Budget Expectations: ASSOCHAM seeks hike in tax holiday for oil & gas.

The Associated Chambers of Commerce and Industry of India (Assocham) called for increasing the tax holiday period for highly capital intensive oil and gas exploration industry which has a long gestation period and is strategically important for the country.

Provision of section 80-1B (9) of the Income Tax Act should be amended to extend the period of seven years of tax holiday to ten years and to allow flexibility to companies involved to chose the period during initial 15 year period of operations.

During the initial seven years, companies have large expenditure to set off and hence the actual benefit of tax holiday does not reach them, said (Assocham). This period is less than the tax holiday period available to companies in infrastructure sector like power generation and distribution.

Considering the country's energy requirements, the sunset clause for commencement of refining should be extended by a year to March 31, 2013. "It is expected that extension of tax holiday will benefit refining companies starting operations in 2012-13 and the benefit be passed on to consumers," said president Rajkumar Dhoot in a pre-Budget memorandum to the finance minister.

It is important that expenditure for drilling and exploration activities be treated as the same as research and development expenditure, and weighted deduction of the actual expenses incurred by the assessee is allowed.

Mr Dhoot said there is need to increase depreciation rate for tax deduction under income tax to improve internal accrual for replacement of assets in the current difficult financial market and volatile crude oil prices. Inverted duty structure in case of certain industries should be removed.

The current rate of excise duty needs to be retained in view of falling industrial growth. Tax refund procedures for exporters of goods and services must be simplified and authorities should ensure that refunds are made within a reasonable time period.

There is also need to remove double taxation of same tax-able items under value added tax like in case of copyright, software, right to use goods and immovable properties, said Assocham.

It said section 73A restricts the claim of adjustment of loss of specified business from profits of other businesses. This discrimination needs to be removed.

Source : moneycontrol.com