SLUMPSALE OF SEZ
This query is : Resolved
25 August 2009
IF SLUMPSALE OF SEZ TAKES PLACE AND THE BUYER CONTINUES WITH THE SAME BUSINESS OF THE UNDERTAKING BEFORE THE SALE. WILL THE BUYER OR THE NEW OWNER ALLOWED TO CLAIM THE EXEPTION U/S 10AA OR/AND DEDUCTION U/S 80I?
26 August 2009
In my opinion if the case can neither be defined as amalgamation nor be defined as a demerger then it will be hit by Section 10AA(4)(iii) which says that the unit is not formed by the transfer to a new business, of machinery or plant previously used for any purpose. "Any" purpose covers "for the purpose of section 10AA" itself.
From the above it can be concluded that the
new unit would not be eligible for exemption/ deduction.
From the above it can be concluded that the
new unit would not be eligible for exemption/ deduction.
27 August 2009
Thank u very much for ur imprompt reply.but the buyer is altogether a new person, then the deduction section of 80i will be applicable to him?
25 July 2025
Regarding **slump sale of SEZ units** and eligibility for **tax benefits under Section 10AA and Section 80I**:
---
### Key points:
1. **Section 10AA** provides exemption to SEZ units on profits derived from export activities.
2. **Section 80I** provides deductions to industrial undertakings on profits for a specified period.
3. When there is a **slump sale of SEZ business**, the key question is whether the buyer is considered a "new unit" or a continuation of the existing unit.
---
### Applicability:
* If the **buyer is a completely new person/entity** (not an amalgamation or demerger), and starts a new business unit in SEZ, then **Section 80I deduction** may be available to the buyer (subject to other conditions).
* However, **Section 10AA exemption** is more restrictive. Under **Section 10AA(4)(iii)**, if the new unit is formed by transfer of machinery or plant previously used (even for a SEZ unit), the exemption may be **denied** because it is not considered a "new unit" started fresh but a continuation/transfer.
* This means **Section 10AA exemption may not be available** to the buyer if the assets transferred were used earlier for the same SEZ business.
---
### Summary:
| Benefit | Buyer eligibility on slump sale of SEZ unit |
| ---------------------- | ------------------------------------------------------------------------------------------------ |
| Section 10AA exemption | Generally **NOT available** if buyer continues using old machinery/plant from previous SEZ unit. |
| Section 80I deduction | May be available if buyer is a new industrial undertaking (subject to conditions). |
---
### Additional Notes:
* These are subject to **interpretation by tax authorities and courts**.
* It is important to **carefully structure the transaction** and take professional advice on tax planning.
---
If you want, I can help prepare a detailed note or refer relevant case laws on this matter.
---
### Key points:
1. **Section 10AA** provides exemption to SEZ units on profits derived from export activities.
2. **Section 80I** provides deductions to industrial undertakings on profits for a specified period.
3. When there is a **slump sale of SEZ business**, the key question is whether the buyer is considered a "new unit" or a continuation of the existing unit.
---
### Applicability:
* If the **buyer is a completely new person/entity** (not an amalgamation or demerger), and starts a new business unit in SEZ, then **Section 80I deduction** may be available to the buyer (subject to other conditions).
* However, **Section 10AA exemption** is more restrictive. Under **Section 10AA(4)(iii)**, if the new unit is formed by transfer of machinery or plant previously used (even for a SEZ unit), the exemption may be **denied** because it is not considered a "new unit" started fresh but a continuation/transfer.
* This means **Section 10AA exemption may not be available** to the buyer if the assets transferred were used earlier for the same SEZ business.
---
### Summary:
| Benefit | Buyer eligibility on slump sale of SEZ unit |
| ---------------------- | ------------------------------------------------------------------------------------------------ |
| Section 10AA exemption | Generally **NOT available** if buyer continues using old machinery/plant from previous SEZ unit. |
| Section 80I deduction | May be available if buyer is a new industrial undertaking (subject to conditions). |
---
### Additional Notes:
* These are subject to **interpretation by tax authorities and courts**.
* It is important to **carefully structure the transaction** and take professional advice on tax planning.
---
If you want, I can help prepare a detailed note or refer relevant case laws on this matter.
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