Page 130 - DCOM301_INCOME_TAX_LAWS_I

Unit 5: Exemptions and Deductions – II

3. The undertaking should not be formed: Notes
(a) by splitting up, or by the reconstruction, of a business already in existence; or
(b) by a transfer to new business of machinery and plant previously used for any purpose
by the assessee;
4. The assessee has exported goods or provided services out of India from the SEZ, whether
physically or otherwise

5. The books of account are audited and audit report is filed along with the return of income
and the assessee claims the deduction in its return of income;
Subject to the provisions of the Section10AA(1), in computing the total income of an assessee,
being an entrepreneur as referred to in clause (j) of section 228 of the Special Economic Zones
Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any
services during the previous year relevant to any assessment year commencing on or after the
1st day of April, 2006, a deduction of:

(i) Hundred per cent of profits and gains derived from the export, of such articles or things or
from services for a period of five consecutive assessment years beginning with the
assessment year relevant to the previous year in which the Unit begins to manufacture or
produce such articles or things or provide services, as the case may be, and fifty per cent of
such profits and gains for further five assessment years and thereafter;
(ii) For the next five 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 Reserve Account”) to be created and
utilized for the purposes of the business of the assessee in the manner laid down in
sub-section (2).

The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions
are fulfilled, namely:
a. the amount credited to the Special Economic Zone Re-investment Reserve Account is to be
utilised—
(i) for the purposes of acquiring machinery or plant which is first put to use before the
expiry of a period of three years following the previous year in which the reserve
was created; and
(ii) until the acquisition of the 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 specified by the Central Board of Direct Taxes in this behalf,
under clause (b) of sub-section (1B) of section 10A have been furnished by the assessee in
respect of machinery or plant along with the return of income29 for the assessment year
relevant to the previous year in which such plant or machinery was first put to use.
Where any amount credited to the Special Economic Zone Re-investment Reserve Account
under clause (ii) of sub-section (1): (a) has been utilised for any purpose other than those referred
to in sub-section (2), 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 (2), the amount not so utilised, shall
be deemed to be the profits:

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