By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi, Chartered Accountants
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Facts:
While computing tax liability u/s. 115JB, the assessee deducted income of its Mumbai unit which was a SEZ unit and eligible for tax benefit u/s. 10A. The Assessing Officer disputed the claim of the assessee on the ground that the Finance Act, 2007 amended section 115JB w.e.f. A.Y. 2008-09 for bringing the amount of income to which provisions of section 10A or 10B apply within the purview of MAT.
Held:
By SEZ Act, 2005 w.e.f. 10th February 2006, a new section 10AA has been inserted which provides exemption to the units located in SEZ. Section 2 of SEZ Act, defines SEZ as under:
“(za) Special Economic Zone means each Special Economic Zone notified under the proviso to s/s. (4) of section 3 and s/s. (1) of section 4 (including free trade and warehousing zone) and includes an existing Special Economic Zone.”
It is evident from the relevant provisions that an existing SEZ unit will also be governed by SEZ Act, 2005. Therefore, the benefits which are to be provided to the newly established unit in SEZ as per section 10AA will also be available to the existing units in SEZ. Moreover, section 4(1) of SEZ Act provides that an existing SEZ unit shall be deemed to have been notified and established in accordance with provisions of SEZ Act and the provisions of SEZ Act shall apply to such existing SEZ units. It is also observed that by the SEZ Act, s/s. (6) to section 115JB was also inserted providing that provisions of section 115JB shall not apply to the income accrued C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi Chartered Accountants Tribunal news or arisen on or after 1st April, 2005 from any business carried on, or services rendered, by an entrepreneur or a developer, in a unit or SEZ, as the case may be. Hence, income of units located in SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6). In view of above, irrespective of the fact that amendment has been made in clause (f) of Explanation 1 to section 115JB(2) to apply the provisions of MAT in respect of units which are entitled to deduction u/s. 10A or section 10B, the units which are in SEZ will continue to get benefits from the applicability of provisions of MAT in view of s/s. (6). Section 115JB(6) does not refer section 10A or section 10AA but it only refers that provisions of section 115JB will not apply to the income accrued or arisen on or after 1st April, 2005 from any business carried on in a unit located in SEZ. Hence, the unit in SEZ will be covered by s/s. (6) to section 115JB irrespective of the fact that those units were claiming deduction u/s. 10A.
