In a recent ruling in the case of Vodafone Essar Gujarat Ltd. (Taxpayer) (ITAT) [38 SOT 51], on the issue of eligibility of the Taxpayer, engaged in the business of providing telecommunication services prior to tax year 1999-00, to choose the initial year of claiming tax holiday under section 801A (Section) of the Income tax Act, 1961 (ITA) the Ahmadabad Income Tax Appellate Tribunal held that, in view of the amended provisions from tax year 1999-00, the Taxpayer had an option to choose its initial year of claiming tax holiday and was justified in exercising its option to avail tax holiday from tax year 2004- 05 on wards.
Background and facts of the case
Tax holiday provisions
- Prior to tax year 1999-00, the Section provided tax holiday to undertakings providing telecommunication services at 100% of the profits for the first five tax years and 30% for the next five tax years, beginning with the tax year in which the undertaking starts providing telecommunication services on or after 1 April 1995 but before 31 March 2000(Old Provision).
- The Finance Act, 1999 amended the Section, with effect from tax year 1999-00, to provide an option to claim tax holiday for any 10 consecutive tax years from a block of 15 years, beginning with the year in which the undertaking starts providing telecommunication services (New Provision). It, further, provided that the New Provision would be applicable for an undertaking which has started or starts providing telecommunication services’ on or after 1 April 1995 but before 31 March 2000 (Refer Note-1).
Facts
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