Friday, January 14 2005 14:17 Hrs (IST) - World Time -

New Delhi: Manufacturing and service units set up in the Domestic Tariff Area (DTA) but later converted into Export-Oriented Units (EOU) will be eligible for tax exemptions till 2009-10.

In a circular issued by the Central Board of Direct Taxes (CBDT), the Government has clarified those undertakings in DTAs, which converted themselves to 100 per cent EOUs, will qualify for tax benefits as offered to other EOUs under Section 10B of the Income Tax Act.

For getting the tax sops, the unit has to show it derives profits from export of articles or computer software.

"The deduction would be available only from the year in which the unit gets approval as 100 per cent EOU," an official release said.

The tax benefit would be available for the remaining period of 10 consecutive assessment years beginning from the period it started manufacturing in the domestic tariff area.

Further, CBDT said the deduction should be restricted to the profits derived from exports after the unit converted into a 100 per cent EOU.

The benefits under Section 10B will not be available after the assessment year 2009-10, which is the sunset clause for such benefits to sink in.

The Foreign Trade Policy had a provision, which lay down that units incorporated in DTA but converted into EOUs will be entitled to tax exemption under Section 10B.

The issue was taken up by Commerce Ministry with the Finance Ministry and accordingly the circular was issued.