Business

A provision that ignores country's security

I WAS surprised to come across the provision under Sec. 10(6C) of the Income-tax Act in one of my forays into the income-tax jungle.

This section allows exemption for a foreign company rendering technical service in or outside India for "projects connected with security of India" subject to notification in the Official Gazette issued by the Central Government.

My further research showed that a number of notifications have been issued naming foreign agencies for our defence projects with such agencies named with enough identification.

Should our defence arrangements be a matter of such publicity jeopardising our defence system?

It was pointed out by the writer in the commentary on this provision in Sampath Iyengar's "Law on Income-tax" Tenth edition, as under:

"The wisdom of a provision like Sec. 10(6C) requiring public notification of foreign companies providing services in connection with projects involving security of the country, which is normally expected to be confidential, if not secretive, is not understandable."

This provision explains the anxiety of the tax wing of the government requiring approval for what is essentially a defence project, so that it should be a matter for the Defence Ministry to satisfy itself and certify fitness for tax relief.

But whoever does it, there is hardly any need or justification for requiring a Gazette notification.

It is surprising that the Defence Department did not get alerted by the unnecessary risk of publicity in a matter relating to security of the country by such Gazette notifications.

S. RAJARATNAM

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