A consultancy in the guise of an educational institute will be exempted from income tax.

Chairman of the National Board of Revenue (NBR) Dr. Shoeb Ahmed has already given the Surface Water Modelling Centre (SWMC) approval for permanent tax exemption, sources said.

Running under a trust, the consultancy rakes in huge profits every year by selling software and providing expert advice to various organisations, the sources added.

According to the law, only incomes from house property and micro-credit of such organisations are tax-free.

The SWMC has also been registered as a consultancy with the value-added tax (VAT) authority.

Director of the firm Imamuddin Ahmed, however, told The Daily Star that the main job of the company was to conduct researches and training in river management.

The organisation was not profit-

oriented, he claimed.

"There are some surplus funds, which we funnel to research, training and technology transfer," he said on the telephone.

The sources, however, said pressure was mounted on the NBR officials to provide the facilities to the firm as an influential secretary is its chairman.

A tug-of-war pitched between two members of the NBR over the issue, the sources added.

TA Chowdhury, NBR member (tax exemption and survey), objected to the issue saying he did not find any reason for considering the firm an educational institute.

Besides, a lot of other firms would seek such tax exemption facilities and the government would lose a huge amount of revenues every year, the member reasoned.

Before giving such facilities to a firm, a Statutory Regulatory Order should be issued by the NBR, he observed.

By contrast, Delwar Hossain, NBR member (income tax policy), said such facilities could be given because the firm provided some technical training.

"I don't see any harm in giving such facilities to a firm under the existing law," said the income tax policy member.

He said the contradiction arises from interpretations of the existing law.

Many other organisations gave such training to their employees and other people but did not get exemption, TA Chowdhury pointed out.

To be exempted from taxes as an educational institute, a firm or an organisation should be completely educational and non-profit-oriented, he said.

Insiders told The daily Star that the annual turnover of the company would be around Tk 10 crore, making a net profit of around Tk 2 crore.

The government will lose around Tk 60 to Tk 70 lakh in revenues, if the facilities are given.

Many officials of the company with luxurious office premises get higher salaries ranging between Tk 60,000 and Tk 80,000.

The NBR chairman could not be contacted by telephone for his comments.