Specifying time limit for bringing consideration against export proceeds into India – Budget 2023
The existing provisions of the section 10AA of the Act, inter alia, provides 15-year tax benefit to a unit established in a SEZ which begins to manufacture or produce articles or things or provide any services on or after 01.04.2005. The deduction is available for units that begin operations before 01.04.2020, which has been extended to 30.09.2020 through the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and is allowed in the specified manner therein.
2. However, the said section does not provide for the condition to file return before due date provided under sub-section (1) of section 139 of the Act for claiming deduction as is provided for similar deductions. Section 143(1) however provides that the deduction under section 10AA shall be eligible if such return is filed before the due date. Hence, it is proposed to align the two provisions by inserting a proviso to sub-section (1) of section 10AA of the Act to provide that no deduction under the said section shall be allowed to an assessee who does not furnish a return of income on or before the due date specified under sub-section (1) of section 139.
3. Further, it has been observed that there is no time- limit prescribed in the Act for timely remittance of the export proceeds from sale of goods or provision of services by SEZ Units for claiming deduction under the said section as is provided under other similar export related deductions in the Act. Hence, it is proposed to insert a new sub-section to provide that the deduction under section 10AA of the Act shall be available for such unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
4. For the purpose of this newly inserted sub-section, the expression “competent authority” shall mean the Reserve Bank of India or such authority as is authorized under any law for the time being in force for regulating payments and dealings in foreign exchange.
5. Also, it is proposed that if the export proceeds from sale of goods or provision of services shall be deemed to have been received in India where such proceeds from sale of goods or provision of services are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.
6. Further, it is proposed to substitute clause (i) of Explanation 1 of the said section to define the term “convertible foreign exchange” and give reference to new sub section (4A) in the definition of “Export Turnover”.
7. Further, it is also proposed to make consequential amendment in sub-section (11A) of section 155 of the Act, to insert section 10AA to allow the Assessing Officer to amend the assessment order later where the export earning is realized in India after the permitted period.
8. These amendments will be effective from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
[Clauses 6 & 74]
Extract of relevant clause of Finance Bill 2023
Clause 6 of the Bill seeks to amend section 10AA of the Income-tax Act relating to special provisions in respect of newly established Units in Special Economic Zones.
The said section, inter alia, provides fifteen years tax benefit to a Unit established in a Special Economic Zone which begins to manufacture or produce articles or things or provide any services on or after 1st April, 2005. The deduction is available for Units that begin operations before 1st April, 2020, which has been extended to 30th September, 2020 through the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and is allowed in the manner specified therein.
The claiming of deduction under the said section for Units established in Special Economic Zone is time bound as it is available to only those Units which begin to manufacture or produce articles or things or provide any services on or after 1st April, 2005 but before 1st April, 2020.
It is proposed to insert a proviso to sub-section (1) of the said section so as to provide that no such deduction under that sub-section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.
It is further proposed to insert a new sub-section (4A) to provide that the deduction under section 10AA shall be available for such Unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
It is also proposed to provide an Explanation to define the expression “Competent Authority” and to provide that the sale of goods or provision of services referred to in this sub-section shall be deemed to have been received in India where such export turnover is credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.
It is also proposed to substitute clause (i) of Explanation 1 to define the term “convertible foreign exchange” and give reference to new sub-section (4A) in the definition of “Export Turnover”.
These amendments will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause 74 of the Bill seeks to amend section 155 of the Income-tax Act relating to other amendments.
Sub-section (11A) of the said section provides that where in the assessment for any year, the deduction under section 10A or section 10B or section 10BA has not been allowed on the ground that such income has not been or partly received in convertible foreign exchange in India and subsequently such income or part thereof has been received in, or brought into India, the Assessing Officer shall amend the order of assessment so as to allow such deduction later.
It is proposed to amend the said sub-section to give reference of section 10AA to allow the Assessing Officer to amend his assessment order later to provide deduction in respect of any income or part thereof not received in, or brought into India, within prescribed time limit, but has been subsequently realised.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
6. Amendment of section 10AA.
In section 10AA of the Income-tax Act, with effect from the 1st day of April, 2024,––
(a) in sub-section (1), after clause (ii) and before the Explanation, the following proviso shall be inserted, namely:––
“Provided that no such deduction shall be allowed to an assessee who does not furnish a return of income on or before the due date specified under sub-section (1) of section 139.”;
(b) after sub-section (4), the following shall be inserted, namely:––
‘(4A) This section applies to a Unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
Explanation 1.––For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or the authority authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.
Explanation 2.––The sale of goods or provision of services shall be deemed to have been received in India where such export turnover is credited to a separate account maintained for that purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.’;
(c) in Explanation 1, for clause (i), the following clause shall be substituted, namely:––
‘(i) “convertible foreign exchange” shall have the meaning assigned to it in clause (ii) of the Explanation 2 to section 10A;
(ia) “export turnover” means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee in convertible foreign exchange in accordance with the provisions of sub-section (4A), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India;’.
74. Amendment of section 155.
In section 155 of the Income-tax Act,–
(a) in sub-section (11A), after the words, figures and letter “section 10A or” at both the places where they occur, the words, figures and letters “section 10AA or” shall be inserted with effect from the 1st day of April, 2024;
(b) after sub-section (18), the following sub-section shall be inserted, namely:–
“(19) Where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee, being a co-operative society engaged in the business of manufacture of sugar, and such deduction has been disallowed wholly or partly in any previous year commencing on or before the 1st day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of the assessee for such previous year after allowing deduction to the extent such expenditure is incurred at a price which is equal to or less than the price fixed or approved by the Government for that previous year, and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years specified in sub-section (7) of that section shall be reckoned from the end of previous year commencing on the 1st day of April, 2022.”;
(c) after sub-section (19) and before the Explanation, the following sub-section shall be inserted with effect from the 1st day of October, 2023, namely:–
‘(20) Where any income has been included in the return of income furnished by an assessee under section 139 for any assessment year (herein referred to as the relevant assessment year) and tax on such income has been deducted at source and paid to the credit of the Central Government in accordance with the provisions of Chapter XVII-B in a subsequent financial year, the Assessing Officer shall, on an application made by the assessee in such form, as may be prescribed, within a period of two years from the end of the financial year in which such tax was deducted at source, amend the order of assessment or any intimation allowing credit of such tax deducted at source in the relevant assessment year, and the provisions of section 154 shall, so far as may be, apply thereto and the period of four years specified in subsection (7) of that section shall be reckoned from the end of the financial year in which such tax has been deducted:
Provided that the credit of such tax deducted at source shall not be allowed in any other assessment year.’.
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