Memo - MEMORANDUM REGARDING DELEGATED LEGISLATION - Finance (No. 2) Bill, 2014

MEMORANDUM REGARDING DELEGATED LEGISLATION Clause 5 of the Bill seeks to amend clause (23C) of section 10 of the Income-tax Act relating to incomes which do not form part of total income. The proposed amendment seeks to insert an Explanation in clause (23C) of the said section so as to provide that for the purposes of sub-clauses (iiiab) and (iiiac) of the said clause, any university or other educational institution, hospital or other institution referred therein shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year. Clause 12 of the Bill seeks to amend section 35AD of the Income-tax Act which relates to deduction in respect of expenditure on specified business . It is proposed to amend sub-section (5) and sub-section (8) of the said section so as to provide that the provisions of the said section shall apply to the specified business referred to in subsection (2) of the said section if it commences its operations on or after the 1st day of April, 2014, where the specified business is in the nature of setting up and operating a semi-conductor wafer fabrication manufacturing unit, and which is notified by the Board in accordance with such guidelines as may be prescribed. Clause 32 of the Bill seeks to insert a new sub-section (9A) in section 92CC of the Income-tax Act which relates to advance pricing agreement. The proposed new sub-section (9A) of the said section provides that the agreement referred to in sub-section (1), may, subject to such conditions, procedure and manner as may be prescribed, provide for determining the arm s length price or specify the manner in which arm s length price shall be determined in relation to an international transaction entered into by the person during any period not exceeding four previous years preceding the first of the previous year referred to in sub-section (4), and the arm s length price of such international transaction shall be determined in accordance with the said agreement. Clause 43 of the Bill seeks to insert a new Chapter XII-FA which deals with special provisions relating to business trusts. Sub-section (4) of section 115UA of the said Chapter relating to tax on income of unit holder and business trust, provides that any person responsible for making payment of the income distributed on behalf of a business trust to a unit holder shall furnish a statement to the unit holder and the prescribed authority, within such time and in such form and manner as may be prescribed, giving details of the nature of the income paid during the previous year and such other details as may be prescribed. Clause 46 of the Bill seeks to insert a new section 133C in the Income-tax Act relating to power to call for information by prescribed income-tax authority. The proposed new section provides that the income-tax authority, as may be prescribed, may, for the purposes of verification of information in its possession relating to any person, issue a notice to such person requiring him to furnish information or documents verified in the manner specified therein relevant to any enquiry or proceeding under the Act. Clause 66 of the Bill seeks to insert a new section 271FAA in the Income-tax Act relating to penalty for furnishing inaccurate statement of financial transaction or reportable account. The proposed new section provides that if a person who is requried to furnish a statement provides inaccurate information in the statement and where the person knows of the inaccuracy but does not inform the income-tax authority as may be prescribed, then the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum of fifty thousand rupees. Clause 71 of the Bill seeks to substitute a new section for section 285BA relating to obligation to furnish statement of financial transaction or reportable account. Sub-section (1) of the proposed new section provides that any person including a prescribed reporting financial institution who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax authority or such other authority or agency as may be prescribed. Sub-section (2) of the proposed new section provides that the statement referred to in sub-section (1) shall be furnished for such period, within such time and in the form and manner, as may be prescribed. Sub-section (3) of the proposed new section provides that specified financial transaction means any transaction, which may be prescribed. The proviso to said sub-section provides that the value or, as the case may be, the aggregate value of such transactions during a financial year so prescribed shall not be less than fifty thousand rupees. Sub-section (7) of the proposed new section provides that the Central Government, by rules made under this section, specify (a) the persons to be registered with prescribed income-tax authority, (b) the nature of information and the manner in which such information shall be maintained by the person referred to in clause (a) of this sub-section, and (c) the due diligence to be carried out by the persons for the purpose of identification of any reportable account referred to in sub-section (1). Clause 90 of the Bill seeks to insert two new sections 15A and 15B in the Central Excise Act. Section 15A empowers the Central Government to make rules to prescribe the periods for which, the time within which, the form and manner in which, and the authority or agency to which, the information return shall be furnished by the persons specified in sub-section (1). Clause 106 of the Bill seeks to amend Chapter V of the Finance Act relating to service tax. Sub-clause (C) of said clause seeks to substitute Explanation in section 67A for empowering the Central Government to make rules to provide for determination of rate of exchange. Sub-clause (J) of said clause seeks to amend section 94 so as to empower the Central Government to make rules in respect of certain matters. Sub-clause (K) of the said clause seeks to amend section 95 of the said Act so as to empower the Central Government to issue order for removal of any difficulty which may arise in implementing the amendments incorporated by the proposed legislation and that such power shall not be exercised beyond a period of one year from the date of the assent to the Bill. 2. The matters in respect of which rules may be made or notification or order may be issued in accordance with the provisions of the Bill are matters of procedure and detail and it is not practicable to provide for them in the Bill itself. 3. The delegation of legislative power is, therefore, of a normal character.