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CMA Final · Indirect Tax Laws and Practice · Special Economic Zone Scheme

A Developer's letter of approval for an SEZ is suspended under section 10 and an Administrator is appointed. The Board invites applications and selects a transferee, and the Developer transfers the letter of approval on 1 September. Which statement about the Developer's position is correct under section 10(9)?

The Developer's rights, duties, obligations and liabilities cease from the date of suspension, or the earlier date of transfer of the letter of approval, but liabilities that accrued before that date survive. Accrued liabilities are the statutory exception to the cessation.

  1. AAll rights, duties, obligations and liabilities of the Developer cease absolutely, including liabilities accrued earlier
  2. BRights and duties cease from the date of suspension or earlier transfer, except liabilities accrued before that dateCorrect
  3. COnly the rights cease, while duties and liabilities continue until the Administrator is divested
  4. DRights, duties and liabilities continue until the one-year period of the Administrator's management ends

Explanation

Section 10(9)(c) says that rights, duties, obligations and liabilities cease from the date of suspension or, if earlier, the date of transfer, except liabilities which accrued before that date. The option saying all liabilities cease ignores that exception, and the others misstate the timing and scope.

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