Exports to third parties by SEZ Unit and 10AA

[Rajendra Prasad]

Dear Sir,

As per SEZ act , exports by third parties are to be treated as exports. Am I eligible to claim 10AA deduction ?

Please clarify

[Malay pota]

Yes,if the following condition of section 10AA of the Income Tax Act are fulfilled.

Entrepreneur should be covered within the provisions of section 2 (j) of the Special Economic Zone Act, 2005;

SEZ unit should have commenced its manufacturing activity or provision of service, as the case may be, during the previous year relevant to any assessment year commencing on or after 1st April, 2006;

SEZ unit is not formed by any splitting up, or the reconstruction of the business that is already in existence.

SEZ unit is not formed by any transfer of plant or machinery, previously used for any purpose, to a new business.

Units who have already enjoyed benefit of deduction under section 10A of the Income Tax Act for a continuous period of 10 years are not eligible to claim deduction under section 10AA of the Act.

[Rajendra Prasad]

Dear Sir,

Whether the third party exports are eligible to claim benefit u/s 10AA. IN third party exports , we will receive INR from the exporter.

Unit is eligilble to claim Exemtpion U/s 10AA as it is not meeting the criteria to claim benefit u/s 10AA.

Please clarify.

[Malay pota]

You can avail benefit of section 10AA of the IT Act even if remittance is in INR because section specifies export turnover and not realization in FCY.

No you can not claim benefit of section 10AA of IT Act if you do not fulfill the conditions stipulated.

AI Summary

SEZ unit 10AA eligibility depends on meeting statutory conditions; export turnover, not remittance currency, governs deduction. Eligibility for the export-linked deduction for SEZ units requires meeting prescribed conditions: qualifying entrepreneur status under the SEZ Act, commencement of activity in the relevant previous year for assessment years beginning on or after 1 April 2006, absence of formation by splitting/reconstruction or by transfer of previously used plant or machinery, and no prior continuous decade of deduction; export turnover is the operative measure and remittance in domestic currency does not bar claim, but all conditions must be fulfilled.