Deduction u/s. 10AA by application of section 10A(7B)

[vdboss]

As per section 10A(7B) of the IT Act,  deduction under section 10A can be claimed by the unit in SEZ, which has begun to manufacture or produce articles or things or computer software between 1 April 2000 to 31 March 2005. No deduction under section 10A will be allowed to the SEZ unit, which has begun (to manufacture or produce articles or things) on or after 1 April 2005 i.e. year ended 31 March 2006 (AY 2006-07).

As per the proviso to section 10AA(3) of the IT Act, if due to the application of 10A(7B), deduction under section 10A is not available to the eligible unit in SEZ, then the said unit shall be able to claim deduction under section 10AA for the unexpired period of 10 consecutive AYs.

From the above, it can be observed that proviso to section 10AA(3) entitles deduction for unexpired period of 10 consecutive AYs to an unit, which became ineligible to claim deduction under section 10A due to application of sub-section 7B of section 10A.

Section 10A(7B) makes those unit ineligible to claim deduction under section 10A, which have begun after 1 April 2005. Section 10AA(1) provides for deduction only to those units which began after 1 April 2005.

In view of the above, it is not clear that proviso to section 10AA(3) refers to which units to be eligible to claim deduction for the unexpired period. This is because by virtue of section 10A(7B), those units which have begun after 1 April 2005 are not eligible for deduction under section 10A as such units are automatically eligible to claim deduction under section 10AA as per proviso of section 10AA(1). In case of such units, there can not be question of unexpired period because they began only after 1 April 2005.     

Query:

Whether an SEZ unit, having claimed deduction under section 10A of the IT Act, would be eligible to claim deduction under section 10AA for the unexpired period by application of proviso to section 10AA(3)?

[camanoj2104]

Dear sir
Section 10A(7B) bars a unit in SEZ from claiming ded under section 10A from A.Y. 2006-07 onwards
Say a unit is located in SEZ from A.y. 2003-04 it claimed ded under sectyion 10A from ay 2003-04 to 2005-06
now from ay 2006-07 it can claim ded under section 10AA (1) (i) for 7 years

CA MANOJ GUPTA
JODHPUR
09828510543