Page 141 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes
Example: To clarify the above position, certain illustrations are given as under:
(i) Undertaking ‘A’ is set up in domestic Tariff Area and starts manufacture or production of
computer software in Financial Year 1999–2000 relevant to assessment year 2000–01. It
gets approval as 100% EOU on 10th September, 2004 in the Financial Year 2004–05 relevant
to assessment year 2005–06. Accordingly, it shall be eligible for deduction under section
10B from assessment year 2005–06 i.e., the year in which it fulfils the basic condition of
being a 100% EOU. Further, the deduction shall be available only for the remaining period
of ten years i.e. from AY. 2005–06 to A.Y. 2009–10. This deduction under section 10B for
A.Y. 2005–06 shall be restricted to the profits derived from exports, from and after the date
of approval of the DTA unit as 100% EOU.

(ii) Undertaking ‘B’ set up in Domestic Tariff Area, begins to manufacture or produce computer
software in financial year 96–97 relevant to assessment year 1997–98. It gets approval as
100% EOU in Financial year 2007–08 relevant to assessment year 2008–09. No deduction
under section 10B shall be admissible to undertaking B as the period of 10 years expires in
F.Y. 2005–06 relevant to A.Y. 2006–07 prior to its approval as 100% EOU.
(iii) Undertaking ‘C’ is set up in Domestic Tariff Area in the financial year 2000–01 relevant to
assessment year 2001–02 and engaged in the business of providing computer related
services, other than those notified by the Board for the purpose of section 10B. In financial
year 2002–2003, it acquires more than 20% of old plant & machinery and starts manufacturing
computer software. It also gets approval as 100% EOU in financial year 2002–03. Undertaking
‘C’ shall not be eligible for deduction under section 10B, as there has been transfer of old
plant and machinery.
(iv) Undertaking ‘D’ is set up and starts producing computer software in Financial year
2003–04 relevant to AY 2004–05. It gets approval as 100% EOU in FY 2006–07 relevant to
AY 2007–08. It shall be eligible for deduction u/s. 10B from AY 2007–08. However, the
deduction shall not be available after AY 2009–10.
(v) Undertaking ‘E’ is set up and starts producing computer software prior to 31.3.1994. It gets
approval as 100% EOU in FY 2004–05 relevant to AY 2005–06. Undertaking ‘E’ shall not be
eligible for deduction u/s. 10B as the period of deduction of 10 years expires prior to
A.Y. 2005–06.

5.3.3 Consequences for Amalgamation and Demerger

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:
(i) Amalgamating or the Demerged company: 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
(ii) Amalgamated or the Resulting company: Deduction shall be admissible under this section
to the amalgamated or the resulting company for the unexpired period of deduction.
Self Assessment

Fill in the blanks:
11. The Government amended in November 1983 a concession scheme to facilitate the setting
up of ………………in order to enable them to meet requirements of foreign demand in
terms of pricing, quality, precision etc.

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