The Hindu Business Line : STPI units eligible for IT sops

The Finance Ministry has said that Software Technology Park of India (STPI) units should not be denied tax exemption under Section 10 A of the income-tax law merely on the grounds that approval to such units have been granted by the directors of the STPIs and that such parks have not been approved by the Central Government.

The Central Board of Direct Taxes (CBDT) has given instructions to this effect to its field formations today.

However, it has been made clear that deduction under Section 10A would be subject to fulfilment of all other conditions spelt out in that provision.

For cases where assessments have already been completed and the claim under Section 10A has been disallowed only on the grounds that the approval to the STPI has not been granted by the Inter-Ministerial Standing Committee, the Finance Ministry has now said that the demand so arising should be kept in abeyance until further orders.

Tax experts reckon that the instruction to keep in abeyance the demands raised in such cases (where assessments have been completed and exemption benefits have been disallowed) was only a "temporary breather" for assesses and does not absolve the liability.

"It is just that the enforcement of the demand has been stopped until further orders," a tax expert said.

Section 10A of the income-tax law provides for 100 per cent deduction for 10 years of export profits derived by units set up in any STPI, which is in accordance with the scheme notified by the Central Government.

The STPI scheme notified in April 1995 by the Commerce Ministry required approval of the STPI by the Inter-Ministerial Standing Committee of the Department Of Electronics.

However, a large number of units have been registered or approved only by the STPI directors and were claiming deduction under section 10A.

Our Bangalore Bureau reports : The IT industry has termed the CBDT's move to streamline the tax exemption regime for STPI-registered software units as a welcome move.

"I am happy that this has set some doubts to rest," said Mr Kiran Karnik, President of Nasscom.

Some of the companies, especially the smaller ones which were issued letters about a month ago saying in effect that the STPI approval meant nothing, were really concerned about this issue, Mr Karnik said, adding that this circular would provide relief to them.

This also means that the current system continues and the Government needs to get its act together to sort out whatever issues exist internally, he added.

"It was a problem of what procedures take place within the Government, the STPI, the IT Ministry, and the Inter-Ministerial Standing Committee. However, what the STPI does at the back-end is what the companies would not like to know," he added.

"This circular clarifies an unnecessary controversy because the process followed for nearly 12 years by the Inter-Ministerial Committee has now been delegated to STPI," said Mr T.V. Mohandas Pai, Chief Financial Officer of Infosys Technologies.

"Further, it demonstrates the need for an approach mechanism wherein the assessing officers who think out-of-the-box can get their ideas tested by CBDT so that the commonality of the views and the assesses do not suffer."

Mr P.V. Srinivasan, Vice-President (Taxation), Wipro Ltd, said that the Government has acted promptly in a transparent way and the quickness with which it has acted is to be appreciated.

More Stories on : Policy | Taxation | Software

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Intelenet gets aggressive on growth plans

Current account deficit narrows to $3.8 b in Q3; oil imports firm

Cheaper food items keep inflation on leash

HPL: Bengal to fix price above Rs 28.80 a share

Videocon-GAIL group bags Oman contract

STPI units eligible for IT sops

Norms eased for unlisted cos raising money from overseas markets

Sify gets nod for investing in telcos

Legalised music downloads made easy

Consolidation is strength, Chidambaram tells PSBs

A booming stock market beckons sunrise sectors