XYZ Pvt. Ltd. furnishes the following information relating to its two business units, one located in Special Economic Zone (SEZ) and other located in Domestic Tariff Area (DTA) for the year ended 31-3-2018: Particulars (
CS Executive · Tax Laws · PYQS · December 2018
XYZ Pvt. Ltd. furnishes the following information relating to its two business units, one located in Special Economic Zone (SEZ) and other located in Domestic Tariff Area (DTA) for the year ended 31-3-2018: Particulars (in lakh) Total turnover of Unit A located in SEZ 400 Profit of the business of Unit A 120 Export turnover of Unit A 200 Total turnover of Unit B located DTA 800 Profit of the business of Unit B 80 You are required to compute the deduction available under section 10AA to XYZ Pvt. Ltd. for the Assessment Year 2018-19 by taking that Unit-A in SEZ was set-up in the previous year 2015-16 and separate books of accounts are being maintained for both the units by the company. Give brief reasons for your answer in the context of provisions of the Act.
Answer & Explanation:
100% of the profits derived from export of articles or things or services is eligible for deduction under section 10AA of the Income Tax Act, 1961 within the first five year period commencing from the year of manufacture or production of articles or things or provision of services by the unit in SEZ. Unit-A in SEZ is in third year of operation and therefore deduction of 100% is available as per section 10AA(7). The profit derived from export of articles or things or services shall be the amount which bears to the profits of business of the undertaking, being the Unit, the same proportion as the export turnover of the business carried on by the undertaking as the separate books of accounts for both the units have been maintained. Deduction under section 10AA Profits of the business of Unit A * (Export Turnover of Unit A / Total turnover of Unit A) = ₹120 lakhs * (200 / 400) = ₹60 lakhs
Topics: Income Tax Act, 1961
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