The Hindu Business Line : Meet to rectify SEZ tax anomaly inconclusive

New Delhi, Oct. 31 The Empowered Group of Ministers (eGoM) for Special Economic Zones (SEZ) on Thursday met inconclusively on setting right the anomaly about Section 10 AA of the Income Tax Act which stipulates the computation of export profit as the ratio of export turnover of the SEZ to the total turnover of the assessee.

The anomaly in the tax provision pertains to the fact that the assessee and the unit might not be the same in all cases in as much as the same assessee might have more than one unit, including units within SEZs and undertakings outside the SEZs.

Official sources told Business Line here that the meeting headed by the Union External Affairs Minister, Mr Pranab Mukherjee, was inconclusive.

‘SEZ stand to lose’

Sources in the SEZs contend that if the distortion in the computation of taxable income is not eliminated, SEZ units would stand to lose and hence there is a need for an amendment to replace the word ‘assessee’ by the word ‘undertaking’.

They also cite a similar anomaly in Section 10 A(4)/10B(4) as substituted by Finance Act 2000 effective from fiscal year 2000-01 which was amended by Finance Act 2001 retrospectively from fiscal year 2000-01.

With the eGoM resolving several contentious issues plaguing the SEZ in its last meeting on October 24, the tax anomaly component remains the single big issue on the viability of these export enclaves, the sources said.

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