TMI Blog2021 (12) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... ive years, such unit shall not be eligible for deduction from income under this section. In view of the above provisions it was the submissions of the assessee that the period of ten consecutive assessment years needs to be seen only as before commencement of the Special Economic Zone Act, 2005. As on the commencement of assessment year 2006-07, which is the effective date of operation of section 10AA, the unit has just claimed deduction under section 10A only for five assessment years and therefore, the assessee has submitted that the assessee company is entitled for deduction under section 10AA. Tribunal in assessee s own case for the assessment year 2011-12 [ 2019 (12) TMI 536 - ITAT CHENNAI] may be followed for the assessment year under consideration as while deciding the appellate order for the assessment years 2012-13 and 2013-14 the ld. CIT(A) followed the Tribunal s order for the assessment year 2011-12 and decided the appeals in favour of the assessee. - I.T.A. No.3341/Chny/2019 - - - Dated:- 23-11-2021 - Shri Duvvuru RL Reddy, Judicial Member And Shri G. Manjunatha, Accountant Member Appellant by : Shri S. Raghunathan Shri S. Sankar Narayanan, Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-02 to 2005- 06 (five years) under section 10A of the Act as well as 50% from 2006-07 to 2010-11 (5 years). The Special Economic Zones Act, 2005 inserted section 10AA of the Act effective from 01.04.2006 and as per proviso to section 10AA of the Act, 50% deduction was claimed by the assessee from assessment year 2006-07 till 2010-11 (5 years) and 50% from assessment years 2011-2012 for five years. Explanation to section 10A of the Act states that for the removal of doubts, it is hereby declared that an undertaking, being the unit, which had already availed, before the commencement of the Special Economic Zones Act, 2005, the deductions referred to in section 10A for ten consecutive years, such unit shall not be eligible for deduction from income under this section. In view of the above provisions it was the submissions of the assessee that the period of ten consecutive assessment years needs to be seen only as before commencement of the Special Economic Zone Act, 2005. As on the commencement of assessment year 2006-07, which is the effective date of operation of section 10AA, the unit has just claimed deduction under section 10A only for five assessment years and therefore, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1961 Act by Revenue for ten consecutive assessment years beginning from ay: 2001-02 to ay: 2010-11. It is an undisputed fact between rival parties that assessee s unit was set up and commenced manufacturing of pillows and cushions in Tambaram MEPZ in previous year relevant to ay: 2001-02 and assessee was entitled for deduction u/s.10A of 1961 Act commencing from ay: 2001-02 onwards. It is only on 01.01.2003, the Tambaram MEPZ unit of the assessee was converted as SEZ unit but assessee continued to claim benefit of deduction u/s 10A of the 1961 Act for a total period of consecutive ten assessment years commencing from ay: 2001-02 to 2010-11, which deduction was in-fact undisputedly also allowed by Revenue. It is claimed by assessee before us that for the first five years, deduction to the tune of 100% of profits derived from export of pillows and cushions were claimed and allowed by Revenue u/s 10A of the 1961 Act, while for next five years, deduction @50% of profits derived from export of pillows and cushions were claimed by assessee and was allowed by Revenue u/s 10A of the 1961 Act. The assessee has also claimed that it created Reserves as are contemplated u/s 10A(1A)(ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial undertakings in free trade zones.1 10A. (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 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy 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 [or section 80-IA] [or section 80-IB] or section 80J in relation to the profits and gains of the industrial under-taking; 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 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 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 under sub-section (1) or subsection (2) of section 139, whether fixed originally or on extension, for furnishing the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ark 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.] 7.3 Section 10A of the 1961 Act as was substituted by Finance Act, 2000 w.e.f. 01.04.2001 and which stood applicable to assessee for the first year of its commencement of production for ay: 2001-02, reads as under:- 10A. Special provision in respect of newly established undertakings in free trade zones, etc. 10A (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 manufacture or produce such articles or things or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be carried forward or set off where such loss relates to any of the relevant assessment years; (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. (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 subsection (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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andla 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 notified by the Government of India in the Ministry of Commerce and Indus-try; (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. 7.4 Thus as could be seen that Finance Act, 2000 itself substituted Section 10A of the 1961 Act w.e.f. 01.04.2001 wherein it was , inter-alia, provided that in case units which are initially located in export processing zones or in free trade zones are subsequently located into an SEZ owing to conversion of such free trade zone or export processing zone into an special economic zone(SEZ) , then period of ten consecuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther 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 : 1[***] The following third proviso shall be inserted to sub-section (1) of section 10A by the Finance Act, 2002, w.e.f. 1-4-2003 : 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, 2010 and subsequent years. The following sub-section (1A) shall be insert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived 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. 2[(4) For the purposes of sub-section (1), 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. (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. (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) Where during any previous year, the ownership or the beneficial interest in the undertaking is transferred by any means, the deduction under sub-section (1) shall not be allowed to the assessee for the assessment year relevant to such previous year and the subsequent years. The following sub-section (9A) shall be inserted after sub-section (9) of section 10A by the Finance Act, 2002, w.e.f. 1-4-2003 : (9A) Notwithstanding anything contained in sub-section (9), where as a result of reorg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 6[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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce articles in SEZ when it got converted itself from EPZ unit to SEZ unit. It is merely a conversion of EPZ unit into an SEZ unit but the fact remains that unit was already in operation since previous year relevant to ay: 2001-02 onwards and it could not be said the unit of the assessee begins to manufacture or produce articles or things or computer software in the previous year relevant to assessment year 2003-04 in SEZ as it is a clear case of mere conversion of EPZ into an SEZ and not setting up of new unit in SEZ. The terminology used in Section 10A(1A) is only begins to manufacture . while the word begun which is also simultaneously used along with begins to manufacture . in Section 10A(2) is missing in Section 10A(1A) of the 1961 Act The second proviso to Section 10A(1) of the 1961 Act shall continue to govern cases of conversion of EPZ into SEZ and benefit of deduction u/s 10A shall be available for ten consecutive assessment year starting from the year in which the unit begins to manufacture cushions and pillows in MEPZ viz. ay: 2001- 02. If that interpretation as is canvassed by assessee is adopted that it begins to manufacture or produce articles or things in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Finance Act, 2002 , Section 10A(1A) of the 1961 Act was introduced which curtailed the period of deduction to newly set up undertaking in SEZ to seven years as against period of deduction upto 10 consecutive years enjoyed by existing SEZ set-up prior to previous year relevant to ay: 2002-03. Not only period of deduction was reduced to 7 years by newly inserted Section 10A(1A) by Finance Act, 2002 as against period of ten consecutive assessment years allowed by Section 10A(1) of the 1961 but also deduction was reduced to 50% of profits derived frome exports for sixth and seventh assessment years. Under normal circumstances , once such type of fiscal incentive is provided by State on fulfillment of condition such as setting up of manufacturing unit in EPZ/FTZ/SEZ for a particular period of time to achieve State Policy for encouraging exports, bringing in foreign investments, enhancing employment etc. and the tax-payer has altered its position by complying with State Policy by setting up accordingly manufacturing unit in SEZ/FTZ/EPZ on the faith that it will continue to enjoy fiscal incentives for a certain number of years as provided in the statute at the time of setting up of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A(1A) of the 1961 Act, the deduction to SEZ unit was restricted to a period of 7 years, if it begins to manufacture or produce articles or things or computer software in SEZ during the previous year starting on or after 1st day of April 2003. Then again by Finance Act, 2003, the amendments were brought in Section 10A of the 1961 Act wherein Section 10A(1A) to Section 10A(1C) were substituted for the existing Section 10A(1A) thereby allowing deduction u/s 10A to newly set up SEZ to a total period of 10 years , w.e.f. 01.04.2004 . The Section 10A as introduced by Finance Act, 2003 read as under: [Special provision in respect of newly established undertakings in free trade zone, etc. 10A. (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 manufacture 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 under-taking 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 utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pur-poses 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (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 subsection (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 7a [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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne per cent of the total voting power in the company and their shareholding continues to be as such for the period for which the company is eligible for deduction under this section; (b) in the case of a sole proprietary concern, the shareholding of the sole proprietor in the company is not less than fifty-one per cent of the total voting power in the company and his shareholding continues to remain as such for the period for which the company is eligible for deduction under this section.]] 8a[Explanation 1.-For the purposes of this section, in the case of a company, where on the last day of any previous year, the shares of the company carrying not less than fifty-one per cent of the voting power are not beneficially held by persons who held the shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year in which the under-taking was set up, the company shall be presumed to have transferred its ownership or the beneficial interest in the undertaking : 9[Provided that nothing contained in this Explanation shall apply to any change in the shareholding of the company as a result of- (a) its becoming a company in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c 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 soft-ware) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.] The following Explanation 4 shall be inserted after Explanation 3 by the Finance Act, 2003, w.e.f. 1- 4-2004: Explanation 4.- For the purposes of this section, manufacture or produce shall include the cutting and polishing of precious and semi-precious stones. 7.6 Thus, as could be seen that Finance Act, 2003 , inert-alia, amended Section 10A by substituting Section 10A(1A) of the 1961 Act by a newly inserted Section 10A(1A) to 10A(1C) with effect from 01.04.2004 , wherein it provided for deduction available to SEZ unit for a period of 10 years as against period of 7 years provided by Finance Act, 2002 provided that for 8th to 10th year, deduction u/s 10A shall be allowed to SEZ unit provided it creates an reserve called Special Economic Zone Re-investment Allowance Reserve Account and the said reserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing below sub-section (9A). It is also proposed to insert a new sub-section (7A) to provide that where a company is transferred to another company under a scheme of amalgamation or demerger, the deduction shall be allowable in the hands of the amalgamated or the resulting company. However, no deduction shall be admissible under this section to the amalgamating company or the demerged company for the previous year in which the amalgamation or demerger takes place. It is also proposed to insert Explanation 4 at the end so as to provide that for the purposes of this section, manufacture or produce shall include the cutting and polishing of precious and semiprecious stones. These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-2005 and subsequent years. 7.8 Thus as can be seen above that Notes on Clauses and Memorandum to Finance Bill, 2003 clearly stipulated that Section 10A(1A) is applicable to newly set up units in SEZ on or after 1st day of April 2003 and it cannot be stretched to the units which are converted from EPZ units to SEZ units. The intention of law makers is manifestly clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nomic Zones Act, 2005, from his Unit, 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, a deduction of- (i) hundred per cent of profits and gains derived from the export, of such articles or things or from services 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, as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter; (ii) for the next five 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 Reserve Account ) to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2). (2) The deduction under clause (ii) of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the commencement of the Special Economic Zones Act, 2005, the deductions referred to in section 10A for ten consecutive assessment years, such Unit shall not be eligible for deduction from income under this section : Provided further that where a Unit 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 above shall be reckoned from the assessment year relevant to the previous year in which the Unit began to manufacture, or produce or process such articles or things or services in such free trade zone or export processing zone : Provided also that where a Unit 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 and has completed the period of ten consecutive assessment years referred to above, it shall not be eligible for deduction from income as provided in clause (ii) of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India; (ii) export in relation to the Special Economic Zones means taking goods or providing services out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise; (iii) manufacture shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zones Act, 2005 66b; (iv) relevant assessment year means any assessment year falling within a period of fifteen consecutive assessment years referred to in this section; (v) Special Economic Zone and Unit shall have the same meanings as assigned to them under clauses (za) and (zc) of section 2 of the Special Economic Zones Act, 2005. Explanation 2.-For the removal of doubts, it is hereby declared that the profits and gains d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. The main objectives of the SEZ Act are: generation of additional economic activity promotion of exports of goods and services promotion of investment from domestic and foreign sources creation of employment opportunities development of infrastructure facilities It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p on or before commencement of this Act. Thus this Act of 2005 brought within its fold not only newly set up SEZ s or units in SEZ which are set up post commencement of this Act of 2005 but also bring within its fold existing SEZ s or Units in SEZ which were in existence at the time when this new Act of 2005 came into force. Section 51 of the Act of 2005 stipulates that the provisions of the 2005 Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. Section 44 of the 2005 Act stipulates that all the provisions of this Act(except Section 3 and 4) shall , as far as may be apply, to every existing Special Economic Zones. Section 27 of the 2005 Act stipulates that the provisions of the 1961 Act , as in force for the time being, shall apply to , or in relation to, the Developer or entrepreneur for carrying on the authorized operations in a Special Economic Zone or Units subject to the modification specified in the Second Schedule. Section 10AA was incorporated in Second Schedule to the 2005 Act and through it got included in the 1961 Act eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 10A , the undertaking being unit shall be entitled to deduction referred to in this sub-section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in clause (ii) of Sub-section (1) of Section 10AA of the 1961 Act. We have already seen that provisions of Section 10AA(1) of the 1961 Act is subject to provisions of other sub-sections of Section 10AA of the 1961 Act. The Section 10AA(1) provides for deduction for a total period of 15 years, first 5 years deduction is provided @100% of profits derived from exports, while for rest ten years deduction is provided @50% of profits derived from exports subject to fulfilment of conditions as are stipulated u/s 10AA of the 1961 Act. As we have observed that by insertion of sub-section 7B to Section 10A , the entire units in SEZ which were existing on or before commencement of SEZ Act were taken out from applicability of Section 10A and new regime of Section 10AA was made applicable even to existing units in SEZ. The first proviso clearly stipulates that the existing SEZ units which begun to produce or manufacture articles or things in old regime wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not exhausted deduction for ten consecutive assessment years on the date of introduction of Section 10AA , as was available to them u/s 10A of the 1961 Act on commencement of SEZ Act, 2005 and thus these SEZ units shall be entitled for deduction for further period of 5 years beyond period of ten consecutive assessment years owing to newly inserted Section 10AA of the 1961 Act keeping in view provisions of Section 10AA(1)(ii) of the 1961 Act. Thus, vide our detailed discussions above, we hold that the assessee is entitled for deduction u/s 10AA(1)(ii) of the 1961 Act for the impugned assessment year, subject to fulfilment of other conditions for grant of deduction u/s 10AA of the 1961 Act. We order accordingly. 4.1 The ld. DR could not controvert the above decision of the Tribunal in assessee s own case for the assessment year 2011-12. Respectfully following the above decision of the Tribunal for the assessment year 2011- 12, we set aside the appellate order and direct the Assessing Officer to allow the claim of deduction for the assessment year 2014-15 as well. 5. In the result, the appeal filed by the assessee is allowed. Order pronounced on the 23rd November, 2021 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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