MoF goofs up one more time

This included various banks, financial institutions, companies such as Max India as well asinvestors in infrastructure companies such as Reliance Telecom and the Maharashtra State Electricity Board (MSEB). Companies such as Reliance, for example, had marketed their bonds as tax-free ones based on the earlier exemptions.

Finance ministry officials today said the fault was that of the law ministry which deleted a critical clause from the ministry’s proposed amendment. According to the ministry, the law ministry sent this directly to the Lok Sabha, and they had no chance to see whether their amendment had been properly worded. During the petrol price hike fiasco, the ministry had tried to pass the blame on to the ministry of petroleum.

Today’s clarification stems from an incorrect amendment in Section 10 (23G) which provides tax reliefs to investments made in the infrastructure sector. After Finance Minister Yashwant Sinha proposed to limit these concessions considerably during his budget speech last month, the ministry received several representations pointing out how this would hurtinfrastructure building. Following this, Sinha more or less agreed to roll-back his proposal and revert to more or less the earlier pre-budget position. He indicated as much in his reply to the Finance Bill in the Lok Sabha on Friday. Except, when the actual amendment was put in, a major error crept in. While Sinha’s amendment came into effect from June 1, 1998 — the date of the budget — it should ideally have been added to the existing Section 10 (23G). Instead, the amendment sought to substitute the existing Section 10 (23G). As a result, the amended section allowed tax reliefs for infrastructure investment only after June 1, 1998 — concessions for investments made before this date then stood negated!

This is not the first time that the ministry has goofed up on critical issues. During the launch of the VDIS scheme last year, confused CBDT officials told mediapersons that those being investigated under FERA could avail of VDIS — this was later corrected by the Revenue Secretary after a faxed query wassent by The Indian Express.