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Unit 7: Deductions: For Special Conditions

Here co-developer means: Notes

(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 fi rm 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 The market value, in relation to any goods or services transferred between the
eligible business and any other business carried on by the assessee, shall mean:
(1) The price that such goods or services would ordinarily fetch in the open market; or

(2) The arm’s length price as defined under section 92F, where the transfer of such
goods or services is a specified domestic transaction referred to in section 92BA.

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

reasonable basis for allowing the deduction.
The Assessing Officer is empowered to make an adjustment while computing the profi t and

gains of the eligible business on the basis of the reasonable profit that can be derived from the
transaction, in case the transaction between the assessee carrying on the eligible business under
section 80-IAB and any other person is so arranged that the transaction produces excessive profi ts
to the eligible business.

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