Page 135 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes In this unit, you will be able to gain in-depth knowledge about the tax provisions in respect of
newly establish undertakings in FTZ, SEZ and 100% EOU in context with Income Tax Act, 1961.

6.1 Special Provision in Respect of Newly Established Undertaking
in FTZ’s

Free Trade Zone, also called Foreign-trade Zone, formerly Free Port, an area within which goods
may be landed, handled, manufactured or reconfigured, and re-exported without the intervention

of the customs authorities. Only when the goods are moved to consumers within the country in
which the zone is located do they become subject to the prevailing customs duties.

Did u know? There are six free trade zones in India namely Kandla Free Trade Zone, Santa
Cruz Electronics Export Processing Zone, Falta Export Processing Zone, Madras Export
Processing Zone, Cochin Export Processing Zone and Noida Export Processing Zone.

Subject to the provisions of this section, a deduction of such profits and gains as are derived by

an undertaking from the export of articles or things or computer software for a period of ten
consecutive assessment years beginning with the assessment year relevant to the previous year
in which the undertaking begins to manufacture or produce such articles or things or computer
software, as the case may be, shall be allowed from the total income of the assessee.

Provided that where in computing the total income of the undertaking for any assessment year,

its profits and gains had not been included by application of the provisions of this section as
it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be
entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid
ten consecutive assessment years.
An undertaking initially located in any free trade zone or export processing zone is subsequently
located in a special economic zone by reason of conversion of such free trade zone or export
processing zone into a special economic zone, the period of ten consecutive assessment years
referred to in this sub-section shall be reckoned from the assessment year relevant to the previous
year in which the undertaking began to manufacture or produce such articles or things or
computer software in such free trade zone or export processing zone.

For the assessment year beginning on the 1st day of April, 2003, the deduction under this
sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the

export of such articles or things or computer software; provided also that no deduction under
this section shall be allowed to any undertaking for the assessment year beginning on the 1st day
of April, 2012 and subsequent years.

6.1.1 Conditions to be Fulfi lled

The tax benefit under section 10A is available to an undertaking which fulfils all the following

conditions:
1. It has begun or begins to manufacture or produce articles or things or computer software
during the previous year relevant to the assessment year
(a) commencing on or after 1-4-1981, in any Free Trade Zone; or
(b) commencing on or after 1-4-1994, in any Electronic Hardware Technology Park or
Software Technology Park; or
(c) commencing on or after 1-4-2001, in any Special Economic Zone;

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