|
| GSPC gets relief from HC in tax plea |
| Kalpana Pathak / Mumbai Oct 17, 2009, 00:40 IST |
|
The Gujarat High Court has granted interim relief to state-owned Gujarat State Petroleum Corporation (GSPC) in a petition filed by the company challenging the constitutional validity of an amendment to the Income Tax Act in the Finance Act, 2009 (giving effect to the Union Budget).
As a result of the court order, “the amendment in the IT Act so far as GSPC is concerned shall not be applied till assessment year 2010-11,” GSPC’s lawyer told Business Standard. GSPC filed a case against the Government of India last Thursday regarding the change. The company has said it could lose around Rs 500 crore due to the amendment. The next court hearing is on November 3.
The Finance Act, 2009, amended the provisions of Section 80-IB(9) of the I-T Act under which companies engaged in the production of mineral oil (including natural gas) had been claiming deduction under it, by treating each well/cluster of wells as a separate undertaking and thereby enjoying a tax holiday of seven years in respect of such each well or cluster. According to the amended provisions, the term ‘undertaking’ has been defined to mean the entire contract area as a single undertaking (as opposed to the above mentioned claim of the taxpayer companies that each well/cluster of wells is an undertaking) with retrospective effect from 1999-2000.
“The court has suspended the amendment as a result of which each well would be treated as a separate new undertaking, entitling GSPC to claim benefit in relation to each well for seven years from the commencement of commercial operation,” the lawyer added.
According to experts, the legal change implied that the seven year tax holiday available under Section 80-IB(9) would be applicable to the entire contract area from the year the first well in that area starts commercial production of mineral oil. In other words, the tax holiday would not be applicable equally to all wells drilled in the contract area over the period, as it (the tax holiday) would start at the commencement of the commercial production by the very first well drilled in that contract area and may end much before the other wells are even earmarked to be drilled.
This situation would arise since the development of the entire contract area may take five to 15 years or even more, as it spans thousands of square miles extending into the sea.
An industry executive from an international energy company said, “The New Exploration and Licensing Policy’s failure is not only due to the fight between the Ambani brother over the gas supply from KG basin, but also because of (such) ambivalent policies of the government.”
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
