Section 10A of Income-Tax Act, 1961

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HomeBrud.gifIndian LawBrud.gifActsBrud.gifIncome-Tax Act, 1961Brud.gifSection 10A of Income-Tax Act, 1961

Section 10A of Income-Tax Act, 1961 deals with Special provision in respect of newly established undertakings in free trade zone, etc.

Contents

From the Act

(1)Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking to which this section applies shall not be included in the total income of the assessee.

(2)This section applies to any industrial undertaking which fulfils all the following conditions, namely:-

(i) it has begun or begins to manufacture or produce articles or things 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;

(ia) in relation to an undertaking which begins to manufacture or produce any article or thing on or after the 1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of the total sales thereof during the previous year;

(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 industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial undertaking 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 subsection.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of any five consecutive assessment years, falling within a period of eight years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, specified by the assessee at his option:

Provided that nothing in this sub-section shall be construed to extend the aforesaid five assessment years to cover any period after the expiry of the said period of eight years.

(4) 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, in relation to any building, machinery, plant or furniture used for the purposes of the business of the industrial 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) 2[or sub-section (3)] of section 74 and no deficiency referred to in sub-section (3) of section 80J, in so far as such, loss or deficiency relates to the business of the industrial undertaking, shall be carried forward or set off where such loss, or, as the case may be, deficiency relates to any of the relevant assessment years;

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I 3[or section 80-IA] or section 80J in relation to the profits and gains of the industrial 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 industrial under-taking 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 years.

(5) Where an industrial undertaking in any free trade zone has begun to manufacture or produce articles or things in any previous year relevant to the assessment year commencing on or after the 1st day of April, 1977, but before the 1st day of April, 1981, the assessee may, at his option, before the expiry of the time allowed tinder sub-section (1) or sub-section (2) of section 139, whether fixed originally or on extension, for furnishing the return of income for the assessment year commencing on the 1st day of April, 1981, furnish to the 4[Assessing] Officer a declaration in writing that the provisions of sub-section (1) may be made applicable to him for each of the relevant assessment years as reduced by the number of assessment years which expired before the 1st day of April, 1981, and if he does so, then, the provisions of sub-section (1) shall apply to him for each of such relevant assessment years and the provisions of sub-section (4) shall also apply in computing the total income of the assessee for the assessment year immediately succeeding the last of the relevant assessment years and any subsequent assessment year.

(6) The provisions of sub-section (8) and sub-section (9) of section 80I shall, so far as may be, apply in relation to the industrial undertaking referred to in this section as they apply for the purposes of the industrial undertaking referred to in section 80-I.

(7) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, 2[before the due date for furnishing the return of income under sub-section (1) of section 139] 3[* * *], furnishes to the 4 [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.

(8) References 7[in sub-section (5)] to any other provision of this Act, which has been amended or omitted by the Direct Tax Laws (Amendment) Act, 1987, shall, notwithstanding such amendment or omission, be construed, for the 8[purposes of that sub-section], as if such amendment or omission had not been made.]

Explanation

For the purposes of this section,-

(i) "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;

[(ii) "relevant assessment years" means the five consecutive assessment years specified by the assessee at his option under sub-section (3);]]

[(iii) "manufacture" includes any-

(a) process, or

(b) assembling, or

(c) recording of programmes on any disc, tape, perforated media or other information storage device;]

[(iv) "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;

(v) "software technology park" means any park set up in accordance with the Software Technology Park Scheme notified by the Government of India in the Ministry of Commerce;

(vi) "produce", in relation to articles or things referred to in clause (i) of sub-section (2), includes production of computer programmes.]

Related Cases / Recent Cases / Case Laws

  • January 2012: Expenses reduced from export turnover for purpose of computing deduction under section 10A has to be reduced from total turnover as well - [2012] 17 LNIN 167 (Karnataka)
  • December 2011: [2011] 16 LNIN 366 (Delhi): Conversion of standard gold into ornaments or jewellery undertaken by assessee amounts to manufacture/production and qualifies for deduction under section 10A/10B
  • December 2011: [2011] 16 LNIN 305 (Delhi): Exemption under section 10A : Merely because there can be more than one method of apportioning common expenses between STP and non-STP units it cannot be said that method of head-count followed by assessee should be discarded, that too mid-way, even though it was not questioned at any time in the past
  • IBM India P. Ltd. v. DCIT (ITAT Bangalore): Maintenance of separate books of account for STP units is not a prerequisite to avail deduction under section 10A
  • April 2011: A foreign company is eligible for exemption u/s 10(6A) when it derives royalty/FTS under an agreement approved by Central Govt. prior to 1-6-2002 - [2011] 10-203 (Ahd. - ITAT)
  • CIT v. Menon Impex (P.) Ltd. [2003] 259 ITR 403/128 LNIN 11 (Madras): Interest income derived by the assessee from funds in connection with letter of credit is not income derived from the profits of the business of the industrial undertaking so as to be entitled to get the benefit of section 10A. The mere fact that the deposit made was for the purpose of obtaining letters of credit which letters of credit were in turn used for the purpose of the business of the industrial undertaking does not establish a direct nexus between the interest and the industrial undertaking

Other related Sections from the Act

  • Section 2: Definitions. Includes meanings of various terms used in the Indian Income Tax Act, 1961

Sections of the Indian Income Tax Act, 1961


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