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Income Tax Laws – I

Notes The Special Economic Zones and Tax Incentives offered as per the SEZ policy of India are indeed
alluring. The Special Economic Zones and Tax Incentives offered covers areas like state and local
taxes, levies, stamp duty and other duties. As per the Income-tax Act, 1961 there are a number of
key tax benefits to be provided to SEZs and SEZ Units.
All the Special Economic Zones function under the guardianship and the jurisdiction of the
Commerce Ministry, Government of India. The relevant or applicable exemptions and incentives
as offered for the operation of the Special Economic Zones are provided in the Special Economic
Zone Act of India. These exemptions on income taxes are detailed in the Second Schedule to the
SEZ Act. Section 27 of the SEZ Act provides -

Provisions of Income tax Act;
As in force for time being;
Shall apply to developer or entrepreneur;

For carrying on authorized operations in an SEZ or Unit;
Subject to modifications specified in Second Schedule;

6.1 Key Tax Benefits for SEZs and SEZ Units

Section 80-IA(1) provides a ten year tax holiday to an assessee, whose gross total income includes
any profits and gains derived by an undertaking or enterprise from an eligible business i.e.,
business referred to in sub-section (4), namely :
(1) Infrastructure facility: Any enterprise carrying on the business of:

a. developing
b. operating and maintaining; or
c. developing, operating and maintaining any infrastructure facility.
Conditions: However, such enterprise must fulfil the following conditions:
(i) It must be owned by a company registered in India or by a consortium of such
companies or by an authority or a board or a corporation or any other body
established or constituted under any Central or State Act.
(ii) It has entered into an agreement with the Central or a State Government or a local
authority or statutory body for:

developing or
operating and maintaining, or
developing, operating and maintaining a new infrastructure facility.
(iii) It starts operating and maintaining such infrastructure facility on or after 1-4-1995.
(iv) However, where an enterprise which developed such infrastructure facility transfers
it to another enterprise on or after 1-4-1999, and such transferee enterprise operates
and maintains it according to the agreement drawn up with the Government, etc.;
this section will apply to the transferee enterprise for the unexpired period of
deduction (which was available to the first enterprise).

Meaning of “infrastructure facility”: For this purpose, ‘infrastructure facility’ means:
(i) a road, including toll road, a bridge or a rail system

144 LOVELY PROFESSIONAL UNIVERSITY