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Wednesday, Jul 02, 2008
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Oil and gas: CBDT clarifies on tax holiday

Special Correspondent

NEW DELHI: Even as about a dozen oil and gas exploration blocks on offer under NELP-VII (National Exploration Licensing Policy) failed to elicit any response from domestic and foreign oil majors, the Central Board of Direct Taxes (CBDT) on Monday dubbed as “incorrect” newspaper reports in the recent past which suggested that the Finance Ministry had gone back on its commitment to provide tax holiday in respect of profits derived from commercial production of both oil and natural gas.

In a statement here, the CBDT said that while Section 80-IA(4E) — the predecessor Section to Section 80-IB (9) — was introduced in the financial year 1997-98, Section 80-IB(9) replaced Section 80-IA(4E) with effect from fiscal 1999-2000. Despite the change, there was, however, no material difference in the content or substance of the old provision and the new provision, it said.

“Subsequent to its introduction, bidding has taken place under NELP I to NELP VI and no request for amendment of the Section was received from any quarter. Meanwhile, whether natural gas is included in the expression “mineral oil” was raised by certain contracting parties before different authorities, including tribunals and courts. This issue is, therefore, sub judice and it would only be appropriate to allow the courts to resolve this issue,” the statement said.

“Furthermore, as oil exploration companies are aware, under Production Sharing Contracts with the Central government, the exploration company is entitled to recover the full costs before profits are shared with the government or subject to any tax.”

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