1[(1) Where the gross total income of an assessee, -
(i) being a scheduled bank, or, any bank incorporated by or under the laws of a country outside India; and having an Offshore Banking Unit in a Special Economic Zone; or
(ii) being a Unit of an International Financial Services Centre,
includes any income referred to in sub-section (2), there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such income, of an amount equal to -
(a) one hundred per cent of such income for five consecutive assessment years beginning with the assessment year relevant to the previous year in which the permission, under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949) or permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other relevant law was obtained, and thereafter;
(b) fifty per cent of such income for five consecutive assessment years.
(2) The income referred to in sub-section (1) shall be the income -
(a) from an Offshore Banking Unit in a Special Economic Zone; or
(b) from the business referred to in sub-section (1) of section 6 of the Banking Regulation Act, 1949 (10 of 1949) with an undertaking located in a Special Economic Zone or any other undertaking which develops, develops and operates or develops, operates and maintains a Special Economic Zone; or
(c) from any Unit of the International Financial Services Centre from its business for which it has been approved for setting up in such a centre in a Special Economic Zone.
(3) No deduction under this section shall be allowed unless the assessee furnishes along with the return of income, -
(i) the report, in the form specified2 by the Central Board of Direct Taxes under clause (i) of sub-section (2) of section 80LA, as it stood immediately before its substitution by this section, of an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section; and
(ii) a copy of the permission obtained under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949).
Explanation : For the purposes of this section, -
(a) International Financial Services Centre shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005;
(b) scheduled bank shall have the same meaning as assigned to it in clause (e) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);
(c) Special Economic Zone shall have the same meaning as assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005;
(d) Unit shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005.]
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1. Substituted by the Special Economic Zones Act, 2005, with effect from 10th February, 2006. Under section 27 of the Special Economic Zones Act, 2005, effective from 10th February, 2006, the provisions of the Income-tax Act, 1961, as in force for the time being, apply to, or in relation to, the Developer or entrepreneur for carrying on the authorised operations in a Special Economic Zone or Unit subject to the modifications specified in the Second Schedule to that Act. The above amendment is specified in the Second Schedule to that Act. Prior to substitution, section 80LA, as inserted by the Finance Act, 2003, with effect from 1st April, 2004, stood as under:
80LA. Deduction in respect of certain incomes of offshore banking units. -
(1) Where the gross total income of an assessee,-
(i) being a scheduled bank (not being a bank incorporated by or under the laws of a country outside India);
(ii) owning an offshore banking unit in a special economic zone, includes any income referred to in sub-section (2), there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such income, of an amount equal to -
(a) one hundred per cent of such income for three consecutive assessment years beginning with the assessment year relevant to the previous year in which the permission, under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949), was obtained, and thereafter;
(b) fifty per cent of such income for two consecutive assessment years.
(2) The income referred to in sub-section (1) shall be the income
(a) from an offshore banking unit in a special economic zone;
(b) from the business, referred to in sub-section (1) of section 6 of the Banking Regulation Act, 1949 (10 of 1949), with an undertaking located in a special economic zone or any other undertaking which develops, develops and operates or operates and maintains a special economic zone;
(c) received in convertible foreign exchange, in accordance with the regulations made under the Foreign Exchange Management Act, 1999 (42 of 1999).
(3) No deduction under this section shall be allowed unless the assessee furnishes along with the return of income,-
(i) in the prescribed form, the report of an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section; and
(ii) a copy of the permission obtained under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949).
Explanation : For the purposes of this section, -
(a) convertible foreign exchange shall have the same meaning assigned to it in clause (a) of the Explanation below sub-section (4C) of section 80HHC;
(b) Offshore Banking Unit means a branch of a bank in India located in the special economic zone and has obtained the permission under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act 1949 (10 of 1949);
(c) scheduled bank shall have the same meaning assigned to it in clause (e) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);
(d) special economic zone shall have the same meaning assigned to it in clause (viii) of the Explanation 2 to section 10A.
2. See rule 19AE and Form No. 10CCF. For analysis, see Mashbras Income-tax Rules.