Finance Minister P Chidambaram today defended the withdrawal of a key tax exemption for amalgamated or demerged infrastructure companies, saying the provision was being misused.
Section 80-IA has been misused in the name of restructuring. Infrastructure companies have taken advantage of higher depreciation and hiving off, to take advantage of the 10-year tax holiday, Finance Minister P Chidambaram told industry leaders at a post-Budget interaction organised by Assocham.
The Finance Bill, 2007, states that the Section would not apply to Indian companies undergoing amalgamation or demerger after March 31, 2007.
The Section provides for a 100 per cent deduction for 10 years concerning profits and gains of certain undertakings engaged in development, operation and maintenance of infrastructure facilities, industrial parks and SEZs.
According to the Sub-Section (12) of Section 80-IA, if a company getting the benefit is merged with another company within this 10-year period, the merged entity will also be eligible for the exemption. This provision will cease to apply after March 31.
Chidambaram expressed dismay over the fact that no one raised issues concerning the common man, like employment and basic amenities.
The economy was likely to grow close to 9 per cent in this fiscal as well the next and efforts should be made to include the 600 million people dependent on agriculture in the growth process, he said.