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Corporate Tax Planning

Notes Where any amount credited to the Special Economic Zone Re-investment Reserve Account under
clause (ii) of sub-section (1):
(a) has been utilised for any purpose other than those referred to in sub-section (2), the amount
so utilised; or

(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a)
of sub-section (2), the amount not so utilised, shall be deemed to be the profi ts:
(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or
(ii) in a case referred to in clause (b), in the year immediately following the period of
three years specified in sub-clause (i) of clause (a) of sub-section (2), and shall be

charged to tax accordingly:
Provided that where in computing the total income of the Unit for any assessment year, its profi ts
and gains had not been included by application of the provisions of sub-section (7B) of section
10A, the undertaking, being the Unit shall be entitled to deduction referred to in this sub-section
only for the unexpired period of ten consecutive assessment years and thereafter it shall be
eligible for deduction from income as provided in clause (ii) of sub-section (1).
Explanation: For the removal of doubts, it is hereby declared that an undertaking, being the Unit,
which had already availed, before the commencement of the Special Economic Zones Act, 2005,
the deductions referred to in section 10A for ten consecutive assessment years, such Unit shall
not be eligible for deduction from income under this section :
Provided further that where a Unit 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 above shall be reckoned from the assessment year relevant to the
previous year in which the Unit began to manufacture, or produce or process such articles or
things or services in such free trade zone or export processing zone :
Provided also that where a Unit 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 and has completed the period of ten
consecutive assessment years referred to above, it shall not be eligible for deduction from income
as provided in clause (ii) of sub-section (1) with effect from the 1st day of April, 2006.
This sub-section applies to any undertaking, being the Unit, which fulfils all the following

conditions, namely:
(i) it has begun or begins to manufacture or produce articles or things or provide services
during the previous year relevant to the assessment year commencing on or after the 1st
day of April, 2006 in any Special Economic Zone;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in
existence:
Provided that this condition shall not apply in respect of any undertaking, being the Unit,
which is formed as a result of the re-establishment, reconstruction or revival by the assessee
of the business of any such undertaking as is referred to in section 33B, in the circumstances

and within the period specified in that section;
(iii) it is not formed by the transfer to a new business, of machinery or plant previously used for
any purpose.

Explanation: The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply
for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of
that sub-section.

136 LOVELY PROFESSIONAL UNIVERSITY