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Unit 5: Exemptions and Deductions – II

(b) the provisions of this section shall, as they would have applied to the amalgamating or the Notes
demerged Unit being the company as if the amalgamation or demerger had not taken
place.
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, being the Unit shall be allowed
to be carried forward or set off.
For the purposes of sub-section (1), the profits derived from the export of articles or things or
services including computer software shall be the amount which bears to the profits of the
business of the undertaking, being the Unit, the same proportion as the export turnover in
respect of such articles or things or services bears to the total turnover of the business carried on:
Provided that the provisions of this sub-section shall have effect for the assessment year beginning
on the 1st day of April, 2006 and subsequent assessment years. The provisions of sub-sections (5)
and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1)
as if:

(a) For the figures, letters and word “1st April, 2001”, the figures, letters and word “1st April,
2006” had been substituted;
(b) For the word “undertaking”, the words “undertaking, being the Unit” had been substituted.

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.
Explanation 1: For the purposes of this section:
(i) “export turnover” means the consideration in respect of export by the undertaking, being
the Unit of articles or things or services received in, or brought into, India by the assessee
but does not include freight, telecommunication charges or insurance attributable to the
delivery of the articles or things outside India or expenses, if any, incurred in foreign
exchange in rendering of services (including computer software) outside India
(ii) “export in relation to the Special Economic Zones” means taking goods or providing
services out of India from a Special Economic Zone by land, sea, air, or by any other mode,
whether physical or otherwise

(iii) “manufacture” shall have the same meaning as assigned to it in clause (r) of section 2 of the
Special Economic Zones Act, 2005
(iv) “relevant assessment year” means any assessment year falling within a period of fifteen
consecutive assessment years referred to in this section
(v) “Special Economic Zone” and “Unit” shall have the same meanings as assigned to them
under clauses (za) and (zc) of section 2 of the Special Economic Zones Act, 2005.

Explanation 2: 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.

Did u know? In order to remove this anomaly, the aforesaid provision of the sub-section
(7) of section 10AA was amended by section 6 of the Finance (No. 2) Act, 2009, so as to
substitute the reference to “assessee” by the word “undertaking”. Accordingly, the
exemption under section 10AA was to be computed with reference to the total turnover of

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