Govt removes anomaly in SEZ I-T law

The government today changed the tax laws relating to the SEZ units which will now give a fair exemption to those businesses which derive sales both from Special Economic Zones and outside these zones.

Section 10(AA) of the Income Tax will be changed to remove an anomaly which had placed at a disadvantage those who derived profits and turnover both from inside and outside the SEZs.

The Section 10 AA of the Income Tax Act provides for exemption in respect of export profit of a unit located in an SEZ. The export profits are required to be computed with reference to the total turnover of the assessee.

Terming the announcement as a positive development, Director General of export promotion council for EoUs and SEZs L B Singhal said, the anomaly has been rectified, but this correction should be made applicable from February 2006, when the SEZ Act rules came into force.

This method of computation of the profits of business with reference to the total turnover of the assessee was perceived to be discriminatory in so far as those assessees are concerned who were having multiple units in both the SEZ and the domestic tariff area vis-a-vis those having units in SEZ units only, Finance Minister Pranab Mukherjee said.

This amendment would be effective from April 1, 2010.