of section 80-I shall apply for the purposes of
clause (iii) of this sub-section as they apply for the purposes of
clause (ii) of that sub-section.
(3) This section applies to the undertaking, if the sale
proceeds of articles or things or computer software exported out of
India are received in, or brought into, India by the assessee in
convertible foreign exchange, within a period of six months from the
end of the previous year or, within such further period as the
competent authority may allow in this behalf.
Explanation 1.-For the purposes of this sub-section, the
expression "competent authority" means the Reserve Bank of India or
such other authority as is authorised under any law for the time
being in force for regulating payments and dealings in foreign
exchange.
Explanation 2.-The sale proceeds referred to in this
sub-section shall be deemed to have been received in India where
such sale proceeds are credited to a separate account maintained for
the purpose by the assessee with any bank outside India with the
approval of the Reserve Bank of India.
(4) For the purposes of sub-sections (1) and (1A), the
profits derived from export of articles or things or computer
software shall be the amount which bears to the profits of the
business of the undertaking, the same proportion as the export
turnover in respect of such articles or things or computer software
bears to the total turnover of the business carried on by the
undertaking.
(5) The deduction under this section shall not be admissible
for any assessment year beginning on or after the 1st day of April,
2001, unless the assessee furnishes in the prescribed form79, along
with the return of income, the report of an accountant, as defined
in the Explanation below sub-section (2) of section 288, certifying
that the deduction has been correctly claimed in accordance with the
provisions of this section.
(6) Notwithstanding anything contained in any other
provision of this Act, in computing the total income of the assessee
of the previous year relevant to the assessment year immediately
succeeding the last of the relevant assessment years, or of any
previous year, relevant to any subsequent assessment year,-
(i) section 32, section 32A, section 33, section 35 and
clause (ix) of sub-section (1) of section 36 shall apply as if every
allowance or deduction referred to therein and relating to or
allowable for any of the relevant assessment years ending before the
1st day of April, 2001, in relation to any building, machinery,
plant or furniture used for the purposes of the business of the
undertaking in the previous year relevant to such assessment year or
any expenditure incurred for the purposes of such business in such
previous year had been given full effect to for that assessment year
itself and accordingly sub-section (2) of section 32, clause (ii) of
sub-section (3) of section 32A, clause (ii) of sub-section (2) of
section 33, sub-section (4) of section 35 or the second proviso to
clause (ix) of sub-section (1) of section 36, as the case may be,
shall not apply in relation to any such allowance or deduction;
(ii) no loss referred to in sub-section (1) of section 72 or
sub-section (1) or sub-section (3) of section 74, in so far as such
loss relates to the business of the undertaking, shall be carried
forward or set off where such loss relates to any of the relevant
assessment years ending before the 1st day of April, 2001;
(iii) no deduction shall be allowed under section 80HH or
section 80HHA or section 80-I or section 80-IA or section 80-IB in
relation to the profits and gains of the undertaking; and
(iv) in computing the depreciation allowance under section
32, the written down value of any asset used for the purposes of the
business of the undertaking shall be computed as if the assessee had
claimed and been actually allowed the deduction in respect of
depreciation for each of the relevant assessment year.
(7) The provisions of sub-section (8) and sub-section (10)
of section 80-IA shall, so far as may be, apply in relation to the
undertaking referred to in this section as they apply for the
purposes of the undertaking referred to in section 80-IA.
(7A) Where any undertaking of an Indian company which is
entitled to the deduction under this section is transferred, before
the expiry of the period specified in this section, to another
Indian company in a scheme of amalgamation or demerger,-
(a) no deduction shall be admissible under this section to
the amalgamating or the demerged company for the previous year in
which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as far as may be,
apply to the amalgamated or the resulting company as they would have
applied to the amalgamating or the demerged company if the
amalgamation or demerger had not taken place.
(7B) The provisions of this section shall not apply to any
undertaking, being a Unit referred to in clause (zc) of section 2 of
the Special Economic Zones Act, 2005, which has begun or begins to
manufacture or produce articles or things or computer software
during the previous year relevant to the assessment year commencing
on or after the 1st day of April, 2006 in any Special Economic Zone.
(8) Notwithstanding anything contained in the foregoing
provisions of this section, where the assessee, before the due date
for furnishing the return of income under sub-section (1) of section
139, furnishes to the Assessing Officer a declaration in writing
that the provisions of this section may not be made applicable to
him, the provisions of this section shall not apply to him for any
of the relevant assessment years.
(9) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
(9A) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Explanation 1.- [Omitted by the Finance Act, 2003, w.e.f.
1-4-2004.]
Explanation 2.-For the purposes of this section,-
(i) "computer software" means-
(a) any computer programme recorded on any disc, tape,
perforated media or other information storage device; or
(b) any customized electronic data or any product or service
of similar nature, as may be notified by the Board,
which is transmitted or exported from India to any place
outside India by any means;
(ii) "convertible foreign exchange" means foreign exchange
which is for the time being treated by the Reserve Bank of India as
convertible foreign exchange for the purposes of 80[the Foreign
Exchange Management Act, 1999 (42 of 1999)], and any rules made
thereunder or any other corresponding law for the time being in
force;
(iii) "electronic hardware technology park" means any park
set up in accordance with the Electronic Hardware Technology Park (EHTP)
Scheme notified by the Government of India in the Ministry of
Commerce and Industry;
(iv) "export turnover" means the consideration in respect of
export by the undertaking of articles or things or computer software
received in, or brought into, India by the assessee in convertible
foreign exchange in accordance with sub-section (3), but does not
include freight, telecommunication charges or insurance attributable
to the delivery of the articles or things or computer software
outside India or expenses, if any, incurred in foreign exchange in
providing the technical services outside India;
(v) "free trade zone" means the Kandla Free Trade Zone and
the Santacruz Electronics Export Processing Zone and includes any
other free trade zone which the Central Government may, by
notification in the Official Gazette, specify for the purposes of
this section;
(vi) "relevant assessment year" means any assessment year
falling within a period of ten consecutive assessment years referred
to in this section;
(vii) "software technology park" means any park set up in
accordance with the Software Technology Park Scheme notified by the
Government of India in the Ministry of Commerce and Industry;
(viii) "special economic zone" means a zone which the
Central Government may, by notification in the Official Gazette,
specify as a special economic zone for the purposes of this section.
Explanation 3.-For the removal of doubts, it is hereby
declared that the profits and gains derived from on site development
of computer software (including services for development of
software) outside India shall be deemed to be the profits and gains
derived from the export of computer software outside India.
Explanation 4.-For the purposes of this section,
"manufacture or produce" shall include the cutting and polishing of
precious and semi-precious stones.
What are the Definitions under Income Tax 1961? Section 2 of Income Tax Act 1961
What is Previous Year? What is Charge of Income tax? Section 3 and 4 of Income Tax Act 1961
What is Dividend income? Section 8 of Income Tax Act 1961
What is Income deemed to accrue or arise in India? Section 9 of Income Tax Act 1961
What are the Incomes not included in total income? Section 10 of Income Tax Act 1961
What is Meaning of computer programmes in certain cases? Section 10BB of Income Tax Act 1961