The implications of Finance Bill, 2007 proposals on companies are as follows:
The hike in dividend distribution tax from 12.5 per cent to 15 per cent will further increase the burden of double taxation. Besides, it will have an impact on the payout, which would adversely affect small the medium investors.
Bringing into the MAT fold Section 10A and 10B companies does not seem justified as the exemption for such companies is anyway available only up to March 31, 2009.
The amendment to Section 80-IA, by introducing a new sub-section (12A), seems justified on the ground that the overall thinking is that exemptions and concessions under the I-T Act should be gradually eliminated.
The extension of weighted deduction under Section 35 raises a debateable issue. That is, though it would encourage in-house development of research and development activities it could go against the philosophy of phasing out exemptions and tax benefits from the I-T Act.
The proposal to restrict the exemption only in respect of income of a venture capital company or venture capital fund from investment in venture capital undertaking engaged in certain specified businesses or industries does not seem justified.
The existing scheme should have been retained.
The meaning of infrastructure facility has been extended to include navigational channel in the sea for a period of 10 years. The tax benefit, though welcome, goes against the overall strategy of phasing out exemptions.
The one-year extension given to power generating plants for revival is reasonable considering the power position in the country.
T. N. Pandey (The author is a former chairman of the CBDT.)