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IT companies get a sigh of relief

No Comments Sub Category:Realty News Posted On: Aug 01, 2014

A significant relief has come to the IT industry as the Central Board of Direct Taxes stated that IT and ITeS units that have shifted operations to the special economic zones will be able to enjoy the tax sops under the scheme as long as their transferred technical manpower to the new units is lesser than the 20% of the existing work power.

This clarification is looking to settle the issue on the companies that are shifting operations to SEZs in order to take advantage of the profit linked exemptions that are available under the policy that is leading to this increased litigation. The present government had promised to review the overall SEZ policy that gives a new lease of life to these tax-free zones.

The Apex direct taxes body’s clarification comes under the Section 10AA of the I-T Act of 1961. The tax exemption is available if the new SEZ is not formed by split-up or reconstruction of an existing business or by transfer of used plant or machinery. However, the deduction is available if the earlier used plant and machinery does not exceed 20% of total value of the plant or machinery used in new business. Although the tax authorities had a number of cases that has been denied of the tax benefits of technical manpower from the already existing units that had been transferred or re employed to the new unit.

Source: The Economic Times

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