1.

Free Trade Zone (FTZ) Special Provision in respect of Newly Established

Undertaking in Free Trade Zone.
1. Conditions to be satisfied
2. Amount of Deduction-General Provisions
3. Period and Rate of Deduction
4. Transfer under a Scheme of Amalgamation or Demerger

A5. FREE TRADE ZONE (FTZ)[ Section 10A]

(SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKINGS
IN FREE TRADE ZONE)

1. CONDITIONS TO BE SATISFIED :

In order to get deduction, an undertaking must satisfy the following conditions :

Condition 1:
It must begin manufacture or production in free trade zone :
It has begun or begins to manufacture or produce during the previous year relevant
to the assessment year
(a) commencing on or after 1-4-1981, in any free trade zone; or
(b) commencing on or after 1-04-1994, in any software technology park or
electronic hardware technology park or;
(c) commencing on or after the 1-04-2001 in any special economic zone;
Conditions 2 : It should not be formed by splitting / reconstruction of business.:
Conditions 3 :
It should not be formed by transfer of old machinery:
it is not formed by the transfer to a new business of machinery or plant previously
used for any purpose.
1. 20% of second value machinery allowed : Where in
the case of an undertaking, any machinery or plant or any
part thereof previously used for any purpose is transferred
to a new business and the total value of the machinery or
plant or part so transferred does not exceed 20% of the
total value of the machinery or plant used in the business,
then, the condition specified therein shall be deemed to
have been complied with.
2. Imported Machinery allowed : Any machinery or plant whish
was used outside India by any person other than the
assessee shall not be regarded as machinery or plant
previously used for any purpose, if the following conditions
are fulfilled, namele :
1. such machinery or plant was not previously used in
India
2. such machinery or plant is imported into India from
any county outside India ; and
3. no deduction on account of depreciation in respect of
such machinery or plant has been allowed or it
allowable under the provisions of the Act in
computing the total income of any person for any
period prior to the date of the installation of
machinery or plant by the assessee.
(Value of imported machine can exceed 20% of the Total Value of Machine)
Conditions 4 :
Sale construction should be remitted to India in convertible foreign exchange.:
Sale consideration should be remitted to India 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.
Condition 5 :
Report of Chartered Accountant :
The assessee shall furnish a report of Chartered accountant in form 56 along with
return of income certifying that the deduction has been correctly claimed.
Condition 6 : Return of income should be submitted in time.:

2. AMOUNT OF DEDUCTION GENERAL PROVISIONS :

If the aforesaid conditions are satisfied , the deduction u/s 10A may be computed as under :

Export Turnover of eligible undertaking
_______________________________ x Profit of the business of eligible undertaking

Total Turnover of eligible undertaking
'Export Turnover'': Sale proceeds brought into India by the assessee in convertible foreign exchange in
accordance with sub-section (3), but does not include
1. freight,
2. telecommunication charges or
3. Export Incentives
4. expenses, if any, incurred in foreign exchange in providing the technical services outside
India
Total Turnover: Means the aggregate of domestic and export turnover. , but does not include
1. freight,
2. telecommunication charges or
3. Export Incentives
4. expenses, if any, incurred in foreign exchange in providing the technical services outside
India


3. PERIOD AND RATE OF DEDUCTION :


Rate of deduction for unit set up in Special Economic Zone on or after 1-4-2003 shall be as follows for
first 10 assessment years :

First 5 Years 100 % 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,

Next 2 Years : 50% of such Profit and Gains is deductible for further 2 assessment years.

Next 3 Years : for the next three consecutive assessment years, so much of the amount not exceeding
50% 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

4 TRANSFER UNDER A SCHEME OF AMALGAMATION OR DEMERGER :

In case an undertaking eligible for deduction under this section is transferred, before the expiry of the
specified period, 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 demerger takes place ; and

(b) the provisions of this section shall apply to the amalgamated or the resulting company as if the
amalgamation or demerger had not taken place.



2. Special Economic Zone (SEZ)- Special Provisions in respect of newly
established units in special economic zone.
1. Conditions to be satisfied
2. Amount of Deduction
3. Consequence for mercer and demerger.



SPECIAL ECONOMIC ZONE [ SECTION 10AA]

(SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNITS IN
SPECIAL ECONOMIC ZONE)

1. CONDITIONS TO BE SATISFIED :

The following conditions should be satisfied to claim deduction u/s 10AA :

Condition 1 : Assessee, being an entrepreneur as referred to in clause (j) of section 2 of the Special
Economic Zones Act, 2005. Entrepreneur is a person who has been granted a letter of approval by the
Development Commissioner to set a unit in a Special Economic Zone.

Conditions 2 : The Unit in Special Economic Zone who begins to manufacture or produce articles or
things or provide any services during the previous year relevant to any assessment year commencing on
or after the 1st day of April, 2006.

Conditions 3 : It is not formed by the splitting up, or reconstruction, of a business already an existence.

Conditions 4 : It not formed by the transfer to a new business, of old plant and machinery. However, it
can be formed by transfer of old plant or machinery to the extent of 20%.

Condition 5 : The assessee has income from export of articles or thing or from services from such unit.
In other words, the assessee has exported goods or provided services out of India from the Special
Economic Zone by land, sea , air, or by any other mode, whether physical or otherwise.

Conditions 6 : Books of Accounts of the taxpayer should be audited. The Tax payer should submit Audit
Report in Form No.56F along with the return of income.

2 AMOUNT OF DEDUCTION :

Deduction depends upon quantum of Profit derived from Export of Articles or things or services (
including computer software). It is calculated as under

Export Turnover of eligible undertaking
_______________________________ x Profit of the business of eligible undertaking

Total Turnover of eligible undertaking


Deduction for First 5 Assessment Years 100% of Profits and Gains derived for a period of five
consecutive assessment years beginning with the assessment year relevant to the previous year in which
the Unit begins to manufacture or produce such articles or things or provide services.

Deduction for 6
th
Assessment Year to 10
th
Assessment Years : 50% of such Profits and Gains for
further five assessment years and thereafter;

Deduction for 11
th
Assessment Year to 15
th
Assessment Year : Amount not exceeding 50% 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
Reserve Account) to be created and utilized for the purposes of the business of the assessee.

3. CONSEQUENCES FOR MERGER AND DEMERGER :

Where any undertaking is transferred, before the expiry of the period specified in this section, to another
undertaking, under a scheme of amalgamation or demerger,

(a) No deduction shall be admissible under this section to the amalgamating or the demerged Unit for
the previous year in which the amalgamation or the demerger takes place; and


3. 100% Export Oriented Undertakings (100% E.O.U.)
1. Conditions to be Satisfied
2. Amount of Deduction
3. Period of Deduction
4. Transfer under a Scheme of Amalgamation or Demerger



100% EXPORT ORIENTED UNDERTAKINS( 100% E.O.U.)
[ Sec 10B]
The Provisions of Sec 10B are given below :---

1. CONDITIONS TO BE SATISFIED :
This section applies to any undertaking which fulfils all the following conditions, namely:-
1. it manufactures or produces any articles or things or computer software;
2. it is not formed by the splitting up, or the reconstruction, of a business already
in existence:
3. 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.
4. Should not be formed as a result of the re-establishment, reconstruction or
revival by the assessee of the business of any such undertaking
5. it is not formed by the transfer to a new business of machinery or plant
previously used for any purpose.
6. 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.
7. Audit Report should be submitted in Form No. 56G.
2. AMOUNT OF DEDUCTION :

If the aforesaid conditions are satisfied , the deduction u/s 10B may be computed as under :
Export Turnover of eligible undertaking
_______________________________ x Profit of the business of eligible undertaking

Total Turnover of eligible undertaking

For the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall
be 90% of the profits and gains derived from the export of such articles or things or computer software

3. PERIOD OF DEDUCTION :

This deduction shall be allowed for a period of 10 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.

No deduction under section 10B shall be allowed to any undertaking from the assessment year beginning on
the 1st day of April, 2010 and subsequent years.

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.

4 TRANSFER UNDER A SCHEME OF AMALGAMATION OR DEMERGER :

In case an undertaking eligible for deduction under this section is transferred, before the expiry of the
specified period, 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 demerger takes place ; and

(b) the provisions of this section shall apply to the amalgamated or the resulting company as if the
amalgamation or demerger had not taken place.









4. Income from Export of Artistic Handmade Wooden Articles[ Section 10BA]
1. Conditions to be Satisfied
2. Amount of Deduction



INCOME FROM EXPORT OF ARTISTIC HANDMADE
WOODEN ARTICLES [ Section 10BA]

A deduction of such profits and gains as are derived by an undertaking from the export out of India of
eligible articles or things, 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,
deductionunder section 10A or section 10B has been claimed, the undertaking shall not be entitled to the
deduction under this section
No deduction under this section shall be allowed to any undertaking for the assessment year beginning on
the 1st day of April, 2010 and subsequent years.

1. CONDITIONS TO BE SATISFIED :

This section applies to any undertaking which fulfils all the following conditions, namely:-
1. it manufactures or produces the eligible articles or things without the use of imported raw
materials;
2. it is not formed by the splitting up, or the reconstruction, of a business already in existence :
3. it is not formed by the transfer to a new business of machinery or plant previously used for any
purpose.
4. 90% or more of its sales during the previous year relevant to the assessment year are by way of
exports of the eligible articles or things;
5. it employs 20 or more workers during the previous year in the process of manufacture or
production.
6. This section applies to the undertaking, if the sale proceeds of the eligible articles or things
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.
7. Audit : Deduction u/s 10BA is not available unless the assessee furnishes auditors report in Form
No. 56H along with the Return of Income.
8. Deduction u/s 10A / 10B is not taken : where in computing the total income of the undertaking for
any assessment year, deduction under section 10A or section 10B has been claimed, the
undertaking shall not be entitled to the deduction under this section.

2. AMOUNT OF DEDUCTION :

If the aforesaid conditions are satisfied , the deduction u/s 10B may be computed as under :
Export Turnover of eligible undertaking
_______________________________ x Profit of the business of eligible undertaking

Total Turnover of eligible undertaking

Following points should be noted :
1. export turnover means the consideration in respect of export by the undertaking of eligible
articles or things 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 outside India.

2. The aforesaid profit is deductible for 6 Assessment Years , i.e. , assessment years 2004-05 to
2009-10.

3. Where a deduction is allowed under this section in computing the total income of the assessee, no
deduction shall be allowed under any other section in respect of its export profits.
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 Management Act, 1999
(42 of 1999), and any rules made thereunder or any other corresponding law for the time being
in force;
eligible articles or things
means all hand-made articles or things, which are of artistic value and which requires the use of
wood as the main raw material;
export out of India
shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other
establishment situate in India, not involving clearance of any customs station13 as defined in the
Customs Act, 1962 (52 of 1962).]





Provisions In Respect Of Profits And Gains From Industrial Undertakings Or
Enterprises Engaged In Infrastructure Development. [Sec. 80-IA]
1. Conditions to be satisfied
2. Amount & Period of Deduction


6.1. CONDITIONS TO BE SATISFIED :
This section applies to any undertaking which fulfils all the following conditions, namely:-
Deduction under section 80-IA is available only to the following businesses carried on by an undertaking
:---
Case 1 : Ay enterprise carrying on the business of (i) developing or (ii) operating and maintaining
any infrastructure facility.
Case 2 : Any undertaking providing telecommunication services, including radio paging, domestic
satellite service, network of trunking, broadband network and internet services on or
after the 1-04-1995, but on or before the 31-03- 2005.
Case 3 : Any undertaking which develops, develops and operates or maintains and operates an
industrial park notified by the Central Government for the period beginning on the 1st
day of April, 1997 and ending on the 31st day of March, 2006 :
Case 4 : an [undertaking] which,
(a) is set up in any part of India for the generation or generation and distribution of
power if it begins to generate power at any time during the period beginning on the 1st
day of April, 1993 and ending on the 31st day of March, 2010;
(b) starts transmission or distribution by laying a network of new transmission or
distribution lines at any time during the period beginning on the 1st day of April, 1999
and ending on the 31st day of March, 2010.
(c) undertakes substantial renovation and modernisation of the existing network of
transmission or distribution lines at any time during the period beginning on the 1st day
of April, 2004 and ending on the 31st day of March, 2010.
Case 5 : an undertaking owned by an Indian company and set up for reconstruction or revival of a
power generating plant, if
(a) such Indian company is formed before the 30-11-2005 with majority equity
participation by public sector companies for the purposes of enforcing the
security interest of the lenders to the company owning the power generating
plant and such Indian company is notified before the 31-12-2005 by the Central
Government for the purposes of this clause;
(b) such undertaking begins to generate or transmit or distribute power before the
31-03-2008
Case 6 : Any undertaking carrying on the business of laying and operating a cross-country natural
gas distribution network, including pipelines and storage facilities being an integral part
of such network, which fulfils the following conditions, namely:
(a) it is owned by a company registered in India or by a consortium of such companies or
by an authority or a board or a corporation established or constituted under any Central
or State Act;
(b) it has been approved by the Petroleum and Natural Gas Regulatory Board and
notified by the Central Government in the Official Gazette;
(c) one-third of its total pipeline capacity is available for use on common carrier basis by
any person other than the assessee or an associated person;
(d) it has started or starts operating on or after the 1st day of April, 2007; and
(e) any other condition which may be prescribed.
6.2. AMOUNT & PERIOD OF DEDUCTION :
Note : Deductions allowed is 100% or 30% of profits from such eligible business. The profits from such
business shall be computed as if such eligible business were the only source of income of the assessee .
Nature of Industry Assessee
Period of
commencement of
business
Deductions
Infrastructure facility
(new undertaking;
agreement with the
Central Govt.)
Indian Company On or after 1-4-1995
100% for 10 years out
of 20 years. In case of
Port out of 15 years.
Telecommunication
(New undertaking:
new Plant)
Any undertaking . In
case of domestic
satellite Indian
Company
1-4-95 to 31-3-2005
100% for first 5 years;
30% for next 5 years.
Industrial Park or SEZ Any undertaking
IP- 1-4-97 to 31-3-
2006
. .

SEZ- on or after 1-4-
2001 to 31-3-2006
100% for 10 years out
of 5 years
Power ( New
undertaking : New
Plant)
Any undertaking
New netword 1-4-
99 to 31-3-2006
. .

Substantial renova.
1-4-2004 to 31-3-
2006.
100% for 10 years out
of 15 years
It means AY specified by the assessee at his option to be initial year not falling beyond 15 AY starting
from the AY in which the enterprise begins to generates power ; or commences transmission or
distribution of power. However, deduction can be claimed only for 10 consecutive AY falling within a
period of 15 AY beginning with the AY in which an assessee begins business.
"infrastructure facility" means
(a) a road including toll road, a bridge or a rail system;
(b) a highway project including housing or other activities being an integral part of the highway
project :
(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage
system or solid waste management system;
(d) a port, airport, inland waterway.