Assocham calls for tax exemption to infra cap Cos
Leading industry body Assocham has called for certain tax exemptions for infrastructure capital companies and funds as the sector’s development has been identified as a thrust area by the government. At the same time, it said, housing, power, water supply, sewerage, oil production and pipelines besides mines should be given the status of infrastructure projects by service tax authorities. Service tax exemption should be extended all such projects.
Section 10 (23G) of the Income Tax Act 1961 which was there till assessment year 2006-07 provided for exemption of interest and long-term capital gains for infrastructure capital companies and funds for various projects like housing and development of special economic zones. This provision was knocked down by the Finance Act 2006, said The Associated Chambers of Commerce and Industry of India (Assocham) in the pre-Budget memorandum for 2011-12 adding the exemption should be reinstated.
This is in view of the fact that major infrastructure projects are executed by special purpose vehicles (SPVs) floated by companies and transfer of shares willnot qualify for tax exemption in the absence of a provision similar to section 10 (23G) as the SPVs will not be listed on stock exchanges.
In the earlier section 115JA of the Act, profits derived by industrial undertakings engaged in the business of generation and distribution of power and those developing, maintaining and operating any infrastructure facility qualifying for tax holiday under section 801A were deductible from book profits computed for minimum alternate tax (MAT) purposes.
The deductibility was withdrawn under the provisions of section 115JB which was introduced in AY 2001-02. Assocham has suggested restoration of the earlier provision to give a fillip to these sectors. It added that while projects relating to housing, power, drinking water supply, sewerage, oil production and pipelines besides mines are given the status of infrastructure by the Income Tax Department and the Reserve Bank of India and accorded favourable tax status under the Income Tax Act, service tax authorities do not recognise them as infrastructure projects.
Only two services – works contract along with commercial and industrial construction – are exempted from service tax in relation to roads, airports, railways, transport terminals, bridges, tunnels, dams, major and other ports.