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Clause - 007 - Amendment of section 10AA.
Clause 7 of the Bill seeks to amend section 10AA of the Income-tax Act relating to special provisions in respect of newly established Units in Special Economic Zones.
Under the existing provisions of the said section, deduction for fifteen consecutive years is provided from the total income of an assessee in respect of profits and gains from his Unit operating in Special Economic Zone which are engaged in manufacturing or production of articles or things or providing any services, subject to fulfilment of the conditions mentioned in that section.
It is proposed to insert a new Explanation after sub-section (1) of the said section so as to provide that the amount of deduction referred to in that section shall be allowed from the total income of the assessee computed in accordance with the provisions of the Income-tax Act, before giving effect to the provisions of the said section and the deduction under the said section shall not exceed such total income of the assessee.
This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.
To overcome the impact of the decision of Supreme Court
2016 (12) TMI 881 - SUPREME COURT
C.I.T. & Another Versus M/s Yokogawa India Ltd.
In this case in the context of Section 10A it was held that:
"The stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI."
SEZ deduction under section 10AA limited to the assessee's computed total income, preventing deduction beyond taxable income. The amendment inserts an Explanation specifying that the SEZ-unit deduction is to be allowed from the assessee's total income computed under the Income-tax Act before giving effect to that special deduction, and that the deduction shall not exceed such total income; the change is made to address a judicial ruling on the stage of deduction. of Press 'Enter' after typing page number.
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