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Income Tax Laws – I

Notes beginning from the year in which the special economic zone has been notified by the Central
Government. If a taxpayer who develops a special economic zone on or after April 1, 2005
(“transferor”) transfers the operation/maintenance of such zone to another developer
(“transferee”), then deduction shall be allowed to the transferee for the remaining period of 10
years as if the operation and maintenance were not so transferred. Similar rule will be applicable
in the case of amalgamation of an Indian company which has developed a special economic zone
with another Indian company.

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Caution One should also keep in view the following points–
1. The profits and gains from the eligible business shall be computed as if such eligible
business were the only source of income of the assessee during the relevant
assessment year.
2. The Assessing Officer has power to recompute profit in some cases. These cases are
given by section 80-IA(8)/(10).

3. Where any amount of profits and gains is claimed and allowed as deduction under
section 80-IAB for any assessment year, deduction to the extent of such profits and
gains shall not be allowed under sections 80HH to 80RRB and shall in no case
exceeds profits and gains of such eligible business.

Self Assessment

Fill in the blanks:
6. …………………was inserted in the Income-tax Act, 1961 by the Special Economic Zones
Act, 2005 (the SEZ Act) with effect from 10-2-2006.
7. …………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.
8. In case of an SEZ deduction for first five assessment years is…………. of the profit and
gains derived from export of articles or things or from services is deductible for a period
of 5 consecutive assessment years.

9. In respect of an undertaking setup in Special Economic Zone on or after April 1, 2003 a
deduction is available under ………………..
10. Where an undertaking is transferred to another company under a scheme of amalgamation
or demerger, the deduction under section 10AA shall be allowable in the hands of the
amalgamated or the …………………...

5.3 Special Provisions in Respect of Newly Established Undertakings

in 100% Export Oriented Units (EOUs)

The Export Oriented Unit (EOU) Scheme, which had been introduced in the early 1980s remains
in the forefront of country’s export production schemes. The Government amended in November
1983 a concession scheme to facilitate the setting up of Export Oriented Units (EOUs) in order to
enable them to meet requirements of foreign demand in terms of pricing, quality, precision etc.
The main objectives of the EOU scheme is to increase exports, earn foreign exchange to the
country, transfer of latest technologies stimulate direct foreign investment and to generate

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