Subject : TAX HOLIDAY UNDER SECTION 10B OF THE INCOME TAX ACT TO DTA UNITS CONVERTED INTO 100% EOUs
Notification No.EPCES CIRCULAR NO. 22 DATED 10.1.2005 EXPORT PROMOTION COUNCIL FOR EOUs

EXPORT PROMOTION COUNCIL FOR EOUs & SEZ UNITS

705, BHIKAJI CAMA BHAVAN, BHIKAJI CAMA PLACE, NEW DELHI 110 066

TEL : 26165805, 26167042, FAX: 26165538, EMAIL : epces@vsnl.net

Websites : www.eouindia.com & www.sezindia.nic.in

 

L.B. Singhal                           

Director General       

 

 

ALL EPCES MEMBERS

 

EPCES CIRCULAR NO. 22 DATED 10.1.2005

 

 

Sub :    TAX HOLIDAY UNDER SECTION 10B OF THE INCOME TAX ACT

TO DTA UNITS CONVERTED INTO 100% EOUs

 

Paragraph 6.37.1 of Handbook of Procedures, Vol. I made a provision that if a DTA unit is converted into 100% EOU then it shall be entitled  for income tax exemption but limited to the period of 10 years from original commencement of manufacture or that prescribed under Section 10 of the Income Tax Act, whichever is earlier.

 

After incorporation of this provision, EPCES had taken up the matter with CBDT requesting that a corresponding notification/clarification may also be issued by CBDT so that there is no ambiguity and the field formation of the income tax authorities provide uniform interpretation. EPCES had a meeting with the Revenue Secretary also on 6th January 2005 and the Revenue Secretary promised that by today evening the clarification would be issued.

 

This was also discussed in open house meeting held in Hyderabad on 4-1-2005 and Director (CBDT) assured that clarification would be issued shortly.

 

I am happy to inform you that CBDT has issued Circular No. 1/2005 dated 6-1-2005 which has clarified as follows:-

 

“ 4.      The matter has been examined and it is hereby clarified that an undertaking set up in Domestic Tariff Area (DTA) and deriving profit from export of articles or things or computer software manufactured or produced by it, which is subsequently converted into a EOU, shall be eligible for deduction u/s 10B of the IT Act, on getting approval as 100% Export Oriented Undertaking. In such a case, the deduction shall be available only from the year in which it has got the approval as 100% EOU and shall be available only for the remaining 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 articles or things or computer software, as a DTA unit. Further, in the year of approval, the deduction shall be restricted to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. Moreover, the deduction to such units in any case will not be available after assessment year 2009-10.”

 

A copy of this circular is enclosed for your information. I would like to further inform that in the Revenue Secretary meeting EPCES has taken up major issues relating to EOUs & SEZs. Some of the issues taken up are mentioned as follows:-

 

ISSUES RELATED TO CBDT

 

1.         Income Tax Exemption, Removal of Sunset Clause                               

2.         Section 10A of the Income Tax Act, 1961 to cover                              

            “Inter-Uit Transfer”, and Re-export of surplus goods” by SEZ

3.         Income Tax benefits to be extended to the Trading Activities    

4.         Restoration of Income Tax Exemption to Old SEZ Units                       

5.         Sub-Section (3) of Section 10B of Income Tax Act                              

6.         Income Tax Benefits for DTA Units converted to EOUs                       

7.         Exemption from Withholding Tax                                                         

8.         Transfer Pricing Regulations (Section 92 of the Income             

            Tax Act, 1961)

9.         Netting off Interest earned on deposits against interest              

            paid on the loans

10.       Definition of Manufacturing                                                                  

 

ISSUES RELATED TO CST ACT

 

11.       Exemption from Central Sales Tax for Supplies from                

            DTA to EOUs/SEZs

 

ISSUES RELATED TO CBEC

 

12.       Service Tax Exemption                                                                        

13.       Fast Track Clearance Scheme                                                             

14.       DEPB Benefits for Supply of goods from DTA to SEZ             

            for the period 1-4-03 to 11-5-04

15.       Problem faced by EOUs/SEZ Units on procurement of HSD    

16.       Exemption from Additional Excise Duty on supply of HSD to   

            EOUs/SEZ Units : Amendment to Finance Act, 1999

17.       Exemption from Central Excise Duty to SEZ Developers                      

18.       Abolition of Cost Recovery Charges                                                    

19.       Repeated Registration with different ports and delay in              

            registration with Customs Authorities.

20.       Disbursement of Drawback to SEZ Units/SEZ Developers                   

21.       Notification of SEZ as a Customs Port                                     

22.       Doing Away with the requirement of Procurement Certificate    

23.       Time frame for various activities to be performed by Customs/  

            Central Field formations : in respect of EOUs/SEZs

24.       Impact of Value Added Tax implementation on EOUs/SEZs     

 

This is for your information please.

 

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