Procurement of used capital goods from DTA by SEZ Units - Income Tax benefits - Shifting
of existing businesses from DTA to SEZs
Department of Revenue, in order to regulate shifting of existing businesses from DTA to SEZs to avail of the direct tax exemption on the export income, had amended Section 10AA of Income Tax Act.
Keeping in view the provisions that exist in Section 10AA of the Income Tax Act, 1961 to deal with tax related issues in case of previously used Capital Goods, in terms of the provisions of sub-section (8) of Section 15 of the Special Economic Zones Act, 2005 , Department of Commerce prescribes that while granting any approval for setting up new units in any SEZ , the Approval Committee or the Development Commissioner, as the case may be, shall ensure that procurement of second hand capital goods shall be allowed only in terms of the provisions of sub-section (4) of Section 10AA read with Explanation 1 & 2 to sub-section (3) of Section 80 IA of the Income Tax Act ,1961.
And the following procedure is prescribed for the guidance of the units in the SEZs :-
(i) The units intending to move second hand capital goods in DTA should furnish details as prescribed in the enclosed annexure and must obtain prior approval of the Development Commissioner before such movement. No second hand capital goods will be allowed to be moved into the Zone without prior approval from the Development Commissioner.
(ii) While computing the value of the used/second hand capital goods sought to be transferred into the Zone from DTA , including from an EOU , EHTP / STP / BTP unit, within the Zone or from any other Zone, the depreciation rates stipulated as per the provisions of Income Tax Act and Rules made thereunder will be adopted for arriving at the depreciated value of such second hand capital goods intended to be moved into the Zone.
(iii) It should be ensured by the Unit that the sum total of S. No. 5 & 6 of the enclosed annexure shall not exceed 20% of the sum total of S. Nos 3 & 4 of the annexure at any given point of time. However, the units can shift used/second hand capital goods valuing more than 20% in which case they will not be entitled to benefits under the Income Tax Act.
(iv) For each transfer of used/second hand capital goods from the DTA into the zone the unit has to compute the values as mentioned above and indicate at the relevant S. Nos of the enclosed annexure.
(v) The details of such procurement of used/second hand Capital goods from DTA (including from an EOU , EHTP / STP / BTP unit) should be clearly mentioned in the Annual Performance Report submitted by the unit.
(vi) The limitation of 20% of the value of used capital goods Capital goods that can move into the zone would not be applicable in respect of capital goods moved to DTA under Rule 50 of the SEZ Rules, 2006.
DOC Instruction No. 11 –Dated: 27 th May , 2009.