Page 171 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes conferred by this section shall not apply to any class of undertaking with effect from any specifi ed
date. Where any undertaking of an Indian company which is entitled to the deduction under this
section is transferred before the expiry of the period of deduction to another Indian company in
a scheme of amalgamation or demerger, no deduction shall be admissible to the amalgamating
or demerged company for the previous year in which the amalgamation or demerger takes
place and the amalgamated or the resulting company shall be entitled to the deduction as if the
amalgamation or demerger had not taken place.

Self Assessment

State whether the following statements are true or false:
14. Substantial expansion means increase in the investment in the plant and machinery by at
least 25% of the book value of plant and machinery, as on the first day of the previous year

in which the substantial expansion is undertaken.

15. Where the gross total income of an assessee includes any profits and gains derived by such

an undertaking, a deduction of 100% of the profits and gains derived from such business
for 5 consecutive assessment years.
16. Where deduction has been allowed under this section in computing the total income of
the assessee, only 25% deduction shall be allowed under any other section contained in
Chapter VIA or section 10AA in relation to the profits and gains of the undertaking.

17. 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.

7.5 Application of the Above Special Conditions

The application of the deduction available under special circumstance can be availed by an
undertaking or an enterprise only on fulfilment of certain important conditions which though

mentioned above are explained in detail below:
Application of Section relating to Tax deductions by SEZ
As per section 10A(7B) of the IT Act, deduction under section 10A can be claimed by the unit
in SEZ, which has begun to manufacture or produce articles or things or computer software
between 1st April 2000 to 31st March 2005. No deduction under section 10A will be allowed to
the SEZ unit, which has begun (to manufacture or produce articles or things) on or after 1st April
2005 i.e. year ended 31st March 2006 (AY 2006-07).
As per the proviso to section 10AA(3) of the IT Act, if due to the application of 10A(7B), deduction
under section 10A is not available to the eligible unit in SEZ, then the said unit shall be able to
claim deduction under section 10AA for the unexpired period of 10 consecutive AYs.

From the above, it can be observed that proviso to section 10AA (3) entitles deduction for
unexpired period of 10 consecutive AYs to an unit, which became ineligible to claim deduction
under section 10A due to application of sub-section 7B of section 10A.

Section 10A (7B) makes those unit ineligible to claim deduction under section 10A, which have
begun after 1st April 2005. Section 10AA (1) provides for deduction only to those units which
began after 1st April 2005.
In view of the above, it is not clear that proviso to section 10AA (3) refers to which units to be
eligible to claim deduction for the unexpired period. This is because by virtue of section 10A(7B),
those units which have begun after 1 April 2005 are not eligible for deduction under section 10A
as such units are automatically eligible to claim deduction under section 10AA as per proviso of

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