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Government have clarified that an undertaking set up in the Domestic Tariff Area (DTA) which is subsequently converted as a 100 percent Export Oriented Unit (EOU) will qualify for availing benefits under section 10 B of the Income Tax Act. This was one of the items of the Foreign Trade Policy announced by the Commerce and Industry Minister Shri Kamal Nath in August last year. The circular issued by the Central Board of Direct taxes (CBDT) is in pursuance of the matter being taken up with the Finance Minister.
For getting benefits under section 10 B of the IT Act, the unit should be deriving profit from export of the articles or things or computer software, manufactured or produced by it. However, the deduction will be available only from the year in which it has got the approval as 100 per cent EOU and shall be available only for the remaining period of 10 consecutive assessment years beginning from the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles as a DTA unit. Further, in the year of approval, the deduction shall be restricted to the profits derived from exports from and after the date of approval of DTA unit as a 100 % EOU. The benefits under section 10 B will not be available after the assessment year 2009-10, which is the sunset clause for such benefits to sink in.
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