TaxTMI 
TaxTMI 
Tax holiday under sections 10A and 10B for units producing computer software in Export Processing Zones (EPZs), Software Technology Parks (STPs) or 100% Export Oriented Units (EOUs)--Certain clarification thereon
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....cessing Zones (EPZs), Software Technology Parks (STPs) or 100% Export Oriented Units (EOUs)--Certain clarification thereon Circular No. 694 Dated 23/11/1994 Section 10A of the Income-tax Act provides for a five-year total tax holiday to industrial undertakings which manufacture or produce any article or thing and are set up in notified Free Trade Zones (FTZs). This provision was introduce....
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....ovementioned provisions are causing disputes between the Income-tax Department and the software export sector and, therefore, need to be clarified. Development of programmes on site 5. Since computer programmes are not physical goods but are developed as a result of an intellectual analysis of the systems and methods followed by the purchaser of the programme, it is often prepared on site, w....
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.... the EPZ/EOU/STP develops software sur place, that is, at the client's site abroad, such unit should not be denied the tax holiday under section 10A or 10B on the ground that it was prepared on site, as long as the software is a product of the unit, i.e., it is produced by the unit. Software exporting units in EPZs/EOUs commencing production before April 1, 1994. 8. Unlike STPs which have co....
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....d not for earlier assessment years. 9. Such a view is not in consonance with the intention of the Government. Finance Act, 1993, extended the scope of the tax holiday to units in STPs but did not curtail the scope in respect of existing software exporting units in EPZs/EOUs, already availing of the incentive. The Explanation of the term "produce" is clarificatory in nature and was inserted in 1....