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Unit 6: Deductions: For Special Conditions

A developer includes: Notes
(i) an authority and
(ii) a Co-developer.
Here Co-developer means:

(i) a person who, or
(ii) a State Government
which has been granted a letter of approval by the Central Government under section 3(12) of
the SEZ Act, 2005.
The deduction shall be allowed only if the accounts are audited by a Chartered Accountant and
the audit report is furnished along with the return of income. The assessee has the option of
claiming the said deduction for any ten consecutive assessment years out of fifteen years
beginning from the year in which a SEZ has been notified by the Central Government.

In a case where an undertaking, being a Developer, who develops a SEZ on or after 1.4.2005 and
transfers the operation and maintenance of such SEZ to another Developer, the deduction under
sub-section (1) shall be allowed to such transferee Developer for the remaining period in the ten
consecutive assessment years as if the operation and maintenance were not so transferred to the
transferee Developer.
The profits and gains from the eligible business should be computed as if such eligible business
were the only source of income of the assessee during the relevant assessment year.

Task Take any Indian firm of your choice who is engaged in development of SEZ and
critically analyse on the deduction availed by it in respect of profits and gains incurred by
it.

Where any goods or services held for the purposes of eligible business are transferred to any
other business carried on by the assessee or, where any goods held for any other business are
transferred to the eligible business and, in either case, if the consideration for such transfer as
recorded in the accounts of the eligible business does not correspond to the market value
thereof, then the profits eligible for deduction shall be computed by adopting market value for
such goods or services. In case of exceptional difficulty in this regard, the profits shall be computed
by the Assessing Officer on a reasonable basis.

Notes India was one of the first in Asia to recognize the effectiveness of the Export Processing
Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965.
With a view to overcome the shortcomings experienced on account of the multiplicity of
controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime
and with a view to attract larger foreign investments in India, the Special Economic Zones
(SEZs) Policy was announced in April 2000.

Where due to the close connection between the assessee and the other person or for any other
reason, it appears to the Assessing Officer that the profits of eligible business is increased to
more than the ordinary profits, the Assessing Officer shall compute the amount of profits on a

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