Mtnl Files Tax Relief Claim With Cbdt

Mahanagar Telephone Nigam Ltd (MTNL) has filed a tax relief claim with the Central Board of Direct Taxes (CBDT) which, if granted, will translate into a benefit of at least Rs 120 crore for the public sector undertaking during 1997-98.

The claim is on the basis of the 1997-98 Finance Bill, which amended Section 80 (I) (a) of the Income Tax Act to classify telecommunications as part of infrastructure. Under the section, revenues accruing from fresh investment in infrastructure will not be taxed for the first five years and the rate of taxation for the next five years will be 25 per cent.

 

The hurdle in the way of MTNL getting this relief is that the government notification in this respect extends tax breaks to only new companies in the telecom sector. As a result, MTNL and Videsh Sanchar Nigam have been deprived of this benefit.

MTNL spends huge amounts on setting up fresh infrastructure every year. We are commissioning about 4 lakh new lines every year, said a senior official of the PSU, which operates basic telephone services in Delhi and Mumbai. If the revenue accruing from these was exempted from tax, you can straightaway knock off 20 per cent from our tax liability, he said.

MTNL paid Rs 576 crore in taxes during 1996-97.

For MTNL to get this relief, a fresh notification will have to be issued. We have a good case, said the official. But the government can also refuse. We can only make a request.

Not many people know that MTNL is the second highest tax paying corporate in the country after the State Bank of India. The kind of tax we pay is equivalent to the turnover of some of the major corporates, said the official.

About the plans to float a separate financial services arm for the department of telecommunications (DoT), the official said the impact will not be much on MTNL, which currently raises finance for the department.

MTNL has, over the last 10 years, raised over Rs 7,000 crore from the market. But this liability in the balance sheet is neutralised by the head under which we show loan to the government. Our debt-equity ratio remains very low, about 0.1, said the official.

The official dismissed recent reports that the cost of the market borrowing will now have to be borne by MTNL.