IT SEZ Parks News: 08/06/09

 

NO TAX BREAK TO SEZ UNITS IF OVER 20 PERCENT CAPITAL GOODS SECOND-HAND
Jayant Singh & Gunjan Pradhan Sinha, New Delhi, June 8, 2009
The Indian Express

In an attempt to finally resolve any misgivings about the use of second-hand or used capital goods while setting up an SEZ unit, the government has issued an instruction saying that a company can now bring in as much second-hand capital equipment to a new special economic zone unit as it wants. The SEZ unit, however, will not be eligible for tax exemption if the ratio of used equipment exceeds 20 percent of the overall capital investment. This is the third time the government has issued such a notification pertaining to the treatment of second-hand capital goods used in SEZs with respect to tax exemption under the Income Tax Act.

In its instruction dated May 27, the commerce ministry outlined the guidelines for procurement of used capital goods from domestic tariff area (DTA) to SEZ units. Apart from clarifying that the developer is free to transfer as many second-hand capital goods as he wants, it also stated that prior approval of the Development Commissioner of that particular zone would be required. That, however, is just a formality, according to Vikram Bapat, executive director with international consultancy PricewaterhouseCoopers (PwC). “This instruction is important especially for old IT companies setting up IT/ITES SEZs across the country, who might want to consolidate their existing software and technology parks (STPIs) — on which they’ve reaped tax benefits for the past 8-10 years — with their new SEZs,” he added. “Given that these STPIs have already been suffering in the face of the ongoing global recession, it only makes sense to ease the cost burden of these companies by allowing them to transfer their existing capital goods from their STPIs, which are a part of the DTA to their SEZs.” These SEZs will, however, still be able to avail of service tax benefits, if not income tax.

The government hadn’t stipulated any guidelines for the use of second hand capital goods when the SEZ Act had first come into being. It was only in August 2006 that it introduced a rule saying banning any use of second hand capital goods in SEZs. That rule, however, lasted only a year and the government issued another clarification in October 2007 saying that the Income Tax Act, in its Section 10AA, already deals with the treatment of used capital goods and hence the earlier rule was invalidated. According to Section 10AA of the IT Act, used capital goods would be allowed only if they did not exceed 20 percent of total capital goods. Hence, prior to this notification, used capital goods were only partially allowed in SEZs.

PRIORITY TO IT PARKS: MINISTER
Nalgonda, June 08, 2009
The Hindu

Minister for Information Technology, Youth Services and Sports Komatireddy Venkat Reddy vowed to develop Information Technology infrastructure and harness the potential of the industry at an optimum scale to usher in accelerated development with a thrust on the rural areas.

Speaking to the media persons on the occasion, the Minister said that top priority will be accorded to develop I-T Parks.

Stating that the district administration has already sent proposals for setting up of an I-T Park near Dhandu Malkapur, he mooted another IT Park in the district particularly in Narkatpalli mandal close to the district headquarters.

“Development of IT infrastructure holds the key to transfer the fruits of information technology to the rural areas”, he remarked. He said that the government will protect the interests of the employees of the Satyam computers.

IT PARKS MOST HIT BY RECESSION
Chennai, June 08, 2009
Deccan Chronicle

Though the other realty segments have shown positive vibes, the Information Technology space segment is still reeling under pressure and many IT parks are still waiting to be occupied. Realty majors who cater to the IT segment are crossing their fingers and hoping that the forthcoming budget would have something for this embattled segment.

“Nearly 6 million sq ft IT space is waiting to be occupied in Chennai alone. The slowdown in the IT sector, sluggishness in the market and failure to extend the Software Technology Parks of India scheme beyond 2010 are some of the reasons for these parks going dry,” noted Prakash M. Chella, president, Confederation of Real Estate Developers’ Association (CREDAI) – Tamil Nadu.

Chella further elucidated that slow infrastructure development and over-supply of space were also reasons for IT parks going vacant. In 2006-07 most developers started constructing IT parks and by the time the buildings were up, the sector was falling, he noted.

However, Ajit Chordia, director of Olympia Technology Park, said his park was houseful and companies were demanding more space. “In fact, we will be constructing another floor in Olympia Technology Park which will be ready for occupancy in June 2010,” he added. He said realty developers have constructed IT parks without analysing the demand.