THE FIFTH SCHEDULE PART A

THE FIFTH SCHEDULE
PART A
COMPUTATION OF THE PROFITS OR GAINS FROM THE
EXPLORATION AND
PRODUCTION OF PETROLEUM AND THE DETERMINATION OF THE
TAX THEREON
[See section 28 (2)(b)]

1.   Profits  from  exploration  and  production  of  petroleum  to  be  computed separately.-

Where any person carries on or is deemed under an agreement with  the  Government  to  be  carrying  on  any  business  which  consist  of  or includes exploration and production of petroleum, the profits or gains of such person  therefrom  shall  be  computed  separately  from  his  income,  profits  or gains from any other business.

2.   Computation of profits.- 

Subject to the provisions of section 29,  the profits and gains for the purposes of paragraph 1, shall be computed after making the following additional allowances, namely:-

(a) where a person incurs any expenditure on searching for, or on discovering and  testing  a  petroleum  deposit  or  winning  access  thereto,  but  the  search, exploration  or  enquiry  upon  which  the  expenditure  is  incurred  is  given  up before  the  commencement  of  commercial  production,  such  expenditure allocable to a surrender area and to the drilling of a dry hole shall be deemed to be  lost at the time of the surrender of the area or the completion of the dry hole, as the case may be. A portion of such loss as provided for any agreement between any such person and the Government, shall be allowed in either of the following ways:-

(i) such  portion  of  the  said  loss in  any  year  shall  be  set  off  against income,  profits  or  gains  from  business  or  under  any  other  head  of income,  other  than  income  from  dividend,  of  that  year.  If  the  loss cannot be wholly set off in this manner, the portion not so set off shall be  carried  forward  to  the  following  year  and  set  off  against  such income, profits or gains, for that year in the same  manner, and if it cannot be wholly so set off, the amount not so set off shall be carried forward  to  the  following  year  and  so  on;  but  no  loss  shall  be  so carried forward for more than six years;

(ii) such portion of the said loss in any year shall be set off against income, profits or gains of the same business of the income year inwhich  commercial  production  commences.  If  the  loss  cannot  be wholly set off against the profit of the same business for that year, the loss not so set off shall be carried forward to the following year and
set  off  against  the  profits  or  gains,  if  any,  of  the  assessee  from  the same business for that year; and if it cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year, and so on; but no loss shall be so carried forward for more than ten years;

(b) after the commencement of commercial production, all expenditure prior thereto not deemed to be lost under clause (a) and not represented by physical assets  in  use  at  the  time  the  commercial  production  commenced,  shall  be allowed  as  deductions.  The  portion  of  such  deduction  to  be  allowed  in  any year shall be such amount (not being greater than 10 per cent. of the aggregate amount deductible) as may be selected by the assessee;

(c) expenditure incurred after the commencement of commercial production in  connection  with  production  and  exploration  shall  be  allowed  as  a deduction:

Provided that such expenditure on asset with respect to which depreciation is allowable shall not be deducted, and depreciation shall be allowable on such assets in accordance with the provisions of the Third Schedule. Depreciation shall also be allowed in respect of the expenditure referred to in the preceding clause  on  physical  assets  acquired  prior  to  the  date  on  which  commercia production commenced, which were in use  on that date, as if the assets were newly  acquired  at  their  original  cost  at  the  time  of  commencement  of commercial production:

Provided  further  that  where  any  depreciation  allowance  has  been  allowed before  the  commencement  of  commercial  production,  the  original  cost  as aforesaid shall be reduced by the amount of such allowance;

(d)  if,  in  any  year,  the  deductions  admissible  under  section  29  and  the foregoing clauses (b) and (c) of this paragraph, exceed the gross receipts from the  sale  of  petroleum  produced  in  Bangladesh  such  excess  shall  be  set  off against other income, not being a dividend, and carried forward in the manner and subject to the limitations laid down in sections 37, 38 and 42.

3.   Depletion allowance.-

In determining the profits or gains for any year ending after  the  date  on  which  commercial  production  commenced,  an  additional allowance  shall  be  made  equal  to  15  per  cent.  of  the  gross  receipts representing the well-head value of the production from the business or part of the business to which the provisions of this Part apply:

Provided that such allowance shall not exceed one-half of the profits or gains as computed without the deduction of such allowance.

4.   Payments to the Government and taxes.-

(1) The sum of payments to the Government  and  taxes  on  income  in  respect  of  the  profits  or  gains  derived from the business or part of the business to which the provisions of this Part apply, for any year of assessment, shall be as provided for in the agreement with the assessee .

¹[subject to the condition that it shall not be less than 50 percent.of the profits or gains derived from the said business or part of the business before deduction of payments to the Government and the additional allowance referred to in paragraph 3]
(2) For the purposes of this paragraph, "payments to the Government" means
amounts  payable  to  the  Government  or  to  any  governmental  authority  in
Bangladesh,-

²[(a)in respect of royalties as specified in the petroleum (production) Rules,1949; and]

(b) in respect of any tax or levy imposed in Bangladesh particularly applicable to oil production or to extractive industries, or any of them, and  not  generally  imposed  upon  all  industrial  and  commercial activities.

5.   Adjustments of payments to the Government and taxes.-

If in respect of any year, the aggregate of the sum of payments to the Government and taxes on income is greater or less than the amount provided for in the agreement referred to in paragraph 4(1), an additional income tax shall be payable by the assessee or an abatement of tax shall be allowed to the assessee, as the case may  be,  so  as  to  make  the  aggregate  of  the  sum  of  payments  to  the Government  and  taxes  on  income  equal  to  the  amount  provided  for  in  the agreement.

6.   Carry forward of excess payments.-

If, in respect of any year, the payments to the Government exceed the amount provided for in the agreement referred to  in  paragraph  4(1),  so  much  of  the  excess  as  consist  of  any  tax  or  levy referred  to  in  paragraph  4(2)(b)  shall  be  carried  forward  and  treated  as payments to the Government for the purposes of paragraph 4 and 5 for the succeeding year.

7.   Sale price of oil.-

For the purposes of computing income under this Part, the "well-head value" shall be adopted as the sale price of the oil.
 

8. Definitions.- For the purposes of this Part,-

(a)  "commercial  production"  means  production  as  determined  by  the Government;

³[(b)  "petroleum"  has  the  same  meaning  as  assigned  to  it  in  Bangladesh Petroleum  Act,  1974  (LXIX  of  1974),  but  does  not  include  refined petroleum products;]
(c)  "surrender"  means  the  termination  of  right  with  respect  to  an  area including the expiration of rights according to the terms of an agreement ;
(d) "surrendered area" means an area with respect to which the rights of a person have terminated by surrender or by assignment or by termination of the business;
(e)  "well-head  value"  has  the  meaning  assigned  to  it  in  the  agreement between  the  assessee  and  the  Government  and,  in  the  absence  of  its definition  in  the  agreement,  the  meaning  assigned  to  it  in  the  Petroleum (Production) Rules, 1949.
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¹Omitted by F.A. 1989
²Omitted by F.A. 1989

³Subs. by F.A. 1989