Query on Sec. 35(2AB)

This query is : Resolved

CA. NIDHI JHUNJHUNWALA (Querist)
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26 August 2010 Facts of the case:

A public limited company has its Units set in both Domestic Area as well as SEZ (Special Economic Zone). The company is engaged in the business of manufacture of pharmaceutical products. In the previous year, it has carried out research and development in the unit set up at SEZ, which is liable for weighted deduction @ 200% u/s. 35(2AB) of the Income Tax Act. The Unit in SEZ maintains seperate books of accounts.

Queries:

Is the company allowed to take deduction of profits from its SEZ unit without applying the formula u/s. 10AA? (Books maintained seperately)

Is the company allowed to take weighted deduction of 200% u/s. 35(2AB) from its profit earned from Domestic Unit? (As the profits from the SEZ Unit are already exempt u/s. 10AA)

Swanand

Swanand (Expert)
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24 October 2010 1 ) As per SEZ Act , 2005 and SEZ rules 2006 - SEZ units has to maintain separate books of A/c's . If not then it is violation of SEZ Act .

IT department will give any benefit only if SEZ books are separate .

2 ) Your second query is not clear .

As per the situation you mentioned I consider R & D activity is happened at SEZ Unit , So only SEZ unit is liable to take the advantage u/s 35(2AB) . This benefit can not be transfer to DTA unit as books of A/c's are separate.