10A. Special provision
in respect of newly established undertakings in free trade
zone, etc.- (1) Subject to the provisions of this
section, a deduction of such profits and gains as are derived
by an undertaking from the export of articles or things or
computer software for a period of ten consecutive assessment
years beginning with the assessment year relevant to the previous
year in which the undertaking begins to manufacture96a or
produce such articles or things or computer software, as the
case may be, shall be allowed from the total income of the
assessee :
Provided that where in computing the total income of the undertaking
for any assessment year, its profits and gains had not been
included by application of the provisions of this section
as it stood immediately before its substitution by the Finance
Act, 2000, the undertaking shall be entitled to deduction
referred to in this sub-section only for the unexpired period
of the aforesaid ten consecutive assessment years :
Provided further that where an undertaking 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 in this sub-section shall be reckoned from the
assessment year relevant to the previous year in which the
undertaking began to manufacture or produce such articles
or things or computer software in such free trade zone or
export processing zone :
Provided also that for the assessment year beginning on the
1st day of April, 2003, the deduction under this sub-section
shall be ninety per cent of the profits and gains derived
by an undertaking from the export of such articles or things
or computer software :
Provided also that no deduction under this section shall be
allowed to any undertaking for the assessment year beginning
on the 1st day of April, 2012 and subsequent years.
(1A) Notwithstanding anything contained in sub-section (1),
the deduction, in computing the total income of an undertaking,
which begins to manufacture or produce articles or things
or computer software during the previous year relevant to
any assessment year commencing on or after the 1st day of
April, 2003, in any special economic zone, shall be,—
(i) hundred per cent of profits and gains derived from the
export of such articles or things or computer software for
a period of five consecutive assessment years beginning with
the assessment year relevant to the previous year in which
the undertaking begins to manufacture or produce such articles
or things or computer software, as the case may be, and thereafter,
fifty per cent of such profits and gains for further two consecutive
assessment years, and thereafter;
(ii) for the next three consecutive assessment years, so
much of the amount not exceeding fifty per cent of the profit
as is debited to the profit and loss account of the previous
year in respect of which the deduction is to be allowed and
credited to a reserve account (to be called the “Special
Economic Zone Re-investment Allowance Reserve Account”)
to be created and utilised for the purposes of the business
of the assessee in the manner laid down in sub-section (1B)
:
Provided that no deduction under this section shall be allowed
to an assessee who does not furnish a return of his income
on or before the due date specified under sub-section (1)
of section 139.
(1B) The deduction under clause (ii) of sub-section (1A)
shall be allowed only if the following conditions are fulfilled,
namely:—
(a) the amount credited to the Special Economic Zone Re-investment
Allowance Reserve Account is to be utilised—
(i) for the purposes of acquiring new machinery or plant
which is first put to use before the expiry of a period of
three years next following the previous year in which the
reserve was created; and
(ii) until the acquisition of new machinery or plant as
aforesaid, for the purposes of the business of the undertaking
other than for distribution by way of dividends or profits
or for remittance outside India as profits or for the creation
of any asset outside India;
(b) the particulars, as may be prescribed in this behalf,
have been furnished by the assessee in respect of new machinery
or plant along with the return of income for the assessment
year relevant to the previous year in which such plant or
machinery was first put to use.
(1C) Where any amount credited to the Special Economic Zone
Re-investment Allowance Reserve Account under clause (ii)
of sub-section (1A),—
(a) has been utilised for any purpose other than those referred
to in sub-section (1B), 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 (1B),
the amount not so utilised, shall be deemed to be the profits,—
(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 (1B), and shall be charged
to tax accordingly.
(2) This section applies to any undertaking which fulfils
all the following conditions, namely :—
(i) it has begun or begins to manufacture or produce articles
or things or computer software during the previous year relevant
to the assessment year—
(a) commencing on or after the 1st day of April, 1981, in
any free trade zone; or
(b) commencing on or after the 1st day of April, 1994, in
any electronic hardware technology park, or, as the case may
be, software technology park;
(c) commencing on or after the 1st day of April, 2001 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 which is formed as a result of the re-establishment,
reconstruction or revival by the assessee of the business
of any such undertakings 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 Explanation 1 and Explanation
2 to sub-section (2) of section 80-I 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.
(3) This section applies to the undertaking, if the sale
proceeds of articles or things or computer software exported
out of India are received in, or brought into, India by the
assessee in convertible foreign exchange, within a period
of six months from the end of the previous year or, within
such further period as the competent authority may allow in
this behalf.
Explanation 1.—For the purposes of this sub-section,
the expression “competent authority” means the
Reserve Bank of India or such other authority as is authorised
under any law for the time being in force for regulating payments
and dealings in foreign exchange.
Explanation 2.—The sale proceeds referred to in this
sub-section shall be deemed to have been received in India
where such sale proceeds are credited to a separate account
maintained for the purpose by the assessee with any bank outside
India with the approval of the Reserve Bank of India.
(4) For the purposes of sub-sections (1) and (1A), the profits
derived from export of articles or things or computer software
shall be the amount which bears to the profits of the business
of the undertaking, the same proportion as the export turnover
in respect of such articles or things or computer software
bears to the total turnover of the business carried on by
the undertaking.
(5) The deduction under this section shall not be admissible
for any assessment year beginning on or after the 1st day
of April, 2001, unless the assessee furnishes in the prescribed
form6, alongwith the return of income, the report of an accountant,
as defined in the Explanation below sub-section (2) of section
288, certifying that the deduction has been correctly claimed
in accordance with the provisions of this section.
(6) Notwithstanding anything contained in any other provision
of this Act, in computing the total income of the assessee
of the previous year relevant to the assessment year immediately
succeeding the last of the relevant assessment years, or of
any previous year, relevant to any subsequent assessment year,—
(i) section 32, section 32A, section 33, section 35 and
clause (ix) of sub-section (1) of section 36 shall apply as
if every allowance or deduction referred to therein and relating
to or allowable for any of the relevant assessment years ending
before the 1st day of April, 2001, in relation to any building,
machinery, plant or furniture used for the purposes of the
business of the undertaking in the previous year relevant
to such assessment year or any expenditure incurred for the
purposes of such business in such previous year had been given
full effect to for that assessment year itself and accordingly
sub-section (2) of section 32, clause (ii) of sub-section
(3) of section 32A, clause (ii) of sub-section (2) of section
33, sub-section (4) of section 35 or the second proviso to
clause (ix) of sub-section (1) of section 36, as the case
may be, shall not apply in relation to any such allowance
or deduction;
(ii) no loss referred to in sub-section (1) of section 72
or sub-section (1) or sub-section (3) of section 74, in so
far as such loss relates to the business of the undertaking,
shall be carried forward or set off where such loss relates
to any of the relevant assessment years ending before the
1st day of April, 2001;
(iii) no deduction shall be allowed under section 80HH or
section 80HHA or section 80-I or section 80-IA or section
80-IB in relation to the profits and gains of the undertaking;
and
(iv) in computing the depreciation allowance under section
32, the written down value of any asset used for the purposes
of the business of the undertaking shall be computed as if
the assessee had claimed and been actually allowed the deduction
in respect of depreciation for each of the relevant assessment
year.
(7) The provisions of sub-section (8) and sub-section (10)
of section 80-IA shall, so far as may be, apply in relation
to the undertaking referred to in this section as they apply
for the purposes of the undertaking referred to in section
80-IA.
(7A) Where any undertaking of an Indian company which is entitled
to the deduction under this section is transferred, before
the expiry of the period specified in this section, to another
Indian company in a scheme of amalgamation or demerger,—
(a) no deduction shall be admissible under this section
to the amalgamating or the demerged company for the previous
year in which the amalgamation or the demerger takes place;
and
(b) the provisions of this section shall, as far as may
be, apply to the amalgamated or the resulting company as they
would have applied to the amalgamating or the demerged company
if the amalgamation or demerger had not taken place.
(7B) The provisions of this section shall not apply to any
undertaking, being a Unit referred to in clause (zc) of section
2 of the Special Economic Zones Act, 2005, which has begun
or begins to manufacture or produce articles or things or
computer software during the previous year relevant to the
assessment year commencing on or after the 1st day of April,
2006 in any Special Economic Zone.
(8) Notwithstanding anything contained in the foregoing provisions
of this section, where the assessee, before the due date for
furnishing the return of income under sub-section (1) of section
139, furnishes to the Assessing Officer a declaration in writing
that the provisions of this section may not be made applicable
to him, the provisions of this section shall not apply to
him for any of the relevant assessment years.
(9) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
(9A) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Explanation 1.— [Omitted by the Finance Act, 2003, w.e.f.
1-4-2004.]
Explanation 2.—For the purposes of this section,—
(i) “computer software” means—
(a) any computer programme recorded on any disc, tape, perforated
media or other information storage device; or
(b) any customized electronic data or any product or service
of similar nature, as may be notified14 by the Board,
which is transmitted or exported from India to any place outside
India by any means;
(ii) “convertible foreign exchange” means foreign
exchange which is for the time being treated by the Reserve
Bank of India as convertible foreign exchange for the purposes
of the Foreign Exchange Regulation Act, 1973 (46 of 1973),
and any rules made thereunder or any other corresponding law
for the time being in force;
(iii) “electronic hardware technology park”
means any park set up in accordance with the Electronic Hardware
Technology Park (EHTP) Scheme notified by the Government of
India in the Ministry of Commerce and Industry;
(iv) “export turnover” means the consideration
in respect of export by the undertaking] of articles or things
or computer software received in, or brought into, India by
the assessee in convertible foreign exchange in accordance
with sub-section (3), but does not include freight, telecommunication
charges or insurance attributable to the delivery of the articles
or things or computer software outside India or expenses,
if any, incurred in foreign exchange in providing the technical
services outside India;
(v) “free trade zone” means the Kandla Free
Trade Zone and the Santacruz Electronics Export Processing
Zone and includes any other free trade zone which the Central
Government may, by notification in the Official Gazette,specify
for the purposes of this section;
(vi) “relevant assessment year” means any assessment
year falling within a period of ten consecutive assessment
years referred to in this section;
(vii) “software technology park” means any park
set up in accordance with the Software Technology Park Scheme
notified18 by the Government of India in the Ministry of Commerce
and Industry;
(viii) “special economic zone” means a zone
which the Central Government may, by notification in the Official
Gazette, specify as a special economic zone for the purposes
of this section.
Explanation 3.—For the removal of doubts, it is hereby
declared that the profits and gains derived from on site development
of computer software (including services for development of
software) outside India shall be deemed to be the profits
and gains derived from the export of computer software outside
India.
Explanation 4.—For the purposes of this section, “manufacture
or produce” shall include the cutting and polishing
of precious and semi-precious stones.
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