Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT Audit :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: due date for vat payment :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: VAT RATES :: TDS :: Central Excise rule to resale the machines to a new company :: cpt :: ACCOUNTING STANDARD
 
 
News Headlines »
 How to link your Aadhaar and PAN details to file income-tax returns
 How to calculate capital gains tax on property sold at less than stamp value?
 Return Filing - Under GST, this is how you will file tax returns from July 1
 Income tax filing FAQs part 1
 Filing Income Tax Returns? Things To Keep In Mind As Deadline Approaches
 Filing of online return for 4th quarter of 2016-17- extension of period thereof.
 New tax accounting standards may reduce leeway for infrastructure companies
 GST – CONCEPT & STATUS – As on 01st May, 2017
 Govt extends VAT deadline, relief for developers
 Income Tax Appellate Tribunal Rules, 2017
 Got your Form 16? You should file income tax returns early to enjoy benefits

The worry Zone
November, 04th 2006

Section 10AA of the Income-Tax Act, 1961 ushered in by the Special Economic Zones Act, 2005, along with a few other Sections, confers a 15-year tax holiday for units located in Special Economic Zones (SEZs) with the first five years allowed 100 per cent exemption with no quid pro quo, the next five a 50 per cent exemption, again no quid pro quo, and the last five granted an exemption of zero to 50 per cent depending on how much is debited to the SEZ Reinvestment Reserve.

Convertible foreign exchange

The absence of two specific provisions in the new regime is worrying. The first, the conspicuous absence of the requirement to earn one's revenue in convertible foreign exchange as a precondition for grant of this exemption a requirement which has hitherto characterised practically all Sections conferring exemption for foreign exchange earnings, be it the now-defunct Section 80HHC or Section 10A.

One may contend that with the country sitting on a comfortable forex reserve, there was no need to continue to insist on positing the tax incentive on earning of convertible foreign exchange. But this goes against the basic condition underpinning the Section that the exemption is only to the extent attributable to export activities. The government ought to have insisted on export proceeds being designated and received in convertible foreign exchange, unless, of course, the intention is to hint at the impending full convertibility of the rupee.

Second-hand machinery

The second de rigueur safeguard that characterises other location-specific exemptions regime but absent in Section 10AA is the prohibition on installing second-hand plant and machinery in excess of 20 per cent of the total investment thereon, unless such second-hand machinery is imported.

The absence of this safeguard may draw potential entrepreneurs into buying existing assets installed in non-SEZ areas besides facilitating shifting of a unit lock, stock and barrel from a non-SEZ area to an SEZ. One does not know whether this omission was deliberate or an oversight.

It is possible to contend that in an era of M&A, where the accent is on better use of existing facilities rather than on going for greenfield projects, especially in an industry facing a glut situation, the omission if anything is well-founded.

A discrimination

But Section 54GA ushered in by the SEZ Act does not take this objective forward and reflects muddled thinking when it exempts capital gains from transfer of machinery, plant, land and buildings of industrial undertakings located in urban areas from tax, provided the capital gain there from is used to purchase one or more of these assets in a SEZ. If the idea is to encourage shifting of units to SEZs, then no discrimination should have been made between units in urban and in non-urban areas.

S. Murlidharan
(The author is a Delhi-based chartered accountant.)

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Organic SEO Outsourcing Organic Search Engine Optimization Outsourcing Organic Website SEO Organic SEO India Website SEO India Organic Search Engine Optimization India Organic Internet SEO India Organic Web

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions