Bangalore: Industry body Assocham on Tuesday called for reinstating income tax exemption for infrastructure capital companies and funds as the country plans to spend one trillion dollars on infrastructure development during the 12th Five Year Plan period 2012-17.
   
Section 10 (23G) of the Income Tax Act provided for exemption of interest and long-term capital gains till 2006-07 in the hands of infrastructure companies derived from lending or investments made in approved eligible projects, development of special economic zones and housing projects, it said in a statement.
   
The provision was withdrawn as tax rates and interest rates on borrowings fell and reduced overall cost of infrastructure projects.
   
"That ground does not hold good now as high interest rates have started increasing borrowing costs," Assocham said in a pre-Budget memorandum to the Finance Ministry.
   
The higher cost would ultimately increase overall cost or make many infrastructure projects unviable, Assocham President Rajkumar Dhoot said, adding that modern infrastructure across the country is imperative for maintaining growth momentum and equitable development.
   
The sector suffers from land acquisition problems, delayed environmental clearances, fund constraints and slow progress in works which lead to cost overruns. Delays pile up supply side constraints, leading to expected demand not being matched and pushing inflation to higher levels, Dhoot said.
   
Dhoot called for regulatory certainties in key infrastructure sectors to resolve implementation issues, pointing out that investments by private sector have increased from 33 percent in the 10th Plan period to 50 percent in the 11th Plan period (2007-2012).

(Agencies)