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May 26, 2001
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Money > Business Headlines > Report May 26, 2001 |
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Remove hurdles to IT sector's growth: CIICalling for a removal of all constraints to the growth of the information technology sector the Confederation of Indian Industry, in a media release issued in New Delhi on Saturday, stated that this was all the more important in the backdrop of a slowdown in the US economy, which constitutes the biggest market for Indian software exports. One such constraint relates to Section 10A and 10B of the Income Tax Act which provides for a ten-year tax holiday to any industrial undertaking in Free Trade Zones for the "manufacture of any article, thing or computer software for export purposes", according to CII. A new subsection 9 in section 10A and 10B was inserted in the Union Budget 2000-01, stipulating 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. While the subsequent Union Budget 2001-02 has withdrawn the earlier restriction imposed by subsection 9 by allowing the change in beneficial ownership of those units by more than 51 percent, it has been restricted to widely held companies only. CII pointed out that the introduction of 10-year tax holiday for units set up as 100 per cent export oriented units and units set up in free trade zones was to encourage exports and changes in management/promoters should not be construed negatively and lead to a withdrawal of such benefits. Anticipating corporate restructuring activity in the IT sector to remain competitive, CII said that consolidation should be viewed as driver for growth and more importantly, competitiveness. 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. Suggesting that subsection (9) of section 10A should be deleted with retrospective effect from 01.04.2000 for closely held companies also, CII stated that this had been an important post budget recommendation. CII had also written to the finance ministry in this regard. |
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