TAX PLANNING WITH

RESPECT TO LOCATION
OF UNDERTAKING &
TYPE OF ACTIVITY
Shaifali
Kanika
Dhanya
Shubhra
Chetan

1. Area of Tax Planning

Location of business.
Nature and size of business.
Form of business organization and the pattern of

its ownership.
Specific management decisions like make or buy,
own or lease, capital structure, renew or replace,
etc.
Employees remuneration.
Mergers/ Amalgamation of companies.
Double Taxation Relief.
Non-resident.

2. Location of Business
Full exemption u/s. 10AA for initial five years, 50% for subsequent

five years and further deduction of 50% for a further period of five
years in the case of a newly established units in special economic
zones on or after 1.4.2005.
Deduction

u/s. 80-IAB in respect of profits and gains by an

undertaking or an enterprise engaged in the development of Special
Economic Zone.

Deduction

u/s. 80-IB in the case of newly set up industrial

undertaking in an industrially backward state or district.

Deduction u/s. 80-IC in case of newly set up industrial undertaking or

substantial expansion of an existing undertaking in certain special

category states.
Deduction u/s. 80-ID in respect of profits and gains from business of

hotels and convention centres in specified area or a hotel at world

heritage site.

3. Nature of Business
Tea Development Account, Coffee Development Account and Rubber

Development Account (Sec. 33AB)

Site restoration fund (Sec.33ABA)
Specified business eligible for deduction of capital expenditure (Sec. 35A)
Amortisation of certain preliminary expenses (Sec. 35D)
Expenditure on prospecting for certain minerals (Sec.35E)
Special reserve created by a financial corporation u/s. 36(1)(viii)
Special provision for deduction in the case of business for prospecting

for mineral oil (Sec. 42 and 44BB)

Special provisions for computing profits and gains of business of civil

construction (Sec. 44AD)

 Special provisions in the case of business of plying , hiring or leasing

goods carriages (Sec. 44AE)

Special provisions for computing profits and gains of retail business (Sec.

44AF)
Special provisions in the case of shipping business (Sec.44B)
Special provisions in the case of business of operation of aircraft (Sec.

44BBA)
Special provisions in the case of certain turnkey power projects (Sec.

44BBB)
Special provisions in the case of royalty income of foreign companies

(Sec. 44D)
Special provisions in the case of royalty income of non-residents (Sec.

44DA)
Profits and gains of industrial undertakings or enterprises engaged in

infrastructure development, etc. (Sec. 80-IA)

 Profits and gains of an undertakings or an enterprise engaged in development

of Special Economic Zone. (Sec. 80-IAB)

Profits

and

gains

from

certain

industrial

undertaking

other

than

infrastructure development undertaking (Sec. 80-IB)

Special provisions in respect of certain undertakings or enterprises in certain

special category states (Sec. 80-IC)

Deduction in respect of profits and gains from business of hotels and

convention centres in specified area or a hotel at world heritage site. (Sec.

80-ID)
Deduction in respect of certain undertakings in North-Eastern States. (Sec.80-

IE)
Profits

and gains from the business of collecting and processing of

biodegradable waste (Sec. 80JJA)

Employment of new workmen (Sec. 80JJAA)
Special tax rate u/s 115A, 115AB, 115AC, 115AD, 115B, 115BB, 115BA, 115D.

4. Tax Planning In Respect of Assesses

Engaged In The Business of Export of
Goods or Merchandise
Exemption available to the unit of an entrepreneur which
begins to manufacturer or produce any or thing or provide any
service in a special economic zone on or after 1-4-2005 [Sec.
10AA]
Special provisions in respect of newly established units
in Special Economic Zones [Sec.10AA]
1. General
2. Assessees who are eligible for deduction
3. Essential conditions to claim deduction

It has begun or begins to manufacturer or produce articles

or things or provide any service during the previous year
2005-2006mor thereafter in any Special Economic Zone.

 It should not be formed by the splitting up or reconstruction of a

business already in existence

It should also not be formed by the transfer of machinery or plant,

previously used for purpose, to a new business.

The assessee should furnish in the Form No. 56F, alongwith the return

of income, the report of a chartered accountant certifying that the

deduction has been correctly claimed in accordance with the provisions
of this section.

The

conditions laid down in sub-section (8)(relating to inter-unit

transfer) and sub-section(10)(relating to showing excess profit from

such unit) of Sec. 80-IA shall, so far as may be, apply in relation to the
undertaking referred to in this sections as they apply for the purposes
of the undertaking referred to in Sec. 80-IA.

4. Period for which deduction is available

1.

For the first 5

consecutive assessment
years beginning with the
assessment year
relevant to the previous
year in which the unit
begins to manufacture
such articles or things or
provide services

100% of the profits and

gains derived from the
export of such articles or
things or from services

2.

Next 5 consecutive
assessment years

50% of such profits or gains

3.

Next 5 consecutive previous

years

So much of the account not

exceeding 50% of the profits as
is debited to profit and loss
account of the previous year in
respect of which the deduction
is to be allowed and credited to
the Special Economic Zone
Reinvestment Reserve Account
to be credited and utilised for
the purpose of the business of

5. How to compute deductions for such undertakings [Sec.

10AA(7)]

Profit from business of the undertaking being

the unit
ET of the undertaking of such articles/things
or services
Total turnover of business carried on by the
undertaking

6. Treatment of unabsorbed depreciation, brought forward

losses, etc.
7. WDV after tax holiday period
8. Deduction allowable in case of amalgamation and
demerger [Sec. 10AA(5)]

5. Deduction In Respect of Profits And

Gains By An Undertaking or Enterprise
Engaged In Development of Special
Economic Zone
[Sec. 80-IAB]
The deduction under this new section is available where the gross total income

of an assessee, being a developer, includes any profits and gains derived by

an undertaking or an enterprise from any business of developing a Special
Economic Zone, notified on or after 1.4.2005 under the Special

Economic Zone Act, 2005.

Quantum of deduction:
The deduction shall be allowed of an amount equal to
and gains derived from such business for

100% of the profits

10 consecutive assessment years.

6. Tax Planning In Respect of

Undertakings or Enterprises In State of
Himachal Pradesh or Uttaranchal [Sec.
80-IC]
Where the gross total income of an assessee includes any profits and

gains derived by an undertaking or an enterprise from any:

i.

Business of manufacturing or producing any article or thing (not

being an article or thing mentioned in Schedule xiii) in any notified
specified area in the States of Himachal Pradesh or Uttaranchal, or

ii.

Business of manufacturing or producing any article or thing/an

operation mentioned in schedule XIV in any area in the said States.

Essential conditions for industrial undertakings or enterprises

1.

It is not formed by splitting up, or the reconstruction, of a business

already in existence.

2.

It is formed by transfer to a new business of machinery or plan

previously used for any purpose.

3. It has begun or begins to manufacturer or produce any

article or thing or undertakes substantial expansion

during the period beginning on 7.1.2003 and ending
before 1.4.2012.

Quantum of deduction:
100% of profits and gains for 5 assessment years
commencing with the initial assessment year and
thereafter 25% of profits and gains.

7. Tax Planning For Hotel Industry [Sec.80-ID]

An assessee who is engage in the business of hotel is eligible for

deduction from gross total income u/s 80-ID.

Deduction under this section is allowed to an assessee whose gross

total includes any profits or gain derived from1.

The business of hotel located in the National Capital Territory of

Delhi and the districts of Faridabad, Gurgaon, Gautam Budh
Nagar and Ghaziabad, if such hotel is constructed and has started
or starts functioning at any time during the period beginning on
1-4-2007 and ending on 31-7-2010: or

2.

The business of building, owning and operating a convention

centre, located in the National Capital Territory Of Delhi and the
districts

of

Faridabad, Gurgaon,

Gautam

Budh

Nagar

and

Ghaziabad, if such convention centre is constructed at any time

3. The business of hotel located in the specified district

having a World Heritage Site, if such hotel is
constructed and has started or starts functioning at any
time during the period beginning on 1-4-2008 and ending
on 31-3-2013.

Quantum of deduction:

100% of profits and gains for 5 consecutive assessment

years commencing with the initial assessment year.

8. Tax Planning In Respect of Certain

Undertaking In North Eastern States
[sec. 80-IE]
Undertaking in North Eastern States are eligible for deduction under
this section if their gross total income includes any profits and gains
derived by an undertaking which fulfills the following conditions:
It has during the period beginning on 1-4-2007 and ending before

1-4-2017 begun or begins in any of the North Eastern States:

It is not formed by splitting up, or the reconstruction, of a

business already in existence

It is not formed by the transfer to a new business of machinery or

plant previously used for any purpose.

Quantum of deduction
100% of the profits and gains derived from such
business

for

10

consecutive

assessment

commencing with the initial assessment year.

years

9. Tax Planning For Hospitals

Undertaking operating and maintaining a hospital are eligible for

the following deduction:

A.

Undertaking operating and maintaining a hospital in a rural areas

[Section 80-IB(11B)]:

Essential conditions:
.Constructed between

1-10-2004 to 31-3-2008

.At least 100 beds for patients

.The

construction of the hospital is in accordance with the

regulation, for the time being in force, of the local authority

B. Undertaking operating and maintaining a hospital located

anywhere in India other than excluded area [section 80IB(11C)]

Essential conditions :
constructed between 1-4-2008 to 31-3-2013
At least 100 beds for patients
The construction of the hospital is in accordance with the

regulation of the local authority

Quantum and period of deduction

100%

of the profits and gains of such business for a

period of 5 consecutive assessment years, beginning with

the initial assessment year

10.Tax Planning For

Telecommunication Industry
Deduction

of expenditure for obtaining license to operate

telecommunication services [Section 35ABB]

Any capital expenditure incurred by the assesse for

acquiring any right to operate telecommunication services
either before the commencement of business or thereafter
any time during any previous year and for which payment has
actually been made to obtain a license, a deduction equal to
the appropriate fraction of the amount of such expenditure
shall be allowed for each of the relevant previous years.

11.Tax Planning For Assessees

Engaged In The Business of
Providing Infrastructural Facilities
Essential conditions:
1. Enterprise should carry on the business of developing
Operating and maintaining
Developing, operating and maintaining,

Any infrastructural facility.

2. Enterprise owned by an Indian company or by an authority or a

Board or a Corporation established under any central or state Act.

3. Entered into an agreement with Central/ State govt. or a

local authority for developing, operating and maintaining, a
new industrial facility.

4.

Starts

operating

and

maintaining

the

infrastructural

facilities on or after 1-4-1995

Quantum of deductionPeriod of Deduction

Assessee
Profit Eligible For

% of

Deduction
Enterprise engaged
%
in developing,
maintaining
and operating any
infrastructural facility

For 10 consecutive
assessment years

100

12. TAX PLANNING FOR TEA, COFFEE

AND RUBBER INDUSTRY
A) Tax

development

account,

coffee

development

account and rubber development account (Section

33AB and Rule 5AC)

Essential conditions:
a) The assessee

is engaged in the business of growing and

manufacturing tea or coffee or rubber in India.

b) The assessee has ,within 6 months from the end of

previous year or before furnishing return of income

whichever is earlier;

 Deposited

with NABARD

any amount in a special

account

maintained by an assessee with that bank in accordance with and

for the purpose specified in a scheme framed by the Tea Board or
Coffee Board or the Rubber Board; or

Deposited any amount

in the Deposit account opened by the

assessee in accordance with and for the purpose specified in a

scheme framed by

the Tea Board or Coffee

Board or

Rubber

Board with the previous approval of the Central Government.

c) The assessee must get its accounts

accountant

audited by an

as per Section 288(2)and furnish the

report of such audit in Form No. 3 AC, along with the

return of income.

Quantum of deduction:
It shall be a) The amount deduction in the schemes referred to
above; or
b) 40% of the profits of such business computed under
the head profits and gains of business and profession,

Whichever is less.

B.

Income from subsidy from Tea board [Section 10(30)]

The Central government has since notified the following

schemes for this clause:

a)

Replantation subsidy scheme of the tea board, as effective

from the 1-10-1968

b)

Amended Replantation subsidy of the tea board as effective

from the 12-3-1970

c)

Amended Replantation subsidy scheme of the tea board as

effective from the 1-1-1972

C.

Tea industry will be eligible for deduction u/s 80-IB as it

is an industrial undertaking.

.The assessee for claiming deduction u/s 33AB must deposit the

money with NABARD/Tea Development account within six months

from the expiry of the previous year or before furnishing return of
income, whichever is earlier.
.The money lying in the account should not be used to acquire an

asset which is not eligible under the scheme. Further , the money
withdrawn from the scheme in any previous year must be utilized
within the same previous year must be utilized within the same
previous year for the purpose mentioned in the scheme.
. Further, such assessee should take the benefit of subsidy from

the Tea board as per the provision of Section 10(30).

13. Tax planning for business of

computer software
Assessee engaged in the business of developing computer

software will be eligible

for exemption u/s 10AA if it is

located in SEZ ( Special economic zone)

TAX PLANNINGThe assessee who is engaged in the export of computer

software should, as far as possible , establish the undertaking
either in a Software Technological Part or become 100%
approved EOU to claim full exemption of income for a period
of 10 years.

14. Tax Planning For Assessees Engaged

In The Business of Generation And
Distribution of Power
A) Option to claim depreciation on basis of straight

line method
.In the case of such assessees, allowances in respect of

depreciation of assets acquired on or after 1-4-1997

shall be calculated at the percentage specified in the
Income tax rules on the actual cost thereof to the
assessee. However, the aggregate depreciation allowed
in respect of any asset for different assessment years
shall not exceed the actual cost of the said asset.

 Further ,the assessee , instead

of claiming depreciation on actual

cost( straight line method) may at its option claim depreciation on

basis of written down value method at the rate prescribed for each
block of assets. However, it can be exercised as under:

a)

In case of undertaking which began to generate power after 313-1997, the option must be exercised before the due date of
filling the return of income u/ s 139(1) for the assessment year
1998-1999.

b)

In case the undertaking begins to generate power after 31-31997, the option

must be exercised before the due date of

furnishing the return of income for the assessment year relevant

to the previous year in which it begins to generate power.

B.

Deduction U/S 80-IA(4)(iv)

It is an undertaking which:-

a)

is set up in any part of India for the generation and distribution

of power if it begins to generate power at any time during the
period beginning on 1-4-1993 and ending on 31-3-2011.

b)

Starts transmission or distribution by laying a network of new

transmission

or distribution lines at any time during

the

period beginning on 1-4-1999 and ending on 31-3-2011.

However, the deduction in case

shall be allowed only in

relation to the profits derived from laying of such networks of

new lines for transmission or distribution.

c)

Undertakes

substantial

renovation

and

modernization of the existing transmission or

distribution lines at any time during the period

1-4-2004 to 31-3-2011.

Substantial renovation and modernization shall

mean an increase of plant and machinery as on 14-2004.

15. Tax planning for shipping business

Special Provisions for computing profits & gains from
Shipping Business in the case of Non-Resident

[Sec.

44B] :As per Sec. 28 to 43A, in case of an assessee, who is a non-resident & is
engaged in the business of operation of ships, a sum equal to 7.5% of

a) The amount paid or payable whether in or out of India to the assessee or to

any person on his behalf, on a/c of carriage of passengers, livestock, mail, or

goods shipped at any port in India, and
b) Any amount received and deemed to be received in India on a/c of carriage

of passengers, livestock, mail, or goods shipped at any port outside India,

Shall be deemed to be the profits of such business.

There are no special provisions for computing the

income of assessee engaged in the business of operation
of ships except that when such assessee is a resident
assessee & doing global business, the income which
accrues or arises outside India may be eligible for tax

relief under Sec. 90/91.

16. Tax Planning For Assessees Engaged

In The Business of Operation of Aircraft
Since provisions

for computing profits and gains of

business of operation of aircraft in the case of non
residents [Section 44BBA]

The income of a non- resident engaged in the business of

operation of an aircraft shall be computed at a flat rate of

5% ofa) The amount paid or payable whether in India or out

of India to the assessse or to any person on his

behalf on account of carriage of passengers ,
livestock, mail or goods from one place in India.

b) The amount received or deemed to be

received in India, on account of carriage of

such items from a place outside India.

17. Tax Planning For Industrial Undertakings

Engaged In The Business of Commercial
Production/Refining of Mineral Oil [Sec. 42]
The Industrial Undertakings is subject to special provisions u/s.
42. Besides, it is eligible for deduction u/s. 80-IB.
A. Special Provisions for deduction in case of business fir

prospecting, etc. for mineral oil [Sec. 42]

Sec. 42( 1) is applicable when the following conditions are
satisfied :
. There

is business consisting of the prospecting for an

extraction or production of mineral oils;
. In relation to such business, the Central Govt has entered into
an agreement with such assessee for the association or
participation of the Central Govt
or any other person
authorised by the Central Govt in such business; &
. Such agreement has been laid on the Table of each house of
Parliament.

B.

Special Provisions in respect of certain undertakings in

North Eastern States [Sec. 80-IE]
Deduction under this section is allowed to an assessee whose
gross total income includes any profits & gains derived by an
undertaking which fulfils the following Condition :

. It has during the period beginning on 01/04/2007 & ending before

01/04/2017 begun or begins in any North-Eastern States;

To manufacture or produce any eligible article or thing;
To undertake substantial expansion to manufacture or produce any
eligible article or thing;
To carry on any eligible business.
. Established in NE states (Arunachal, Assam, Manipur, Meghalaya,

Mizoram, Nagaland, Sikkim, Tripura)

. It is Not formed by splitting up, or reconstruction, of a business already

in existence.

 It is Not formed by the transfer to a new business

of machinery or plant previously used for any

purpose.

Quantum of deduction
100% of the profits & gains derived from such
business for 10 consecutive Assessment Years
commencing with the Initial Assessment Year.

18. Tax Planning For Assessee Engaged In

Prospecting For or Extraction or Production of
Petroleum or Natural Gases or Both In India
[Sec. 33aba]
Deduction u/s. 33ABA is allowed to an assessee who satisfies the following conditions:
ESSENTIAL CONDITIONS :
The assessee is carrying on business consisting of prospecting for or extraction or

production of petroleum or natural gas or both in India & in relation to which Central
Government has entered into an agreement with such assessee for such business.
The assessee has before the end of the previous year

deposited amount with SBI in Special A/c maintained by the assessee with the bank, in
accordance with & for the purposes specified in a scheme approved by Ministry of
Petroleum & Natural Gas of the Government of India .

Deposit Scheme - deposited amount in Site Restoration A/c, in accordance with &
for the purposes specified in a scheme approved by aforesaid Ministry.

Assess must gets its account audited by an Accountant as defined in Sec. 288(2) &

furnish the report in Form No. 3AD alongwith the return of income.

Quantum of deduction:
It shall be(i) Amount deposited in the scheme as mentioned
above;
(ii) 20% of profit of such business computed under
the heads Profits & Gains of business or
profession,

Whichever is less.

19. Tax Planning For Assessee

Engaged In Prospecting, Etc., For
Certain Minerals [Sec. 35e]
While computing the business of such assessee, a
deduction is allowed u/s. 35E which is as under:
Where an assessee, being an Indian company or a

person who is a resident of India, is engaged in

any operations relating to prospecting for, or
extraction or production of certain minerals &
incurs after 31st day of March, 1970, any
specified expenditure, the assessee shall be
allowed to amortise such expenditure.

What is specified expenditure ?

The expenditure should be incurred by the assessee at any
time during the year of commercial production and any one or
more of the four years immediately preceding that year,
wholly and exclusively on any operations relating to
prospecting for any mineral or group of associated minerals
specified in Part A or Part B, respectively, of the Seventh
Schedule or on the development of a mine or other natural
deposit of any such mineral or group of associated minerals.

What is not
expenditure ?

included

in

specified

There shall be excluded from such expenditure any portion

thereof which is met directly or indirectly by any other person
or authority and any sale, salvage, compensation or insurance
moneys realised by the assessee in respect of any property or
rights brought into existence as a result of the expenditure.

The following shall not be eligible for deduction under this section
:
1.

Any expenditure on the acquisition of the site of the source of

any mineral or group of associated minerals or of any rights in
or over such site;

2.

Expenditure on the acquisition of the deposits of such mineral

or group of associated minerals or of any rights in or over
such deposits; or

3.

Expenditure of a capital nature in respect of any building,

machinery, plant or furniture for which allowance by way of
depreciation is admissible u/stion 32.

Quantum of deduction:
The deduction to be allowed for any relevant previous year
shall be
an amount equal to 1/10th of the expenditure (such one-

tenth being hereafter referred to as the INSTALMENT); or

such amount as is sufficient to reduce to nil, the income

(as computed before making the deduction under this

section) of that previous year arising from the commercial
exploitation of any mine or other natural deposit of the
mineral in respect of which the expenditure was incurred,

Whichever amount is less.