Stung by rejection of its demand for restoration of tax breaks on production of natural gas, the Oil Ministry has asked the Finance Ministry to let courts decide if 7-year tax holiday should apply only to oil and not on gas produced from the same well.
Oil Secretary S Sundareshan has asked Revenue Secretary Sunil Mitra to allow profit-linked incentives to continue for existing contracts signed under the New Exploration Licensing Policy (NELP) since 1999 under the proposed Direct Tax Code.
The government promised exemption from payment of Income Tax on profit made from production of crude oil and natural gas for seven years from areas awarded under NELP. But the then Finance Minister P Chidambarm amended the tax act to say the exemption was available to a product with huge carbon footprint (oil) and not to environment friendly fuel (gas).
