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