Section 10AA(1)

Section 10AA(1) — the law in short

What the courts have decided on section 10AA(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — the Explanation to s.10AA(1): the SEZ deduction is capped at total income, and a late return kills it CBDT Circulars & InstructionsCuts both ways
  My client has an SEZ unit in profit and other units in loss. Does the s.10AA deduction come off the unit's own profit before the other units' losses, or only after? And does a late return matter?
  The Explanation to s.10AA(1) now settles the arithmetic against the taxpayer at the outer limit: the deduction "shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee". So whatever the unit-wise computation produces, the allowance cannot exceed the assessee's total income computed after every other provision of the Act — including the set-off provisions — has been applied. Separately, the proviso to s.10AA(1) denies the deduction outright to an assessee who does not furnish a return of income on or before the due date under s.139(1).
• Statutory position — s.10AA: the SEZ deduction, its fifteen-year run, and the commencement sunset CBDT Circulars & InstructionsCuts both ways
  A client wants to set up a new SEZ unit. Can it still claim s.10AA, and what exactly does an existing unit get in years eleven to fifteen?
  No new unit can get into s.10AA. The section applies only where the Unit begins to manufacture or produce articles or things or provide services "during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, but before the first day of April, 2021", so the gate is shut on anyone commencing now. The last previous year in which a Unit could commence and qualify is FY 2019-20, that is, commencement by 31 March 2020. For a Unit that got in before the cut-off the deduction runs for fifteen assessment years: hundred per cent of the profits derived from export for the first five, fifty per cent for the next five, and for the last five so much of the profit, not exceeding fifty per cent, as is debited to the profit and loss account and credited to a Special Economic Zone Re-investment Reserve Account.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.