CII seeks review of tax holiday norms for FTZs

By Our Special Correspondent

NEW DELHI, OCT. 2. The Confederation of Indian Industry (CII) has urged the Government to review the norms for providing tax holidays to units being set up in free trade zones (FTZs).

According to CII, Section 10A of the Income-tax Act provides a ten-year tax holiday to industrial undertakings in FTZs under the condition that they export at least 75 per cent of their turnover. In addition to this, a new sub-section 9 was inserted by the Finance Act 2000 stating that if there was any change in the beneficial ownership of a company by more than 51 per cent the company would be deprived of this deduction.

CII believes that in this age of mergers and acquisitions, this provision will lead to undue hardship for the exporting community especially in the case of the software industry, where M & A activity is extremely common.

This provision is not in tune with the overall policy of the government to promote corporate restructuring. In fact, it believes that this provision would discourage such activity and would also restrict export growth. It has therefore suggested that this new provision should be deleted with retrospective effect from April this year.

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