Special Economic Zones Act, 2005
The
duty exemptions to SEZs are available to the Act itself read with Rules on the
subject. The operative part of the Act for duty purposes is given below.
[23rd June, 2005]
An Act to provide for the establishment, development
and management of the Special Economic Zones for the promotion of exports and
for matters connected therewith or incidental thereto.
Be it enacted by Parliament in the Fifty-sixth Year of
the Republic of India as follows:-
1. (1)
This Act may be called the Special Economic Zones Act, 2005.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may,
by notification in the Official Gazette, appoint, and different dates may be
appointed for different provisions of this Act and any reference in any such
provision to the commencement of this Act shall be construed as a reference to
the coming into force of that provision.
Definitions
2. In
this Act, unless the context otherwise requires,-
(a) “Appointed
day” with reference to a Special Economic Zone means the date on which the
Special Economic Zone is notified by the Central Government under sub-section
(1) of section 4;
(b) “Approval
Committee” means an Approval Committee constituted under sub-section (1) of
section 13;
(c) “Authorised
operations” means operations which may be authorised under sub-section (2) of
section 4 and sub-section (9) of section 15;
(d) “Authority”
means a Special Economic Zone Authority constituted under sub-section (1) of
section 31;
(e) “Board”
means the Board of Approval constituted under sub-section (1) of section 8;
(f) “Co-Developer”
means a person who, or a State Government which, has been granted by the Central
Government a letter of approval under sub-section (12) of section 3;
(g) “Developer” means a person who, or a State
Government which, has been granted by the Central Government a letter of
approval under sub-section (10) of section 3 and includes an Authority and a
Co-Developer;
(h) “Development
Commissioner” means the Development Commissioner appointed for one or more
Special Economic Zones under sub-section (1) of section 11;
(i) “Domestic
Tariff Area” means the whole of India (including the territorial waters and
continental shelf) but does not include the areas of the Special Economic
Zones;
(j) “Entrepreneur”
means a person who has been granted a letter of approval by the Development
Commissioner under sub-section (9) of section 15;
(k) “Existing
Special Economic Zone” means every Special Economic Zone which is in existence
on or before the commencement of this Act;
(l) “Existing
Unit” means every Unit which has been set up on or before the commencement of
this Act;
(m) “Export”
means –
(i)
taking goods, or providing services, out of India, from a Special Economic
Zone, by land, sea or air or by any other mode, whether physical or otherwise;
or
(ii)
Supplying goods, or providing services, from the Domestic Tariff Area to a Unit
or Developer; or
(iii)
Supplying goods, or providing services, from one Unit to another Unit or
Developer, in the same or different Special Economic Zone;
(n) “Free Trade
and Warehousing Zone” means a Special Economic Zone wherein mainly trading and
warehousing and other activities related thereto are carried on;
(o) “Import”
means-
(i)
bringing goods or receiving services, in a Special Economic Zone, by a Unit or
Developer from a place outside India by land, sea or air or by any other mode,
whether physical or otherwise; or
(ii)
Receiving goods, or services by, Unit or Developer from another Unit or
Developer of the same Special Economic Zone or a different Special Economic
Zone;
(p) “Infrastructure
facilities” means industrial, commercial or social infrastructure or other
facilities necessary for the development of a Special Economic Zone or such
other facilities which may be prescribed;
(q) “International
Financial Services Centre” means an International Financial Services Centre
which has been approved by the Central Government under sub-section (1) of
section 18;
(r) “manufacture”
means to make, produce, fabricate, assemble, process or bring into existence,
by hand or by machine, a new product having a distinctive name, character or
use and shall include processes such as refrigeration, cutting, polishing,
blending, repair, remaking, re-engineering and includes agriculture,
aquaculture, animal husbandry, floriculture, horticulture, pisciculture,
poultry, sericulture, viticulture and mining;
(s) “Notification”
means a notification published in the Official Gazette and the expression
“notify” shall be construed accordingly;
(t) “Notified
offences” means the offences specified as such under sub-section (1) of section
21; 10 of 1949.
(u) “Offshore
Banking Unit” means a branch of a bank located in a Special Economic Zone and
which has obtained the permission under clause (a) of sub-section (1) of
section 23 of the Banking Regulation Act, 1949;
(v) “person”
includes an individual, whether resident in India or outside India, a Hindu
undivided family, co-operative society, a company, whether incorporated in
India or outside India, a firm, proprietary concern, or an association of
persons or body of individuals, whether incorporated or not, local authority
and any agency, office or branch owned or controlled by such individual, Hindu
undivided family, co-operative, association, body, authority or company;
(w) “Prescribed”
means prescribed by the rules made by the Central Government under this Act; 2
of 1934
(x) “Reserve
Bank” means the Reserve Bank of India constituted under section 3 of the
Reserve Bank of India Act, 1934;
(y) “Schedule”
means Schedules to this Act;
(z) “services” means such tradable services which,-
(i) are
covered under the General Agreement on Trade in Services annexed as IB to the
Agreement establishing the World Trade Organisation concluded at Mar rakes on
the 15th day of April, 1994;
(ii) may be prescribed by the Central Government for the purposes
of this Act; and
(iii) earn foreign exchange;
(za) “Special Economic Zone” means each Special
Economic Zone notified under the proviso to sub-section (4) of section 3 and
sub-section (1) of section 4 (including Free Trade and Warehousing Zone) and
includes an existing Special Economic Zone;
(zb) "State Government” means a State
Government of the State in which a Special Economic Zone is established or
proposed to be estacblished;
(zc)
“Unit” means a Unit set up by an entrepreneur in a Special Economic Zone and
includes an existing Unit, an Offshore Banking Unit and a Unit in an
International Financial Services Centre, whether established before or
established after commencement of this Act;
(zd)
all other words and expressions used and not defined in 1 of 1944.
this Act but defined in the Central Excise Act, 1944, the Industries
(Development and Regulation) Act, 1951, the Income–tax At, 1961, the Customs
Act, 1962 and the Foreign Trade ( Development and Regulation) Act, 1992 shall
have the meanings respectively assigned to them in those Acts.65 of 1951, 43 of
1961,52 of 1962, 22 of 1992.
Procedure for making proposal to establish Special Economic
Zone.
***
Constitution
of Board of Approval
***
Constitution of Approval Committee.
***
Exemptions,
drawbacks and concessions to every Developer and entrepreneur.
26. (1)
Subject to the provisions of sub-section (2), every Developer and the
entrepreneur shall be entitled to the following exemptions, drawbacks and
concessions, namely: -
(a) exemption from any duty of customs, under the Customs Act, 1962 or
the Custom Tariff Act, 1975 or any other law for the time being in force, on
goods imported into, or service provided in, a Special Economic Zone or a Unit,
to carry on the authorised operations by the Developer or entrepreneur;
(b) exemption from any duty of
customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any
other law for the time being in force, on goods exported from, or services
provided, from a Special Economic Zone or from a Unit, to any place outside
India:
(c) exemption from any duty of
excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act,
1985 or any other law for the time being in force, on goods brought from
Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the
authorised operations by the Developer or entrepreneur;
(d) drawback or such other
benefits as may be admissible from time to time on goods brought or services
provided from the Domestic Tariff Area into a Special Economic Zone or Unit or
services provided in a Special Economic Zone or Unit by the service providers
located outside India to carry on the authorised operations by the Developer or
entrepreneur;
(e) exemption
from service tax under Chapter-V of the Finance Act, 1994 on taxable services
provided to a Developer or Unit to carry on the authorised operations in a
Special Economic Zone;
(f) exemption
from the securities transaction tax leviable under
section 98 of the Finance (No. 2) Act, 2004 in case the taxable securities
transactions are entered into by a non-resident through the International
Financial Services Centre;
(g) Exemption from the levy of
taxes on the sale or purchase of goods other than newspapers under the Central
Sales Tax Act, 1956 if such goods are meant to carry on the authorised
operations by the Developer or entrepreneur.
(2) The
Central Government may prescribe the manner in which, and the terms and
conditions subject to which, the exemptions, concessions, drawback or other
benefits shall be granted to the Developer or entrepreneur under sub-section
(1).
27. The
provisions of the Income-tax Act, 1961, as in force for the time being, shall
apply to, or in relation to, the Developer or entrepreneur for carrying on the
authorised operations in a Special Economic Zone or Unit subject to the
modifications specified in the Second Schedule.
28. The
Central Government may prescribe the period during which any goods brought
into, or services provided in, any Unit or Special Economic Zone without
payment of taxes, duties or Cess shall remain or continue to be provided in
such Unit or Special Economic Zone.
29.
The transfer of ownership in any goods brought into, or produced or
manufactured in, any Unit or Special Economic Zone or removal thereof from such
Unit or Zone shall be allowed, subject to such terms and conditions as the
Central Government may prescribe.
30.
Subject to the conditions specified in the rules made by the Central Government
in this behalf:-
(a) any goods removed from a Special Economic Zone to the Domestic Tariff
Area shall be chargeable to duties of customs including anti-dumping,
countervailing and safeguard duties under the Customs Tariff Act, 1975, where
applicable, as leviable on such goods when imported;
and
(b) the rate of duty and tariff valuation, if any, applicable to goods
removed from a Special Economic Zone shall be at the rate and tariff valuation
in force as on the date of such removal, and where such date is not
ascertainable, on the date of payment of duty.
***
42. (1)
Notwithstanding anything contained in any other law
for the time being in force, if
(a) Any dispute of civil nature
arises among two or more entrepreneurs or two or more Developers or between an
entrepreneur and a Developer in the Special Economic Zone; and
(b) the court or the courts to try
suits in respect of such dispute had not been designated under sub-section (1)
of section 23, such dispute shall be referred to arbitration: Provided that no
dispute shall be referred to the arbitration on or after the date of the
designation of court or courts under sub-section (1) of section 23.
(2) Where
a dispute has been referred to arbitration under sub-section (1), the same
shall be settled or decided by the arbitrator to be appointed by the Central
Government.
(3)
Save as otherwise provided under this Act, the provisions of the Arbitration
and Conciliation Act, 1996 shall apply to all arbitration under this Act as if
the proceedings for arbitration were referred in settlement or decision under
provisions of the Arbitration and Conciliation Act, 1996,
43.
(1) the period of limitation in the case of any dispute which is required to be
referred to arbitration shall be regulated by the provisions of the Limitation
Act, 1963, as if the dispute was a suit and the arbitrator is civil court.
(2)
Notwithstanding anything contained in sub-section (1), the arbitrator may admit
a dispute after the expiry of the period of limitation, if the applicant
satisfies the arbitrator that he had sufficient causes for not referring the
dispute within such period.
44.
All the provisions of this Act (except sections 3 and 4) shall, as far as may
be apply, to every existing Special Economic Zones.
45.
A communication by any competent authority or person under this Act may be sent
to the person who has the ultimate control over the affairs of the Special
Economic Zone or Unit or where the said affairs are entrusted to a manager,
director, chairperson, or managing director, or to any other officer, by
whatever name called, such communication may be sent to such manager, director,
chairperson, or managing director, or any other officer.
46.
Every person, whether employed or residing or required to be present in a Special
Economic Zone, shall be provided an identity card by every Development
Commissioner of such Special Economic Zone, in such form and containing such
particulars as may be prescribed.
47.
Any authority which, has been conferred upon any power, or, is, required
discharging any function under any Central or State Act, may, subject to the
provisions of this Act, exercise such powers or discharge such function in any
Special Economic Zone under that Act.
48.
No suit, prosecution or other legal proceeding shall lie against the Central
Government or any Chairperson, Member, officer or other employee of the Board
Approval Committee or the Authority or Development Commissioner for anything
done or intended to be done in good faith under this Act.
49.
(1) The Central Government may, by notification, direct that any of the
provisions of this Act (other than sections 54 and 56) or any other Central Act
or any rules or regulations made thereunder or any notification or order issued
or direction given thereunder (other than the provisions relating to making of
the rules or regulations) specified in the notification-
(a) Shall not apply to a Special Economic Zone or a class of Special
Economic Zones or all Special Economic Zones; or
(b) Shall apply to a Special Economic Zone or a class of Special Economic
Zones or all Special Economic Zones only with such exceptions, modifications
and adaptation, as may be specified in the notification. Provided that nothing
contained in this section shall apply to any modifications of any Central Act
or any rules or regulations made thereunder or any notification or order issued
or direction given or scheme made thereunder so far as such modification, rule,
regulation, notification, order or direction or scheme relates to the matters
relating to trade unions, industrial and labour disputes, welfare of labour
including conditions of work, provident funds, employers’ liability, workmen’s
compensation, invalidity and old age pensions and maternity benefits applicable
in any Special Economic Zones. (2) A copy of every notification proposed to be
issued under sub-section (1), shall be laid in draft before each House of
Parliament, while it is in session, for a total period of thirty days which may
be comprised in one session or in two or more successive sessions, and if,
before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in disapproving the issue of
the notification or both Houses agree in making any modification in the
notification, the notification shall not be issued or, as the case may be,
shall be issued only in such modified form as may be agreed upon by both the
Houses.
50.
The State Government may, for the purposes of giving effect to the provisions
of this Act, notify policies for Developers and Units and take suitable steps
for enactment of any law:-
(a) granting exemption from the State taxes, levies and duties
to the Developer or the entrepreneur;
(b) Delegating
the powers conferred upon any person or authority under any State Act to the
Development Commissioner in relation to the Developer or the entrepreneur.
51.
(1) The provisions of this Act shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the time being in force
or in any instrument having effect by virtue of any law other than this Act.
52.
The provision contained in the Chapter X-A of the Customs Act, 1962 and the
Special Economic Zones Rules, 2003 and the Special Economic Zones (Customs
Procedure) Regulations, 2003 made thereunder shall not with effect from such
date as the Central Government by notification appoint, apply to the Special
Economic Zones.
(2)
Notwithstanding anything contained in sub-section (1), all offences committed,
before the commencement of this Act, under any provisions of Customs Act, 1962
and the Special Economic Zones Rules, 2003 and the Special Economic Zones (Customs
Procedure) Regulations, 2003 made thereunder, shall continue to be governed by
the said Act or rules, as the case may be.
(3)
Anything done or any action taken or purported to have been done or taken
including any rule, notification, inspection, order or notice made or issued or
any permission, authorization or exemption granted or any document or
instrument executed under the said provisions of the Act, rules and regulations
referred to in sub-section (1) shall, in so far as they are not inconsistent
with the provisions of this Act, be deemed to have been done or taken or made
or issued or granted under the corresponding provisions of the Act or rules
referred to in that sub-section.
53.
A Special Economic Zone shall, on and from the appointed day, be deemed to be a
territory outside the customs territory of India for the purposes of
undertaking the authorized operations.
(2) A
Special Economic Zone shall, with effect from such date as Central Government
may notify, be deemed to be a port, inland container depot, land station and
land customs stations, as the case may be, under section 7 of the Customs Act,
1962:
Provided that for the purposes of this section, the
Central Government may notify different dates for different Special Economic
Zones.
54. (1)
The Central Government may, having regard to the objects of this Act, and if it
considers necessary or expedient so to do, by notification add to, or as the
case may be, omit from the First Schedule any enactment specified therein.
(2) A
copy of every notification proposed to be issued under sub-section (1), shall
be laid in draft before each House of Parliament, while it is in session, for a
total period of thirty days which may be comprised in one session or in two or
more successive sessions, and if, before the expiry of the session immediately
following the session or the successive sessions aforesaid, both houses agree
in disapproving the issue of the notification or both Houses agree in making
any modification in the notification, the notification, the notification shall
not be issued or, as the case may be , shall be issued only in such modified
form as may be agreed upon by both the House.
***
56.
(1) if any difficulty arises in giving effect to the provisions of this Act,
the Central Government may, by order published in the Official Gazette, make
such provisions not inconsistent with the provisions of this Act, as may appear
to it to be necessary or expedient or expedient for removing the difficulty:
Provided that no such order shall be made under this section after the
expiration of two years from the date of commencement of this Act.
(2) Every order make under this section shall be laid, as soon as may be
after it is make, before each House of Parliament.
57.
With effect from such date as the Central Government may by notification
appoint, the enactments specified in the Third Schedule shall be amended in the
manner specified therein:
Provided that different dates may be appointed on which the amendments
specified in the Third Schedule shall apply to a particular Special Economic
Zone or a class of Special Economic Zones or all Special Economic Zones.
58.
All rules made or purporting to have been made or all notifications issued or
purporting to have been issued under any Central Act relating to the Special
Economic Zone shall, in so far as they relate to matters for which provision is
made in this Act or rules made or notification issued thereunder and are not
inconsistent therewith, be deemed to have been made or issued under this Act as
if this Act had been in force on the date on which such rules were made or
notifications were issued and shall continue to be in force unless and until
they are superseded by any rules made or notifications issued under this Act.
1. The
Agricultural Produce Cess Act, 1940 (27 of 1940).
2. The
Coffee Act, 1942 (7 of 1942).
3. The
Mica Mines Labour Welfare Fund Act, 1946 (22 of 1946).
4. The
Rubber Act, 1947 (24 of 1947).
5. The
Tea Act, 1953 (29 of 1953).
6. The
Salt Cess Act, 1953 (49 of 1953).
7. The
Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).
8. The
Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of
1957).
9. The
Sugar (Regulation of Production) Act, 1961 (55 of 1961).
10. The
Textiles Committee Act, 1963 (41 of 1963).
11. The
Produce Cess Act, 1966 (15 of 1966).
12. The
Marine Products Export Development Authority Act, 1972 (13 of 1972).
13. The
Coal Mines (Conservation and Development Act, 1974 (28 of 1974).
14. The
Oil Industry (Development) Act, 1974 (47 of 1974).
15. The
Tobacco Cess Act, 1975 (26 of 1975).
16. The
Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of
1978).
17. The
Sugar Cess Act, 1982 (3 of 1982).
18. The
Jute Manufactures Cess Act, 1983 (28 of 1983).
19. The
Agricultural and Processed Food Products Export Cess Act, 1985 (3 of 1986).
20. The
Spices Cess Act, 1986 (11 of 1986).
21. The
Research and Development Cess Act, 1986 (32 of 1986).
(A) in clause (15), after sub-clause (vii), the following clause
shall be inserted at the end, namely: -
“(viii) any income by way of interest received by a non-resident or a
person who is not ordinarily resident, in India on a deposit made on or after
the 1st day of
April, 2005 in an Offshore Banking Unit referred to in clause (u) of section 2
of the Special Economic Zones Act, 2005;”;
(B) In clause (23G), after the words, brackets, figures and letters
“sub-section (4) of section 80-IA”, the words brackets, figures and letters “or
sub -section (3) of section 80-IAB.” shall be inserted;
(C) In clause (34), the following Explanation shall be inserted, namely:-
“Explanation.-(a)
For the removal of doubts, it is hereby declared that the dividend referred to
in section 115-O shall not be included in the total income of the assesses,
being a Developer or entrepreneur.”;
(b) in
section 10A, after sub-section (7A), the following sub-section shall be
inserted, namely:- “(7B) The provisions of this section shall not apply to any
undertaking, being a Unit referred to in clause (zc)
of section 2 of the Special Economic Zones Act, 2005, which has begun or begins
to manufacture or produce articles or things or computer software during the
previous year relevant to the assessment year commencing on or after the 1st
day of April, 2006 in any Special Economic Zone.”;
(c) after section 10A, the following section shall be inserted,
namely:-
‘10AA.
(1) Subject to the provisions of this section, in computing the total income of
an assesses, being an entrepreneur as referred to in clause (j) of section (2)
of the Special Economic Zones Act, 2005, from his Unit, who begins to
manufacture or produce articles or things or provide any services during the
previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, a deduction of –
(i) hundred per cent. of
profits and gains derived from the export, of such articles or things or from
services for a period of five consecutive assessment years beginning with the
assessment year relevant to the previous year in which the Unit begins to
manufacture or produce such articles or things or provide services, as the case
may be, and fifty per cent. of such profits and gains
for further five assessment years and thereafter;
(ii) For the next five consecutive assessment years, so much of the
amount not exceeding fifty per cent. of the profit as is debited to the profit
and loss account of the previous year in respect of which the deduction is to
be allowed and credited to a reserve account (to be called the “Special
Economic Zone Re-investment Reserve Account”) to be created and utilized for
the purposes of the business of the assesses in the manner laid down in
sub-section (2). (2) The deduction under clause (ii) of sub-section (1) shall
be allowed only if the following conditions are fulfilled, namely:- (a) the amount credited to the Special Economic Zone
Re-investment Reserve Account is to be utilized- (i) for the purposes of
acquiring machinery or plant which is first put to use before the expiry of a
period of three years following the previous year in which the reserve was
created; and
(ii) until the acquisition of the machinery or plant as aforesaid, for
the purposes of the business of the undertaking other than for distribution by
way of dividends or profits or for remittance outside India as profits or for
the creation of any asset outside India;
(b) the
particulars, as may be specified by the Central Board of Direct Taxes in this
behalf, under clause (b) of sub-section (IB) of section 10A have been furnished
by the assesses in respect of machinery or plant along with the return of
income for the assessment year relevant to the previous year in which such
plant or machinery was first put to use. (3) Where any amount credited to the
Special Economic Zone Re-investment Reserve Account under clause (ii) of
sub-section (1),- (a) has been utilised for any purpose other than those
referred to in sub-section (2), the amount so utilized; or (b) has not been
utilized before the expiry of the period specified in sub-clause (i) of clause
(a) of sub-section (2), the amount not so utilized, shall be deemed to be the
profits,- (i) in a case referred to in clause (a), in the year in which the
amount was so utilized; or (ii) in a case referred to in clause (b), in the
year immediately following the period of three years specified in sub-clause
(i) of clause (a) of sub-section (2), and shall be charged to tax accordingly:
Provided that where in computing the total income of the Unit for any
assessment year, its profits and gains had not been included by application of
the provisions of sub-section (7B) of section 10A, the undertaking being the
Unit shall be entitled to deduction referred to in this sub-section only for
the unexpired period of ten consecutive assessment years and thereafter it
shall be eligible for deduction from income as provided in clause (ii) of
sub-section (1): Explanation.- For the removal of doubts, it is hereby declared
that an undertaking being the Unit, which had already availed before the
commencement of the Special Economic Zone Act, 2005, the deductions referred to
in section 10A for ten consecutive assessment years, such Unit shall not be
eligible for deduction from income under this section. Provided further that
where a Unit initially located in any free trade zone or export processing zone
is subsequently located in a Special Economic Zone by reason of conversion of
such free trade zone or export processing zone into a Special Economic Zone,
the period of ten consecutive assessment years referred to above shall be
reckoned from the assessment year relevant to the previous year in which the
Unit began to manufacture, or produce or process such articles or things or
services in such free trade zone or export processing zone:
Provided also that where a Unit initially located in any free trade zone
or export processing zone is subsequently located in a Special Economic Zone by
reason of conversion of such free trade zone or export processing zone into a
Special Economic Zone and has completed the period of ten consecutive
assessment years referred to above, it shall not be eligible for deduction from
income as provided in clause (ii) of sub-section (1) with effect from the 1st day of April, 2006.
(4)
This section applies to any undertaking being the Unit, which has begun or
begins to manufacture or produce articles or things or services during the
previous year relevant to the assessment year commencing on or after the 1st
day of April, 2006, in any Special Economic Zone;
(5)
Where any undertaking being the Unit which is entitled to the deduction under
this section is transferred, before the expiry of the period specified in this
section, to another undertaking, being the Unit in a scheme of amalgamation or
demerger,-
(a) no deduction shall be admissible under this
section to the amalgamating or the demerged Unit, being the company for the
previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as
they would have applied to the amalgamating or the demerged Unit being the
company as if the amalgamation or demerger had not taken place.
(6)
Loss referred to in sub-section (1) of section 72 or sub-section (1) or
sub-section (3) of section 74, in so far as such loss relates to the business
of the undertaking, being the Unit shall be allowed to be carried forward or
set off.
(7) For
the purposes of sub-section (1), the profits derived from the export of
articles or things or services (including computer software) shall be the
amount which bears to the profits of the business of the undertaking, being the
Unit, the same proportion as the export turnover in respect of such articles or
things or services bears to the total turnover of the business carried on by
the assesses.
(8) The
provisions of sub-sections (5) and (6) of section 10A shall apply to the
articles or things or services referred to in sub-section (1) as if –
(a) for the figures, letters and word “1stApril, 2001”, the figures, letters and
word “1st April,
2006” had been substituted;
(b) for the word “undertaking”, the words
“undertaking, being the Unit” had been substituted.
(9) The
provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so
far as may be, apply in relation to the undertaking referred to in this section
as they apply for the purposes of the undertaking referred to in section 80-IA.
Explanation
1.-
For the purposes of this section,-
(i) “export turnover” means the consideration in respect of export by the
undertaking, being the Unit of articles or things or services received in, or
brought into, India by the assesses but does not include freight,
telecommunication charges or insurance attributable to the delivery of the
articles or things outside India or expenses, if any, incurred in foreign
exchange in rendering of services (including computer software) outside India;
(ii) “export” in relation to the Special Economic Zones” means taking
goods or providing services out of India from a Special Economic Zone by land,
sea, air, or by any other mode whether physical or otherwise;
(iii) “Manufacture” shall have the same meaning as assigned to it in
clause (r) of section 2 of the Special Economic Zones Act, 2005;
(iv) “Relevant assessment year” means any assessment year falling within
a period of fifteen consecutive assessment years referred to in this section;
(v) “Special Economic Zone” and “Unit” shall have the same meanings as
assigned to them under clause (za) and (zc) of section 2 of the Special
Economic Zones Act, 2005.
Explanation 2. – For the removal of doubts, it
is hereby declared that the profits and gains derived from on site development
of computer software (including services for development of software) outside
India shall be deemed to be the profits and gains derived from the export of
computer software outside India;
(d) after section 54G, the following section shall be inserted,
namely:-
“54GA.
(1) Notwithstanding anything contained in section 54G, where the capital gain
arises from the transfer of a capital asset, being machinery or plant or
building or land or any rights in building or land used for the purposes of the
business of an industrial undertaking situate in an urban area, effected in the
course of, or in consequence of the shifting of such industrial undertaking to
any Special Economic Zone, whether developed in any urban area or any other
area and the assesses has within a period of one year before or three years
after the date on which the transfer took place,
(a) Purchased machinery or plant for the purposes of business of the
industrial undertaking in the Special Economic Zone to which the said
undertaking is shifted;
(b) Acquired building or land or constructed building for the purposes of
his business in the Special Economic Zone;
(c) Shifted the original asset and transferred the establishment of such
undertaking to the Special Economic Zone; and
(d) incurred expenses on such other purposes as may be specified in a
scheme framed by the Central Government for the purposes of this section, then,
instead of the capital gain being charged to income-tax as income of the
previous year in which the transfer took place, it shall, subject to the
provisions of sub-section (2), be dealt with in accordance with the following
provisions of this section, that is to say, -
(i) if the amount of the capital gain is greater than the cost and
expenses incurred in relation to all or any of the purposes mentioned in
clauses (a) to (d) (such cost and expenses being hereafter in this section referred
to as the new asset), the difference between the amount of the capital gain and
the cost of the new asset shall be charged under section 45 as the income of
the previous year; and for the purpose of computing in respect of the new asset
any capital gain arising from its transfer within a period of three years of
its being purchased, acquired, constructed or transferred, as the case may be,
the cost shall be nil; or
(ii) if the amount of the capital gain is equal to, or less than, the
cost of the new asset, the capital gain shall not be charged under section 45;
and for the purpose of computing in respect of the new asset any capital gain
arising from its transfer within a period of three years of its being
purchased, acquired, constructed or transferred, as the case may be, the cost
shall be reduced by the amount of the capital gain.
Explanation.-In
this sub-section,-
(a)
“Special Economic Zone” shall have the meaning assigned to it in clause (za) of the Special Economic Zones Act, 2005;
(b)
“urban area” means any such area within the limits of a municipal corporation
or municipality as the Central Government may, having regard to the population,
concentration of industries, need for proper planning of the area and other
relevant factors, by general or special order, declare to be an urban area for
the purposes of this sub-section.
(2) The
amount of capital gain which is not appropriated by the assesses towards the
cost and expenses incurred in relation to all or any of the purposes mentioned
in clauses (a) to (d) of sub-section (1) within one year before the date on
which the transfer of the original asset took place, or which is not utilized
by him for all or any of the purposes aforesaid before the date of furnishing
the return of income under section 139, shall be deposited by him before
furnishing such return [such deposit being made in any case not later than the
due date applicable in the case of the assesses for furnishing the return of
income under sub-section (1) of section 139] in an account in any such bank or
institution as may be specified in, and utilized in accordance with, any scheme
which the Central Government may, by notification, frame in this behalf and
such return shall be accompanied by proof of such deposit; and, for the purposes
of sub-section (1), the amount, if any, already utilized by the assesses for
all or any of the aforesaid purposes together with the amount so deposited
shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not
utilized wholly or partly for all or any of the purposes mentioned in clauses
(a) to (d) of sub-section (1) within the period specified in that sub-section,
then, -
(i) The
amount not so utilized shall be charged under section 45 as the income of the
previous year in which the period of three years from the date of the transfer
of the original asset expires; and
(ii) The assesses shall be entitled to withdraw such amount
in accordance with the scheme aforesaid.”
(e) in section 80-IA, after sub-section (12), the following section shall
be inserted, namely:- “(13) nothing contained in this section shall apply to
any Special Economic Zones notified on or after the 1st day of April, 2005 in accordance with
the scheme referred to in sub-clause (iii) of clause (c) of sub-section (4)”.
(f)
After section 80-IA, the following section shall be inserted,
namely:-
“80-I
AB. (1) Where the gross total income of an assesses, being a Developer,
includes any profits and gains derived by an undertaking or an enterprise from
any business of developing a Special Economic Zone, notified on or after the 1st day of April, 2005 under the Special
Economic Zone Act, 2005, there shall, in accordance with and subject to the
provisions of this section, be allowed, in computing the total income of the
assesses, a deduction of an amount equal to one hundred per cent. of the profits and gains derived from such business for ten
consecutive assessment years.
(2) The
deduction specified in sub-section (1) may, at the option of the assesses, be
claimed by him for any ten consecutive assessment years out of fifteen years
beginning from the year in which a Special Economic Zone has been notified by
the Central Government: Provided that where in computing the total income of
any undertaking, being a Developer for any assessment year, its profits and
gains had not been included by application of the provisions of sub-section
(13) of section 80-1A, the undertaking being the Developer shall be entitled to
deduction referred to in this section only for the unexpired period of ten
consecutive assessment years and thereafter it shall be eligible for deduction
from income as provided in sub-section (1) or sub-section (2) as the case may
be: Provided further that in a case where an undertaking, being a Developer who
develops a Special Economic Zone on or after the 1st day of April, 2005 and transfers the
operation and maintenance of such Special Economic Zone to another Developer
(hereafter in this section referred to as the transferee Developer), the
deduction under sub-section (1) shall be allowed to such transferee Developer
for the remaining period in the ten consecutive assessment years as if the
operation and maintenance were not so transferred to the transferee Developer.
(3) The
provisions of sub-sections (5) and sub-sections (7) to (12) of section 80-IA
shall apply to the Special Economic Zones for the purpose of allowing
deductions under sub-section (1).
Explanation.2-
For the purposes of this section, “Developer” and “Special Economic Zone” shall
have the same meanings respectively as assigned to them in clauses (g) and (za) of section 2 of the Special Economic Zones Act,
2005";
(g) for section 80LA, the following section shall be
substituted, namely:–
‘80LA.
(1) Where the gross total income of an assesses,-
(i) being a scheduled bank, or, any bank incorporated by or under the
laws of a country outside India; and having an Offshore Banking Unit in a
Special Economic Zone; or
(ii) being a Unit of an International Financial Services Centre, includes
any income referred to in sub-section (2), there shall be allowed, in
accordance with and subject to the provisions of this section, a deduction from
such income, of an amount equal to-
(a) one
hundred per cent of such income for five consecutive assessment years beginning
with the assessment year relevant to the previous year in which the permission,
under clause (a) of sub-section (1) of section 23 of the Banking Regulation
Act, 1949 or permission or registration under the Securities and Exchange Board
of India Act, 1992 or any other relevant law was obtained, and thereafter;
(b)
fifty per cent. of such income for five consecutive
assessment years.
(2)
The income referred to in sub-section (1) shall be the in-come—
(a) from an Offshore Banking Unit in a Special
Economic Zone; or
(b) from the business referred to in sub-section (1) of section 6 of the
Banking Regulation Act, 1949 with an undertaking located in a Special Economic
Zone or any other undertaking which develops, develops and operates or
develops, operates and maintains a Special Economic Zone; or
(c) From any Unit of the International Financial Services Centre from its
business for which it has been approved for setting up in such a Centre in a
Special Economic Zone.
(3) No
deduction under this section shall be allowed unless the assesses furnishes
along with the return of income,—
(i) the report, in the form specified by the Central Board of Direct
Taxes under clause (i) of sub-section (2) of section 80LA, as it stood
immediately before its substitution by this section, of an accountant as
defined in the Explanation below sub-section (2) of section 288, certifying
that the deduction has been correctly claimed in accordance with the provisions
of this section; and
(ii) a copy of the permission obtained under
clause (a) of sub-section (1) of section 23 of the Banking Regulation Act,
1949.
Explanation.2—for
the purposes of this section,—
(a)
“International Financial Services Centre” shall have the same meaning as
assigned to it in clause (q) of section 2 of the Special Economic Zones Act,
2005;
(b) “scheduled bank” shall have the same meaning as assigned to
it in clause (e) of section 2 of the Reserve Bank of India Act, 1934;
(c)
“Special Economic Zone” shall have the same meaning as assigned to it in clause
(za) of section 2 of the Special Economic Zones Act,
2005;
(d)
“Unit” shall have the same meaning as assigned to it in clause (zc) of section (2) of the Special
Economic Zones Act, 2005;
(h) in
section 115JB, after sub-section (5), the following sub-section shall be
inserted, namely: - “(6) The provisions of this section shall not apply to the
income accrued or arising on or after the 1st day of April, 2005 from any business
carried on, or services rendered, by an entrepreneur or a Developer, in a Unit
or Special Economic Zone, as the case may be.”.
(i) in section 115-0, after sub-section (5), the following sub-section
shall be inserted, namely:- “(6) Notwithstanding anything contained in this
section, no tax on distributed profits shall be chargeable in respect of the
total income of an undertaking or enterprise engaged in developing or
developing and operating or developing, operating and maintaining a Special
Economic Zone for any assessment year on any amount declared, distributed or
paid by such Developer or enterprise, by way of dividends (whether interim or
otherwise) on or after the 1st day of
April, 2005 out of its current income either in the hands of the Developer or
enterprise or the person receiving such dividend not falling under clause (23G)
of section 10.”;
(j) in section 197A, after sub-section (1C), the following
sub-section shall be inserted, namely:- ‘(1D) Notwithstanding anything
contained in this section, no deduction of tax shall be made by the Offshore
banking Unit from the interest paid-
(a) on deposit made on or after the 1st day of April, 2005, by a non-resident
or a person not ordinarily resident in India; or
(b) On borrowings, on or after the 1st day of April, 2005, from a non-resident
or a person not ordinarily resident in India.
Explanation.- For the purposes of this
sub-section “Offshore Banking Unit” shall have the same meaning as assigned to
it in clause (u) of section 2 of the Special Economic Zones Act, 2005.’.
Amendment
to the Insurance Act, 1938 (4 of 1938)
1.
In section 2C, in sub-section (1), after the
third Proviso, insert–
“Provided also an insurer being an Indian Insurance Company, insurance
co-operative society or a body corporate referred to in clause (c) of this
sub-section carrying on the business of insurance, may carry on any business of
insurance in any Special Economic Zone as defined in clause (za) of section 2 of the Special Economic Zones Act, 2005.”.
Power of Central Government to apply provisions of this Act to
Special Economic Zones.
2. After
section 2C insert –
“2CA.
The Central Government may, by notification, direct that any of the provisions
of this Act,-
(a) shall not apply to insurer, being an Indian Insurance Company,
insurance co-operative society or a body corporate referred to in clause (c) of
this sub-section (1) of section 2C, carrying on the business of insurance, in
any Special Economic Zone as defined in clause (za)
of section 2 of the Special Economic Zones Act, 2005; or
(b) Shall apply to any insurer being an Indian Insurance Company,
insurance co-operative society or a body corporate referred to in clause
(c) of sub-section (1) of section 2C, carrying on the business of
insurance, in any Special Economic Zone as defined in clause (za) of section 2 of the Special Economic Zones Act, 2005
only with such exceptions, modifications and adaptations as may be specified in
the notification.”.
1.
Section 53 shall be renumbered as sub-section (1) thereof and in sub-section
(1) as so re-numbered, for “banking company or institution or to any class of
banking companies”, substitute,-
“Banking company or institution or to any class of banking companies or
any of their branches functioning or located in any Special Economic Zone
established under the Special Economic Zones Act, 2005.”
2. After
sub-section (1) as so numbered, the following sub-section shall be inserted,
namely:-
“(2) A copy of every notification proposed to be issued under sub-section
(1), shall be laid in draft before each House of Parliament, while it is in
session, for a total period of thirty days which may be comprised in one
session or in two or more successive sessions, and if, before the expiry of the
session immediately following the session or the successive sessions aforesaid,
both Houses agree in disapproving the issue of the notification or both Houses
agree in making any modification in the notification, the notification shall
not be issued or, as the case may be, shall be issued only in such modified
form as may be agreed upon by both the Houses.”.
In
section 3, in the proviso, after clause (2), insert,- “(3) any instrument
executed, by, or, on behalf of, or, in favour of the Developer, or Unit or in
connection with the carrying out of purposes of the Special Economic Zone.
Explanation.- For the purposes of this
clause, the expressions “Developer”, “Special Economic Zone” and “Unit” shall
have meanings respectively assigned to them in clause (g), (za)
and (zc) of section 2 of the Special Economic Zones
Act, 2005.”