1. Computation of profits arising from exploration and production of petroleum.-

In cases where a person carries on a business of exploration and production of petroleum or is deemed to be carrying on it under a contract with the Government, the profits arising from exploration and production of petroleum shall be calculated from the income, profits and gains of other businesses carried on by such person. and profit has to be calculated separately.

2. Computation of profits.-

Subject to the provisions of section 49, after allowing the following expenses, for the purposes of section 1, the profits and gains shall be computed, namely:-

(a) damages for the surrendered area or drilling of dry wells where a person has incurred any expenditure for the purpose of prospecting for petroleum, or discovering or testing petroleum reserves or entering such place, but has abandoned such prospecting or discovery operations or investigation operations prior to commercial production; the said expenditure shall be apportioned between the said Surrender Area and Dry Well Digging, as incurred; a portion of such damages shall be sanctioned under any of the following ways under the agreement entered into with the Government and the person concerned, namely:-

(i) The said portion of the said loss in any year shall be adjusted against any other income, profit or gain of the business other than the dividend income of that year. If it is not possible to fully adjust the loss in this manner, the unadjusted portion shall be carried forward to the next year and shall be adjusted against the income, profit or gain of the said year in the same manner and if even in this way the entire loss cannot be adjusted, then the corresponding carry forward shall be carried forward in the following year. and will be coordinated and thus continued; in no case shall such damages be carried forward for more than 6 (six) years;

(ii) the said portion of the loss in any year in which commercial production has commenced shall be set off against the income, profit or gain of the business in that income year. If it is not possible to fully set off the loss against the profits of the same business for the year, the unadjusted portion of the loss shall be carried forward to the next year and set off against the profits or gains of any such business of the taxpayer for that year and even if the entire loss is not set off, It will be drawn and adjusted in subsequent years and will continue to be drawn in this way; in no way shall such damages be carried forward for more than 10 (ten) years;

(b) after the commencement of commercial production, all expenses incurred before it are not treated as losses under clause (a) and fall outside the scope of tangible assets in use at the time of commencement of commercial production, shall be allowed as deductible expenses, the portion of such deductible expenses in any year, not exceeding 10% (ten percent) of the total deductible amount, shall be allowed, the amount to be determined by the taxpayer;

(c) Expenditure related to production and exploration after commencement of commercial production shall be allowable as deductible expenses:

Provided that the expenditure on such property to which depreciation allowance is admissible shall not be deductible and depreciation shall be allowed on such property in accordance with the provisions of the Fourth Schedule, if the tangible asset referred to in the preceding sub-paragraph is acquired before the date of commencement of commercial production and is in use on that date a deductible benefit will be allowed in respect of such expenditure also on the basis that the said asset was newly acquired at the actual cost at the time of commencement of commercial production:

Further provided that in cases where any depreciation allowance has been allowed before commencement of commercial production, an amount equal to the said allowed depreciation allowance shall be deducted from the above-mentioned actual price;

(d) if, in any year, the deductions allowed under sections 49-53 and under clauses (b) and (c) above of this section, the proceeds from the sale of petroleum produced in Bangladesh are in excess of the gross receipts, such excess receipts, dividends, etc. shall be adjustable with other income, and shall be withdrawn in the manner and subject to the conditions specified in sections 70 and 71.

3. Depletion allowance.

In computing the profits and gains for any year ending after the date of commencement of commercial production, the provisions of this section shall apply to the gross receipts earned as wellhead value on the production of such business or part of such business 15% (Fifteen percent) additional allowance will be paid:

Provided that the said allowance shall not exceed half of the profit or gain calculated without deducting such allowance.

4. Amounts and taxes payable to Government.-

In respect of income arising from profits or gains derived from any business or part of such business to which the provisions of this Part apply, the amount of money and income tax payable to Government in any tax year shall be determined in accordance with the terms of the agreement entered into with the taxpayer.

5. Combination of sums and taxes paid to Government.-

If the combination sum of sums and taxes paid by a taxpayer to Government in respect of any year is more or less than the amount specified in the agreement referred to in section 4, the amount payable to Government for the income specified in the terms of his agreement with the Government. , the tax of the said taxpayer shall be adjusted to equalize the amount of tax payable with him.

6. Carried forward of excess payment.-

If the amount of money paid to the Government in any year exceeds the amount determined under the agreement referred to in section 4, the amount of such excess amount included in any tax or levy referred to in section 4 shall be shall be carried forward for the following year and shall be deemed to have been paid to the Government for the purposes of paragraphs 4 and 5 for the following year.

7. Sale price of oil.—

In computing income under this section, “wellhead price” shall be deemed to be the sale price of oil.

8. Explanation.-

For the purposes of this Part-

(a) “commercial production” means production of quantities prescribed by the Government;

(b) “petroleum” means petroleum as defined in The Bangladesh Petroleum Act, 1974 (Act No. LXIX of 1974), but shall not include refined petroleum products;

(c) “surrender” means the termination of any rights applicable to any territory and any rights that have expired under the terms of any Agreement;

(d) “surrendered area” means an area whose right to an area has been terminated by a person surrendering or relinquishing ownership or winding up business;

(e) “wellhead price” means wellhead price as defined in the agreement entered into between the taxpayer and the Government and, if not defined in the said agreement, wellhead price within the meaning of the Petroleum (Production) Rules, 1949;

(f) “payment to Government” means any money paid to the Government or to any authority of the Government of Bangladesh, in respect of any tax or levy imposed in Bangladesh specifically for the oil producing or exploration industry or for all such industries, or for any of them, and all industries; not generally imposed for institutions and commercial functions.