Procurement of used capital goods from DTA by SEZ Units.

the Appellate Tribunal was right in holding that the second reassessment proceedings were not validly initiated and thereby quashing the reassessment proceedings-the proceedings initiated by the AO for the second time under Section 147 is barred by limitation-even the proviso to Section 147 does not come into play on the facts of the case-AIT-2010-373-HC Even if the goods belong to same entry, manufacture does take place if new identifiable/marketable goods known in market emerge due to operation conducted-the process of ironing applied to the stiched brassieres prior to their packing was a process incidental to the completion of the brassieres as a manufactured product-process of purification and filtration being incidental or ancillary to the manufacture of a marketable product, the Respondent was entitled to Modvat credit on the inputs involved-AIT-2010-370-HC Larger Bench of CESTAT rules the Tribunal has ample power to condone the delay in filing the appeal including the one filed under section 35 E (4)-AIT-2010-372-CESTAT Corruption in IRS takes its toll-Deputy Commissioner of Income Tax Dhananjay Kumar arrested by CBI in Mumbai-Joint Commissioner of Customs & Excise Hemant Kothikar also arrested by CBI FM directs expediting of Cadre Restructuring in CBDT & CBEC Tariff Value for import of Brass Scrap is 3924-Customs Non-Tariff Notification No. 78 Chief Justice of Gauhati High Court Justice Ranjan Gogoi to be Chief Justice of Punjab & Haryana High Court Anti-dumping duty on imports of Acrylic Fibre originating in, or exported from Japan and Belarus-Customs Tariff Notification No.85 Prescribing SION for new product “Propylene” under Chemical & Allied Products Group-DGFT PN 7 Inclusion of Finished Leather in the Focus Product Scheme of FTP-DGFT PN 6 Exchange Rate for imported goods is Rs 47.25 per US Dollar and Rs 60.35 per EURO-Exchange Rate for export goods is Rs 46.30 per US Dollar and Rs 58.70 per EURO-Customs Non-Tariff Notification No. 77-Click on Exchange Rate for details Anti Dumping Duty under the Notification No.15/2007 is not applicable to Spandex Yarn (Elastomeric yarn)-Customs Circular No.30 Import of goods under Notification No.13/2010 for Commonwealth Games, 2010-Customs Circular No.31 Larger Bench of CESTAT rules charges towards pre-delivery inspection and after-sale-service by dealers from buyers of the cars to be included in the assessable value of cars for payment of excise duty-AIT-2010-366-CESTAT merely because there was non accounting of goods, penalty was technical and inference of clandestine removal was not called for-AIT-2010-365-HC ITAT rules provision for doubtful debts and provision for standard debts are to be taken into consideration for computation of book profit u/s. 115JB of the IT Act-AIT-2010-361-ITAT HC rules slitting of aluminum foils into customized width, mounting the same on the printing machine and thereafter printing the necessary text thereon is covered for 80IB benefit as it falls within the ambit of the term “produce”-AIT-2010-363-HC Definitive Anti-dumping duty imposed on imports of Coumarin, originating in, or exported from China-Customs Tariff Notification No. 82 Special Bench of ITAT Ruling-where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract-AIT-2010-355-ITAT-SB

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Instruction No.11

No.B-11/3/2008-SEZ
Government of India
Ministry of Commerce and Industry
(Department of Commerce)
Uydog Bhawan, New Delhi

Dated the 27th May 2009

OFFICE MEMORANDUM

The Development Commissioner SEZ & Chairperson, Approval Committee (All Special Economic Zones)

Sub: Procurement of used capital goods from DTA by SEZ Units.

As you are aware the Department of Revenue, in order to regulate shifting of existing businesses from DTA to SEZs to avail of the direct tax exemption on the export income, substituted subsection (4) of Section 10AA of Income Tax Act as below:

“(4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:

(i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence:

Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;

(iii) it is not formed by the transfer to a new business, of machinery or plant previously used for any purpose.

Explanation: The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.”

Relevant extract from Section 80IA referred to in the new subsection are as below:

Explanations to sub-section (3) of Section 80 IA :

Explanation 1.—For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or lant previously used for any purpose, if the following conditions are fulfilled, namely :—

(a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India;

(b) such machinery or plant is imported into India from any country outside India; and

(c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the assessee.

Explanation 2.—Where in the case of an undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with.

3. Keeping in view the provisions that exist in Section 10AA of the Income Tax Act, 1961 to deal with tax related issues in case of previously used Capital Goods, in terms of the provisions of sub-section (8) of Section 15 of the Special Economic Zones Act, 2005 , it is hereby prescribed that while granting any approval for setting up new units in any SEZ, the Approval Committee or the Development Commissioner, as the case may be, shall ensure that procurement of second hand capital goods shall be allowed only in terms of the provisions of sub-section (4) of Section 10AA read with Explanation 1 & 2 to sub-section (3) of Section 80 IA of the Income Tax Act ,1961. For this purpose, it has been decided to prescribe the following procedure for the guidance of the units in the SEZs:-

(i) The units intending to move second hand capital goods in DTA should furnish details as prescribed in the enclosed annexure and must obtain prior approval of the Development Commissioner before such movement. No second hand capital goods will be allowed to be moved into the Zone without prior approval from the Development Commissioner.

(ii) While computing the value of the used/second hand capital goods sought to be transferred into the Zone from DTA, including from an EOU, EHTP/STP/BTP unit, within the Zone or from any other Zone, the depreciation rates stipulated as per the provisions of Income Tax Act and Rules made thereunder will be adopted for arriving at the depreciated value of such second hand capital goods intended to be moved into the Zone.

(iii) It should be ensured by the Unit that the sum total of S. No. 5 & 6 of the enclosed annexure shall not exceed 20% of the sum total of S. Nos 3 & 4 of the annexure at any given point of time. However, the units can shift used/second hand capital goods valuing more than 20% in which case they will not be entitled to benefits under the Income Tax Act.

(iv) For each transfer of used/second hand capital goods from the DTA into the zone the unit has to compute the values as mentioned above and indicate at the relevant S. Nos of the enclosed annexure.

(v) The details of such procurement of used/second hand Capital goods from DTA (including from an EOU, EHTP/STP/BTP unit) should be clearly mentioned in the Annual Performance Report submitted by the unit.

(vi) The limitation of 20% of the value of used/capital goods Capital goods that can move into the zone would not be applicable in respect of capital goods moved to DTA under Rule 50 of the SEZ Rules, 2006.

4. These instructions are issued in supersession of Instruction No. 8 issued vide this Department’s O.M. No. F1/6/2006-SEZ dated 12th October 2007.

5. Please acknowledge the receipt of this communication the contents of which may please be brought to the notice of all concerned including Zones, Units and Members of Approval Committee.

(T. Srinidhi)
Director

ANNEXURE

Application for procurement of used capital goods from DTA (including from an EOU/EHTP/STP/BTP unit)

(1) Name of the unit :

(2) Date of Commencement of : Commercial production

(3) Value of the installed Capital goods : (Imported) (New & used/second hand)

(4) Value of the installed Capital goods : (Procured from DTA) – (New)

(5) Value of the installed Capital goods : (Procured from DTA) – (used/second hand)

(6) Value of the Capital Goods: proposed to be procured from DTA - (used/second hand)

We hereby declare that this procurement of the above mentioned second hand capital goods is strictly in terms of the provisions of sub-section (4) of Section 10AA read with explanation 1 & 2 to sub-section (4) of section 10AA read with explanation 1 & 2 to sub-section (3) of section 80 IA of the Income Tax Act 1981.

SIGNATURE OF THE UNIT

AUTHORISED SIGNATORY