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Industry & Economy - Income Tax


I-T clarification on tax holiday benefits

Our Bureau

New Delhi , April 5

THE Finance Ministry has clarified that the income-tax provision (Sec 10A(9)) requiring denial of Section 10A tax holiday benefits on account of the transfer of ownership in an undertaking should not be applied for those cases where the transfer has taken place prior to April 1, 2000.

Section 10A(9) of the Income-Tax Act, 1961, provides that where during any previous year, the ownership or the beneficial interest in the undertaking is transferred by any means, the deduction under Section 10A would not be allowed to the assessee for the assessment year relevant to such previous year and subsequent years.

"Since Section 10A(9) has been brought on the statute prospectively with effect from April 1, 2001 i.e from assessment year 2001-02, the provision will operate only if there is a change in the beneficial ownership during the previous year 2000-01 relevant to assessment year 2001-02 or in subsequent years", a circular issued by the Central Board of Direct Taxes (CBDT) circular has said.

The CBDT circular said that the Section 10A(9) should not be applicable in cases where the change in ownership has taken place prior to April 1, 2000, when the provision was not at all on the statute.

The Board has, in its circular, observed that some of the assessing officers are invoking Section 10A(9) to withdraw the deduction under Section 10A for assessment years 2001-02 or subsequent years even when the change in beneficial interest or ownership took place during a previous year prior to the previous year relevant to assessment year 2001-02.

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