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Corporate Tax Planning

Notes 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 -
1. Provisions of Income tax Act;
2. As in force for time being;
3. Shall apply to developer or entrepreneur;

4. For carrying on authorised operations in an SEZ or Unit;

5. Subject to modifi cations specified in Second Schedule.

7.1 Key Tax Benefits for SEZs and SEZ Units

As per the Income-tax Act, 1961 (ITA), there are various key tax benefits to be provided to 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:
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:
(a) developing, or
(b) operating and maintaining, or
(c) 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 fi rst enterprise).

Meaning of “infrastructure facility”

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

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