10A(2):
this section talks about an undertaking established in:
1. FTZ free trade zone, provided that the undertaking in such free trade zone commenced business on or after 1.4.1981.
2. EHTP or STP, namely electronic hardware technology park or software technology park, provided that such undertaking commences business on or after 1.4.1994 in such STP or EHTP.
3.SEZ, provided that such firm commences business on or after 1.4.2001.
therefore the benefit of this subsection shall be availed provided that the undertaking fulfills the above condition. therefore a question arises, is there a necessity of registration for the above preceeding the condition?? i.e. should an undertaking be registered as a STP or SEZ or FTZ before fulfilling the conditions specified above?? this is an interesting line of thought having certain litigations. The whole subsection is silent about the date of registration for such undertakings under the relevant types of havens, hence the same shall be interpreted that if the registration succeeds the commencement then the condition of commencement of business on or after the above mentioned dates shall be the criterion for determining the exemption for such undertakings. therefore on commencement of business the registration shall be with retrospective effect from the date on which the commencement began under the respective havens.
the undertaking shall not be formed out of splitting up or reconstruction of an exisiting business undertaking. but this condition shall not apply, ie the undertaking shall be formed out of reconstruction or rehabilitation or revival of an undertaking restricted to conditions specified u/s 33B (which shall be discussed in detail separately).
the undertaking shall not be formed by transferring to a new undertaking a plant and machinery used by an existing undertaking.
thus an undertaking shall have to compy with the following to be eligible for the exemption under this section.
10A(3)
this section talks about the condition following the receipt of consideration for the sale of goods or articles or computer software. all such sale proceeds shall be brought into india or shall be received in India in convertible foreign exchange within a period of 6 months or as per the period specified by RBI or such other authority as per any law under force for regulating and dealing in payments. if such sale proceeds are received outside of india the same shall be deemed to be received in india if the sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside india with the approval of
10A(4)
this section talks about the proportionof deduction availed under this section for the havens. it specifies that profits derived shall be exempt in proportion to the ratio of export turnover tothat of total turnover, which means if the total turnover is 10 lakhs and if the export turnover is 8 lakhs then the exempted export profits shall be =8lakhs/10lakhs(8lakhs) therefore the exemption u/s 10A shall be Rs. 6.4lakhs. therefore the exemption shall be inproportion to the domestic to export turnover.
Friday, March 13, 2009
Friday, October 17, 2008
SECTION 10A SUB SECTION 1B-2
sub section 1(A) clause talks about the last 3 years of the ten year tenure whereby the amount of profits from export of articles or things or computer software 50% of such profits shall be debited to profit and loss for the creation of a reserve namely special economic zone reinvestment allowance reserve account. but the section says it has to be utilised as per the provisions of sub section 1B. this subsection specifies that the amount transferred to such reserve shall be utilised for 1.the purposes of acquisition of new machinery or plant and the said plant must be put into use within 3 years from the previous year in which the reserve is created.
2. prior to the purchase of the asset the reserve same shall be used for the purpose of business other than declaring dividends, remittance outside india, creation of asset outside india.
if the above stipulatioons are not followed with regard to the sez reinvestment allowance reserve then the amount of such reserve utilised shall be taxable. for instance if the reserve is used to create an asset outside india that portion of the reserve used to create an asset outside india shall be taxable.
the chargeablity of the amounts shall be also due to the expiry of the three year period within which the asset has to be put to use. if the asset is not put to use within three years from the year in which reserve is created then the same amount of export profits to the extnet of 50% transferred to the reserve shall be taxable.thus in other words if the condition or timing limit is not followed then the section by itself becomes useless as the exemption gets cancelled.
but how do i determine what plant and machinery to acquire for the purpose of this exemption. since the section is silent with regard plant and machinery the same can be referred to appendix 1 where the block is being defined. so any plant and machinery covered under the same shalll be eligible for deduction for the 3 years in the ten year tenure.
thus for an SEZ the last 3 years provision shall form a criterion from the machinery and plant and the time period of 3 years from the date of creation of such reserve.
thus is the deduction under this exemption section for SEZs.
the next topic shalll still go on with 10A but with referrence toSTPI
shambo mahadeva
2. prior to the purchase of the asset the reserve same shall be used for the purpose of business other than declaring dividends, remittance outside india, creation of asset outside india.
if the above stipulatioons are not followed with regard to the sez reinvestment allowance reserve then the amount of such reserve utilised shall be taxable. for instance if the reserve is used to create an asset outside india that portion of the reserve used to create an asset outside india shall be taxable.
the chargeablity of the amounts shall be also due to the expiry of the three year period within which the asset has to be put to use. if the asset is not put to use within three years from the year in which reserve is created then the same amount of export profits to the extnet of 50% transferred to the reserve shall be taxable.thus in other words if the condition or timing limit is not followed then the section by itself becomes useless as the exemption gets cancelled.
but how do i determine what plant and machinery to acquire for the purpose of this exemption. since the section is silent with regard plant and machinery the same can be referred to appendix 1 where the block is being defined. so any plant and machinery covered under the same shalll be eligible for deduction for the 3 years in the ten year tenure.
thus for an SEZ the last 3 years provision shall form a criterion from the machinery and plant and the time period of 3 years from the date of creation of such reserve.
thus is the deduction under this exemption section for SEZs.
the next topic shalll still go on with 10A but with referrence toSTPI
shambo mahadeva
Thursday, October 16, 2008
SECTION 10A SUBSECTION 1-1A
having seen that it is necessary to have an export done and there must be profits or gains on such exports and the same shall be out of manufacturing goods and computer software, we shall she what are the conditions provided for,
1. the first proviso says where the business has been in exisistence prior to the arrival of this act then the deduction shall be for a period specified beginning from the year of commencement of production and not from the date on which approval is received.
2. the second proviso specifies that where a business has been situated in either ftz or epz layer on converted into sez then the same shall deduction not from the date of conversion but from the date of manufacturing commencement in such ftz or epz. but if the conversion takes place after 2005-06 then the provisions of section 10AA shall apply to the sez undertaking. prir to insertion of such a clause only section 10A provisions of sez shall apply. further stated that if this takes place prior to April 1 2003 then only 90% of such pgbp from exports shall be available for exemption.
3. the next proviso talks about the winding up of the deductions availed by this exemption section, it states that no deduction shall be availed by any enterprise for the assessment year beginning from 2011 April. thus this section is nearing its scrapping off period.subsection 1A:this subsection talks about the deductions available to sez for commencement of production after 1.4.2003.
the same shall be eligible for 100% deduction of profits and gains from business and profession for the first 5 years from the year in whic the firm begins to manufacture the said items. for the next 2 years the deduction shall be 50% of such pgbp. for the next three years so much amount of profits equivalent to 50% of total income from pgbp shall be debited to p&l a/c and the deduction shall be allowed and credited to a reserve a/c namely sez reinvestment allowance reserve a/c to be utilized as per subsection 1B of this section.it is provided that if 139(1) is not complied with no exemption shall be availed which means 139(4) belated return shall cancel this exemptioni would like to continue with subsection 1B in my next version.
once again a thanks to all who made me do it.shambo mahadeva.
1. the first proviso says where the business has been in exisistence prior to the arrival of this act then the deduction shall be for a period specified beginning from the year of commencement of production and not from the date on which approval is received.
2. the second proviso specifies that where a business has been situated in either ftz or epz layer on converted into sez then the same shall deduction not from the date of conversion but from the date of manufacturing commencement in such ftz or epz. but if the conversion takes place after 2005-06 then the provisions of section 10AA shall apply to the sez undertaking. prir to insertion of such a clause only section 10A provisions of sez shall apply. further stated that if this takes place prior to April 1 2003 then only 90% of such pgbp from exports shall be available for exemption.
3. the next proviso talks about the winding up of the deductions availed by this exemption section, it states that no deduction shall be availed by any enterprise for the assessment year beginning from 2011 April. thus this section is nearing its scrapping off period.subsection 1A:this subsection talks about the deductions available to sez for commencement of production after 1.4.2003.
the same shall be eligible for 100% deduction of profits and gains from business and profession for the first 5 years from the year in whic the firm begins to manufacture the said items. for the next 2 years the deduction shall be 50% of such pgbp. for the next three years so much amount of profits equivalent to 50% of total income from pgbp shall be debited to p&l a/c and the deduction shall be allowed and credited to a reserve a/c namely sez reinvestment allowance reserve a/c to be utilized as per subsection 1B of this section.it is provided that if 139(1) is not complied with no exemption shall be availed which means 139(4) belated return shall cancel this exemptioni would like to continue with subsection 1B in my next version.
once again a thanks to all who made me do it.shambo mahadeva.
SECTION 10 A DETAILS PART 1
this section is posting a great challenge along with its followers namely 10 AA and 10 B.the section specifies " subject to the provisions of this section, a deduction of such profits and gains are derived by such undertakings from the export of articles or things or computer for a period of 10 consecutive assessment year relevant to the previous year in which undertaking begins to manufacture or produce articles or things or computer software, as the case may be allowed from the total income of the assessee:"now the section has to be analysed in detail so that we have some background before we go into the proviso:1. this section is covered under the third chapter of the it act which talks about exemptions. but this section starts off with the word deduction. so this is a peculiarity of a deduction section under the exemption chapter is the observation to be made. but what difference is this deduction going to apply for??? here is a point to think about. if there s a deduction then there is no question as to whether profits are there or not. so deduction is availed for losses and carry forward is also possible for deductions. how s this?? chapter 6 a deductions are not subject to losses but section 10 a talks about incomes that do not form part of total income so if there s no income no exemptionbut deduction is a high possibility. the set off of losses will not be available as there is exemption clause that by itself sets off the set off provisions. thus the classiiaction of this section as a deduction implications with exemption section is a vital understanding.2. the next important catch of the section is pgbp thru exports. so if a firm has income under any other head being a n enterprise in the units prescribed under this section the same shall not be availed for exemption. the firm shall also be not exempt from business incomes if such business income arises out of domestic business. so a vital condition is export. (clarifications shll be discussed about export oriented units in section 10B.) so there must be business income in the form of profits and gains thru exports. the next filter applied is that of articles or things or goods manufactured including computer software. so this section specifically includes the following items which implies anyting beyond this section s coverage shall not avail exemption even if it satisfies the condn of export and pgbp. so the 3 condns area. profits and gains of business or professionb. export of goods manufactured articles things etc.c. good articles things and computer software alone are covered under this section.3.the next very catchy part of this section is that deduction is available for 10 years beginning from the year in which the firm starts to produce or manufacture the said articles or things.so if the institutions covered under this section register themselves after they commence production, the delay in the registration is penalised by considering the year of first commencement of business. so if i start an undertaking and begin manufactring in year 2000 and get registered on 2002. my exemption shall not be 10 years but 8 years, because the exemption beginbs irrespective of whether the registration is complete or not. thus this is another note to be taken care.thus i have completed a small portion in this ocean in my next discussion i shall deal in depth about:what are the various types of enterprises covered?is there a possibility of conversion and the rest of the topics in this section
i would again be indebted to thank my tax masters ajith and tgs and my elder sisters who motivated me my parents who contributed to my brain, and finally my love-lord shiva.shambo mahadeva
i would again be indebted to thank my tax masters ajith and tgs and my elder sisters who motivated me my parents who contributed to my brain, and finally my love-lord shiva.shambo mahadeva
SECTION 10 A PRELIMINARIES
this is a section of the income tax act contained in the 3rd chapter of the it act. my blogs from here on shall discuss in detail about all the sections in the it act.this section since is covered under the 3rd chapter of the it act talks about income not forming part of total income which means exempted incomes.but the section begins with a twist calling it a deduction from the total income. the wordings of the section make it like a deduction section but is covered under exemption.then how are we to classify.issue no. 2 this also deals with FTZ - free trade zone, STP- software technology park, SEZ- special economic zone.what are the benefits accruing to such enterprises. they are exempted from any export income arising due to transfer of goods articles or things and computer software.so any export income derieved of the above shall be eligible for 100% exenption for the above mentioned enterprises.questions popping out?will they have exemption for infinite no of years?will 115 jb apply for such undertakings?will this section allow any conversion from one to another type of enterprise?what other details are there in this section?so by the next blog i ll deal this section in delicious detail to close it down.
my due respect to my tax masters Ajith and Tgs who motivated me in tax and with the guidance of my 2 elder sisters (Divya and Nandhini) akka and with the blessings of my parents and my lord parameshwara i have begun this task of section interpretting may it go wellshambo mahadeva.
my due respect to my tax masters Ajith and Tgs who motivated me in tax and with the guidance of my 2 elder sisters (Divya and Nandhini) akka and with the blessings of my parents and my lord parameshwara i have begun this task of section interpretting may it go wellshambo mahadeva.
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