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TMI BlogCHAPTER VII - SPECIAL ECONOMIC ZONES - TAXATION OF EXISTING UNITS - Revised Discussion Paper – Direct Tax Code (DTC)X X X X Extracts X X X X X X X X Extracts X X X X ..... CHAPTER VII - SPECIAL ECONOMIC ZONES - TAXATION OF EXISTING UNITS - Revised Discussion Paper – Direct Tax Code (DTC) X X X X Extracts X X X X X X X X Extracts X X X X ..... gional development. However, such area based exemptions create economic distortion, i.e., allocate/ divert resources to areas where there is no comparative advantage. Such exemptions also lead to tax evasion and avoidance. Besides, there is a huge cost of administration. Hence, the Code does not allow area-based exemptions. Area-based exemptions that are available under the Income Tax Act, 1961 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be grandfathered. 2. It has been pointed out that while the current profit linked deductions available to developers of Special Economic Zones (SEZs) have been protected for their unexpired period in the DTC, there is no mention of grandfathering of these profit linked deductions in the case of units operating in these SEZs. 3. Profit linked deductions are distortionary in nature as they cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eate an incentive to inflate profit as well as to transfer profits from a taxable entity to a non-taxable one. As a policy, it has, therefore, been decided not to extend the scope or the period of profit linked deductions. However, specific provisions for protecting such deduction for the unexpired period have been provided in the DTC in the case of SEZ developers. A similar provision to protect p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit linked deductions of units already operating in SEZs for the unexpired period will also be incorporated. X X X X Extracts X X X X X X X X Extracts X X X X
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