Deduction for Special Economic Zone – CA Final DT Question Bank is designed strictly as per the latest syllabus and exam pattern.
Deduction for Special Economic Zone – CA Final DT Question Bank
Taxation of Co-operative Societies
Question 1.
Chennai Co-operative Society derives income during financial year 2020-21 from the following sources:
- Income from processing with the aid of power – ₹ 20,000
- Income from collective disposal of labour of its members – ₹ 30,000
- Interest from another co-operative society – ₹ 15,000
- Income from House property – ₹ 90,000
- Income from other business – ₹ 60,000
- Income by way of dividend from another co-operative society – ₹ 25,000
Determine its total income (without considering Sec. 115BAD) for A.Y. 2021-22. [CA Final Nov. 2016] [5 Marks]
Answer:
Computation of Total income for Chennai Co-operative Society A.Y. 2021 -22
Deduction for Special Economic Zone
Question 2.
X Ltd. has an undertaking (Unit X) in Special Economic Zone (SEZ) and another undertaking (Unit Y) in Free Trade Zone (FTZ) for manufacturing of computer software. It furnishes the following particulars of its 2nd year of operations ending 31st March, 2021:
| Unit X (₹ in lakhs) | Unit Y (₹ in lakhs) | |
| Total sales | 360 | 240 |
| Export sales (inclusive of ₹ 20 lakh onsite development of software outside India by Unit X) | 240 | 20 |
| Profit earned (after claim of bad debts u/s 36(l)(vii) in Unit X) | 126 | 72 |
Plant and machinery used in the business has been depreciated at 15% on straight line method (SLM) basis and depreciation of ₹ 18 lakh was charged to Profit and Loss Account in the proportion of sales during the previous year. ₹ 200 lakh were realized out of export sales in time and balance of ₹ 40 lakh becomes irrecoverable due to bankruptcy of one of the foreign buyers in Unit X. [CA Final May 2012] [10 Marks]
Answer:
Depreciation of the second year on straight line method at the rate of 15% is ₹ 18 lakh.
Actual cost of plant and machinery is ₹ 120 lakh (i.e. ₹ 18 lakh + 0.15).
Depreciation under section 32 will be calculated as follows:
Question 3.
X Company engaged in developing and exporting software is having two units, namely Unit A and Unit-B, Unit A is setup in Special Economic Zone (SEZ) and Unit B does not fall under section 10AA of the Act. Company furnishes the following information relating to its 3rd year of operation ended on 31.03.2021:
(₹ in lacs)
| Items | Unit-A | Unit-B |
| Export Sales | 600 | 780 |
| Domestic Sales | 100 | 220 |
| Duty Draw Back | 19 | 35 |
| Profit on sale of Import Entitlement | 12 | NIL |
| Salaries Paid | 270 | 160 |
| Other Expenses | 210 | 260 |
| Net Profit of the year | 251 | 615 |
Additional Information:
Unit A: Expenses of 12 lakhs are disallowable u/s 43B and sales proceeds in convertible foreign exchange received in India by 30.09.2021 amounted to ₹ 520 lakhs. Export sales of ₹ 600 lakhs include freight of ₹ 100 lakhs and realization of ₹ 520 lakhs includes amount of insurance and freight charges of ₹ 70 lakhs.
Unit B: Realisation of export sales in convertible foreign exchange received in India by 30.09.2021 was of ₹ 690 lakhs. Expenses charged and are to be disallowed as per section 40A(3) of Act are of ₹ 60 lakhs.
Compute the total income of X Company for the A.Y. 2021 -22 after claiming deduction under section 10AA. [CA Final Nov. 2017] [4 Marks]
Answer:
Note: Computation of Deduction under section 10AA
Export Turnover includes only the F.O.13. value of exports realization and therefore, insurance and freight shall be excluded.
Expoil Turnover = ₹ 520 Lakhs (Realization) – ₹ 70 Lakhs (Insurance & Freight)
= ₹ 450 lakhs
Total Turnover F.O.B. value of Export + Domestic Sales
= ₹ 500 lakhs (₹ 600 lakhs – ₹ 100 lakhs) + ₹ 100 lakhs
= ₹ 600 Lakhs
As per Supreme Court in Liberty India; Dut Drawback and profit on sales of import entitlement license is not eligible for deduction under section 10AA.
∴ Profits of Business From Unit A for the purpose of deduction u/s 10AA
= ₹ 263 lakhs – ₹ 19 lakhs – ₹ 12 lakhs
= ₹ 232 lakhs
Deduction under section 10AA = ₹ 232 Lakhs × ₹ 450/₹ 600
= ₹ 174 Lakhs