Page 177 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes Questions

1. Study and analyze the case.
2. Write down the case facts.
3. What do you infer from it?

Source: http://taxguru.in/income-tax-case-laws/deduction-80iab-sez-developer-allowable-income-lease-rentals-developed
-area.html

7.6 Summary

A Special Economic Zone (SEZ) is a specified, delineated and duty-free geographical region
that has different economic laws from those of the country in which it is situated. In some
countries, such a region is even treated as a deemed foreign territory.

The Special Economic Zones and Tax Incentives offered as per the SEZ policy of India are
indeed alluring. The Special Economic Zones and Tax Incentives offered covers areas like
state and local taxes, levies, stamp duty and other duties. As per the Income-tax Act, 1961

there are a number of key tax benefits to be provided to SEZs and SEZ Units.
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.
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) including industrial undertaking, SEZ,
industrial parks, power generation, telecom and firms engaged in reconstruction of power

unit.
Infrastructure facility means a road, including toll road, a bridge or a rail system, a highway
project including housing or other activities being an integral part of the highway project;
a water supply project, water treatment system, irrigation project, sanitation and sewerage
system or solid waste management system; and a port, airport, inland waterway or inland
port or navigational channel in the sea.
Any undertaking providing telecommunication services, whether basic or cellular,
including radio paging, domestic satellite service or network of trunking (NOT), broadband
network and internet services on or after 1st April, 1995 but on or before 31st March, 2005
can avail tax deductions.

Sub-section (1) of Section 80-IAB provides for a deduction of 100% of profits and gains
derived by an undertaking or an enterprise from any business of developing a SEZ for 10
consecutive assessment years. The deduction is available to an assessee, being a Developer,

whose gross total income includes any profits and gains derived by an undertaking or an
enterprise from any business of developing a SEZ, notified on or after 1st April, 2005 under

the SEZ Act, 2005.
Section 80-IC allows tax holiday to the new undertakings or existing undertakings on
their substantial expansion in the States of Himachal Pradesh, Uttaranchal, Sikkim and

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