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(viii) "special economic zone" means a zone which the Central Government may, by notification in the Official Gazette, specify as a special economic zone for the purposes of this section.] 7a [Explanation 3.--For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.] 7.5 Now, two events happened, first the assessee unit which was located in export processing zone got converted into an SEZ unit effective from 01.01.2003 and secondly, provision was introduced by Finance Act, 2002 w.e.f. 01.04.2003 by way of Section 10A(1A) of the 1961 Act with a non obstante clause that notwithstanding anything contained in Section 10A(1) of the 1961 Act , the deduction u/s 10A is to be allowed for a total period of seven years to a unit located in SEZ which begins to manufacture or produce article or things or computer software during the previous year relevant to assessment year beginning from 01.04.2003 and thereafter. At the same time, deduction u/s 10A(1) was restricted to units other than to whom Section 10A(1A) applies to 90% of the profits derived from export of articles or goods or computer software for ay: 2003-04. The assessee unit got itself converted into an SEZ unit during previous year relevant to ay: 2003-04 but can it be said that it begins to manufacture or produce goods or articles in SEZ in previous year relevant to ay: 2003-04. The answer is emphatic 'no', the assessee unit begins to manufacture or produce pillows or cushions in previous year relevant to ay: 2001-02 in MEPZ and once the unit begins to manufacture or produce articles in previous year relevant to ay: 2001-02 , then it cannot be said that it again begins to manufacture or produce articles in SEZ when it got converted itself from EPZ unit to SEZ unit. It is merely a conversion of EPZ unit into an SEZ unit but the fact remains that unit was already in operation since previous year relevant to ay: 2001-02 onwards and it could not be said the unit of the assessee begins to manufacture or produce articles or things or computer software in the previous year relevant to assessment year 2003-04 in SEZ as it is a clear case of mere conversion of EPZ into an SEZ and not setting up of new unit in SEZ. The terminology used in Section 10A(1A) is only 'begins to manufacture....' while the word 'begun' which is also simultaneously used along with 'begins to manufacture....' in Section 10A(2) is missing in Section 10A(1A) of the 1961 Act The second proviso to Section 10A(1) of the 1961 Act shall continue to govern cases of conversion of EPZ into SEZ and benefit of deduction u/s 10A shall be available for ten consecutive assessment year starting from the year in which the unit begins to manufacture cushions and pillows in MEPZ viz. ay: 2001-

(viii) "special economic zone" means a zone which the Central Government may, by notification in the Official Gazette, specify as a special economic zone for the purposes of this section.] [Explanation 3.--For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of soft-ware) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.] The following Explanation 4 shall be inserted after Explanation 3 by the Finance Act, 2003, w.e.f. 1- 4-2004:

(7) For the purposes of sub-section (1), the profits derived from the export of articles or things or services (including computer software) shall be the amount which bears to the profits of the business of the undertaking, being the Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the assessee.

(8) The provisions of sub-sections (5) and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1) as if--

Explanation 2.--For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]"

7.10 Sub-section 7B was also simultaneously added to Section 10A by the Special Economic Zones Act, 2005 w.e.f. 10.02.2006 , which reads as under: