HC nod for withdrawing I-T exemption to SEZs

The High Court on Wednesday upheld the amendments to the Income Tax Act in 2011, withdrawing exemption from payment of certain types of Income Taxes (I-T) given to developers of special economic zones (SEZs).

Justice H N Nagamohan Das dismissed a batch of petitions filed by companies like Biocon Ltd, Mindtree Ltd, OPTO Infrastructure Ltd and Mangalore SEZ Ltd.  He observed, “All decisions in economical and social sphere are ad hoc and experimental in nature. Every tax exemption and incentive shall have a sunset clause and fiscal legislations providing tax exemption must have a life span fixed in the enactment.”

Noting that there was discrimination on account of some companies enjoying exemption, taking benefit from lack of sunset clause, the judge said the government had noticed certain flaws in the exemptions granted in 2005, under the Income Tax Act, as they were of permanent nature and the same was limited by amending the Act in 2011 and it is well within its legislative competence.

Limited exemption

The petitioners had moved the court after the Union government limited the exemption to five years, which came into effect from April 1, 2005 and they were asked to pay minimum alternate tax at the rate of 18.5 per cent on their ‘book’ profits from April 1, 2011. The I-T department had claimed before the court that these exemptions had resulted in huge revenue loss to the government from SEZs.