UNIT IN A SPECIAL ECONOMIC ZONE – CHANGE IN NAME OF THE COMPANY

[DR.MARIAPPAN GOVINDARAJAN]

Special Economic Zone (‘SEZ’ for short) is a geographically delineated duty-free enclave and shall be deemed to be a foreign territory for the purposes of trade operations and duties and tariffs.

Section 10AA of the Income Tax Act, 1961 (‘Act’ for short) is the special provision for the newly established units in SEZ. The said section provides that in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 2 of the Special Economic Zones Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 01.04. 2006, but before the 01.05.2021, the following deduction shall be allowed-

• 100% of profits and gains derived from the export, of such articles or things or from services for a period of 5 consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services, as the case may be, and 50% of such profits and gains for further 5 assessment years and thereafter;
• for the next 5 consecutive assessment years, so much of the amount not exceeding 50% of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account, to be called the "Special Economic Zone Re-investment Reserve Account" to be created and utilized for the purposes of the business of the assessee.

No such deduction shall be allowed to an assessee who does not furnish a return of income on or before the due date.

The units in SEZ are also eligible for concession from other tax as detailed below-

• Duty free import/procurement of goods and services for authorised operations as well as for development, operation and maintenance
• All Goods and services supplied by SEZ units to Domestic Tariff Area (‘DTA’ for short) are treated as imports into India and subject to all procedures and rules applicable in case of normal imports into India.
• SEZs are deemed to be an airport, port, Land Custom Stations, and Inland Container Depot under the Customs Act. There is thus an inhouse customs clearance.
• SEZs ensure ease of doing business by reducing procedural complexities, bureaucratic hassles and barriers raised by monetary, trade, fiscal, tariff and labour policies,
• Economic laws are generally more liberal than rest of the country’s general economic laws
• No routine examination by customs authorities of export/import cargo.

In M/S. OPEN TEXT TECHNOLOGIES PVT. LTD VERSUS THE COMMISSIONER, THE SUPERINTENDENT AND DEVELOPMENT COMMISSIONER. - 2025 (1) TMI 1224 - TELANGANA HIGH COURT, the petitioner is a company under the name of ‘Vignettee Software Development India Private Limited’. The said unit is functioning in Special Economic Zone unit in Raheza Mindspace Park, Hyderabad. An application was preferred by the petitioner seeking change of name of the Company, the office of Registrar of Companies issued the certificate dated 22.04.2010.

A show-cause notice dated 22.10.2021 was issued to the petitioner relating to the period 2016-2017 and 2017-2018 (up to June, 2017). The petitioner filed its reply to the said show cause notice on 20.11.2021. In its reply the petitioner explained the change of the name of the company. The show-cause notice issued to the said Company in its previous name cannot be pressed into service for the present company. The petitioner is also a unit in special economic zone. Considering the reply filed by the petitioner the Adjudicating Authority passed the impugned order dated 24.03.2023. Against this order the petitioner filed the present writ petition before the High Court.

The petitioner submitted the following before the High Court-

• The findings given in the said order are erroneous in nature. 
• The petitioner-Company is a unit in the S.E. Zone and is exempted from payment of tax.
• The principal reason for not accepting the change of name of the Company is that the assessee failed to furnish the original documents (such as original certificate issued by the Registrar of Companies) in support of their contention that the name of Unit is changed. 
• The petitioner filed the certificate issued by the Registrar of Companies which certified that the name of said company is this day changed to Open Text Technologies India Private Limited and this Certificate is issued pursuant to Section 23(1) of the Companies Act, 2013.
• The company (in its old name) passed the necessary resolution in terms of Section 21 of the Companies Act, 1956 and the approval of the Central Government signified in writing having been accorded thereto under Section 21 of the Act.

The Department supported the impugned order and submitted the following before the High Court-

• The show-cause notice was issued on the basis of the Income Tax Return for the year 2016-2017, which was filed by Vignette Software Development India Private Limited.
• The petitioner has not revealed this aspect while filing the reply to the show-cause notice. 
• The petitioner has statutory remedy of appeal and can avail the same. 
• There are two different registration numbers and the petitioner has not furnished any explanation for the same in the reply to the show-cause notice. 
• The petitioner was given an opportunity to file original certificate regarding change of name of Company but the same was not furnished.

The High Court considered the submissions of both the parties. The High Court observed that in para 20 of the impugned order, the order shows that the petitioner submitted copy of relevant certificate issued by the competent authority showing the change of name of the company. The said certificate is disbelieved by the Authority holding that certified copy of the same was not filed. The High Court observed that no attempt was made to get the genuineness of the certificate verified from issuing authority i.e. the office of the Registrar. No reasons are assigned as to why true/photocopy of certificate is to be disbelieved. Similarly, there is no iota of discussion whether the petitioner deserves any exemption for functioning in SEZ. These relevant aspects are required to be looked into.

Therefore, the High Court set aside the impugned order dated 24.03.2023. The High Court directed the petitioner to file his additional reply within 15 days and produce true copy/certified copy of certificate issued by the Registrar of Companies regarding the change of name before such authority. It will be open for the petitioner to make necessary pleadings in additional reply regarding two different registration numbers as mentioned in paragraph No. 20 of the impugned order. The High Court also directed the competent authority to give personal hearing to the petitioner and pass a fresh order in accordance with law.