Income tax deduction for hundred percent EOUs – CBDT issues clarification.
AS per Section 10-B of the Income Tax Act, profits of 100% EOUs are allowed 100% deduction for a period of 10 consecutive years from the year of starting of manufacture, but the deduction is not available after the year 2009-10. Doubts have been raised as to whether this deduction under section 10B is available to a DTA unit on conversion as a 100% EOU.
The benevolent Board has now clarified that it is indeed available, but only for the remaining period till 2009-10. The Board has given certain examples to drive home its points. Shorn of North Block bureaucratic English, it means:-
1. A unit in DTA started in 1999-2000, gets approval as EOU in September 2004. It shall be eligible for deduction under Section 10B from the Assessment Year 2005-06 to 2009-10.
2. A DTA unit started in 96-97, becomes EOU in 2007-08. It is not eligible for 10B deduction as the ten year period is over. (This is most unfair as the period is to be computed from the time the unit becomes an EOU, not before)
3. A unit formed by transferring old machinery is not eligible for deduction.
Income Tax Circular No dated 6.1.2005