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CAG flags tax breaks for companies (Relevant for GS Prelims and Mains Paper II)

CAG reprimanded IT Dept. over tax exemptions to big firms, especially RIL:
The Comptroller and Auditor-General (CAG) has reprimanded the Income-Tax Department for extending tax exemption amounting to hundreds of crores to several companies by inappropriately extending benefits available for infrastructure projects.

In a report tabled in Parliament, the CAG said the biggest beneficiary was Reliance Industries Ltd. (RIL).

Details:
The report said the Gujarat Maritime Board (GMB) had entered into an agreement with the Reliance group, for construction of four captive jetties at Port Sikka near its refinery complex in Gujarat, with a condition that captive jetties were meant for landing and shipping of captive industrial raw materials by the Reliance group companies. Since jetties were captively used by the assessee company and not for public purposes, the deduction allowed was not in order,” the audit report pointed out.

The irregular allowance of deduction by the AO has resulted in under-assessment of income of Rs. 5,245.38 crore involving a tax effect of Rs. 1,766.74 crore,” the CAG said.

The audit also pointed out that Essel Mining & Industries Limited, part of the Aditya Birla group, was provided over Rs. 73 crore tax benefits between 2010 and 2013 though the infrastructure it developed was for private use.

IT dept. response:
The CAG dismissed the I-T department’s argument that the I-T Act did not distinguish “public facility” and “private facility” for claiming the deduction under section 80IA.

 



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