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Petroleum

19.A8. Expenditure incurred in exploration or prospecting for petroleum is treated on an identical basis to general mining. Under section 124AH of the Act, expenditure incurred in ‘exploration and prospecting’ is an allowable deduction in the year in which it is incurred. The taxpayer must derive assessable income from petroleum in that year and the amount of the deduction is limited to the amount of such income remaining after deducting all other allowable deductions.

19.A9. If the expenditure on exploration or prospecting exceeds the amount deductible in any year, the excess is carried forward for deduction against similar income of the next and subsequent years until the entire amount is absorbed.

19.A.10. ‘Exploration or prospecting’ is defined in section 124AH (7) so as to include geological, geophysical and geochemical surveys, exploration drilling and appraisal drilling but excludes development drilling or operations in the course of working a petroleum field.

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