IT parks to enjoy tax sops under Section 10A

The Central Board of Direct Taxes has today issued directions to all its field authorities that the tax deduction available under Section 10A of the Income-tax Act would not be denied to software technology parks units on the ground that approval or registration to such units had been granted by the directors of software technology parks.

The board, however, stated that the deduction under section 10A would be subject to fulfillment of all other conditions, an official release said.

In cases where assessments or re-assessments have already been completed, and claims under Section 10A disallowed on the ground that approval to the STP has not been granted by the Inter-Ministerial Standing Committee in accordance with the scheme, the CBDT has instructed that the demand be kept in abeyance until further orders.

The instructions have been issued on account of a large number of units registered and approved by the directors of the software technology park claiming deduction under Section 10A.

Section 10A of the Income-tax Act, 1961, provides for 100 per cent deduction for ten years, of export profits earned by units set up in a Software Technology Park.

The STP scheme notified in March, 1995 by the Ministry of Commerce, requires approval of the Software Technology Park by the Inter-Ministerial Standing Committee of the Department of Electronics.

The Central Board of Direct Taxes (CBDT) had received representations from its field formations questioning the STPI's status and its powers to grant tax exemptions under Section 10A of the Income tax Act.

'Over 95 per cent of software exporters are now claiming deduction under Section 10A on the basis of their registration with a society by the name of STPI. The registering society, a profit-making entity, is not recognised either under the statute or any rules or notifications. The board, too, has not issued any clarification on this issue,' Chief Commissioner of Income Tax, Delhi, Hardayal Singh, had said in a recent report to the CBDT.