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of <h1>Tax Treatment of 'Farm-in' Expenditure: Intangible Asset Depreciation for Oil E&P Companies u/s 32 of Income-tax Act.</h1> The circular clarifies the tax treatment of 'Farm-in' expenditure for Oil Exploration and Production (E&P) companies. It states that the cost incurred for acquiring a 'Participating Interest' in a Production Sharing Contract (PSC) should not be treated as a partnership share or investment in an association. Instead, it is considered as an acquisition of underlying assets. The expenditure, after deducting costs for tangible assets, is classified as an 'intangible asset' eligible for depreciation under section 32 of the Income-tax Act, 1961. This clarification aligns with international accounting practices and is applicable from the specified date in the Act.
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