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TMI BlogNotes on clauses - Income taxX X X X Extracts X X X X X X X X Extracts X X X X ..... at source during the financial year 2013-14 from income other than Salaries Part II of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source during the financial year 2013-14 from income other than Salaries . In view of the proposed amendment to section 115A, it is proposed to provide that the income by way of royalty or fees for technical services shall be taxable at a uniform rate of twenty-five per cent; if such income has been received by the non-resident (not being a company) or a foreign company under an agreement entered on or after 1st day of April, 1976. Subject to these modifications, the rates of deduction are the same, as those specified in Part II of the First Schedule to the Finance Act, 2012 for the purposes of deduction of income-tax at source during the financial year 2012-13. The amount of tax so deducted shall be increased by a surcharge in the case of- (i) every non-resident (other than a company) at the rate of ten per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees; (ii) every company other than a domestic company at the rate of two per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l continue to be the same as those specified for assessment year 2013-14. The surcharge in cases of co-operative societies, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph C of this Part specifies the rate of income-tax in the case of every firm. In such cases, the rate of tax will continue to be the same as that specified for assessment year 2013-14. The surcharge in cases of firms, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph D of this Part specifies the rate of income-tax in the case of every local authority. In such cases, the rate of tax will continue to be the same as that specified for the assessment year 2013-14. The surcharge in cases of local authorities, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph E of this Part specifies the rates of income-tax in the case of companies. In both the cases of domestic companies and companies other than domestic companies, the rate of tax will continue to be the same as that specified for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (c) of clause (1A) of section 2 so as to provide that if the land is situated in any area within the distance, measured aerially, (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh, the income derived from such building on, or in the immediate vicinity of such land will not be agricultural income. An Explanation has been inserted to define the expression population . The provisions contained in clause (14) of the said section, define the term capital asset as property of any kind held by an assessee, whether or not connected with his business or profession. Certain categories of properties including agricultural land have been excluded from thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase or ailment as specified in the rules made under section 80DDB. This proviso shall apply in respect of an insurance policy, issued on or after 1st day of April, 2013. Clause (10D) of the said section, inter alia, exempts any sum received under a life insurance policy other than a Keyman insurance policy. Explanation 1 to clause (10D) defines a Keyman insurance policy to mean a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person. It is proposed to amend the said Explanation 1 to provide that a Keyman insurance policy which has been assigned to a person during its term, with or without consideration, shall continue to be treated as a Keyman insurance policy for the purposes of clause (10D) of section 10. It is further proposed to insert a new clause (23DA) to provide for exemption in respect of any income of a securitisation trust from the activity of securitisation. It is also proposed to insert a new clause (23ED) to provide for exemption in respect of any income, by way of contributions received from a deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to insert a new clause (34A) in section 10 so as to provide for exemption in respect of any income arising to an assessee being a shareholder on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA. It is also proposed to insert a new clause (35A) in section 10 so as to provide for exemption in respect of any income by way of distributed income referred to in section 115TA received from a securitisation trust by any person being an investor of the said trust. An Explanation has been inserted to define the expressions investor and securitisation trust occurring in the proposed amendment. These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Government, of any previous year relevant to any assessment year commencing on or before 1st April, 2014. This amendment will take effect retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and the assessment year 2014-15. Clause 5 of the Bill seeks to insert a new section 32AC in the Income-tax Act to provide fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any previous year. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years. Clause 6 of the Bill seeks to amend section 36 of the Income tax Act relating to other deductions. The proposed amendment seeks to insert Explanation 2 to the clause (vii) of sub-section (1) of the said section so as to clarify that for the purposes of the proviso to clause (vii) of subsection (1) and clause (v) of sub-section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for the purposes of computing profits and gains from transfer of such asset. The proposed sub-section (2) of the aforesaid section seeks to provide that the provisions of sub-section (2) and subsection (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1). The proposed sub-section (3) of the aforesaid section provides that where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 10 of the Bill seeks to amend section 80C of the Incometax Act relating to deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. Under the existing provisions contained in sub-section (3A) of the aforesaid section, the deduction is available in respect of any premium or other payment made on an insurance policy up to ten per cent. of the actual capital sum assured . It is proposed to insert a proviso in aforesaid sub-section (3A), so as to provide a higher limit of fifteen per cent. where the policy referred to in sub-section (3A) is for the insurance on life of any person who is,-(a) a person with disability or a person with severe disability as referred to in section 80U; or (b) suffering from disease or ailment as specified in the rules made under section 80DDB. This proviso shall apply in respect of an insurance policy issued on or after 1st day of April, 2013. This amendment will take effect from 1st Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, being an individual, to effect or to keep in force an insurance on his health or the health of his family or any contribution made towards the Central Government Health Scheme or any payment made on account of preventive health check-up of the assesssee or his family, as does not exceed in the aggregate fifteen thousand rupees, is allowed to be deducted in computing the total income of the assessee. It is proposed to amend the said clause so as to allow the benefit of deduction under section 80D within the said limit, in respect of any payment or contribution made by the assessee to any other health scheme which may be notified by the Central Government. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 13 of the Bill seeks to insert a new section 80EE in the Income-tax Act relating to deduction in respect of interest on loan taken for residential house property. Sub-section (1) of the new section 80EE seeks to provide that in computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of donations made to the National Children s Fund, deduction is allowed at the rate of fifty per cent. of the amount so donated. It is proposed to allow hundred per cent. deduction in respect of any sum paid to the National Children s Fund in computing the total income of an assessee. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years. Clause 15 of the Bill seeks to amend section 80GGB of the Income-tax Act relating to deductions in respect of contributions given by companies to political parties. Under the existing provisions of the said section, any sum contributed by an Indian company to any political party or an electoral trust in the previous year, is allowed as deduction in computing the total income of such Indian company. It is proposed to amend the aforesaid section by inserting a proviso so as to provide that no deduction shall be allowed under this section in respect of any sum contributed by way of cash. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of an amount equal to thirty per cent. of additional wages paid to the new regular workmen employed in any previous year by an Indian company engaged in manufacture or production of article or thing. The deduction is available for three assessment years including the assessment year relevant to the previous year in which such employment is provided. It is proposed to substitute the said sub-section (1) of section 80JJAA so as to provide that where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from the manufacture of goods in a factory, there shall, be allowed a deduction of an amount equal to thirty per cent. of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. Sub-section (2) of the aforesaid section, inter alia, provides that no deduction under sub-section (1) shall be available, if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years. It is also proposed to insert a new sub-section (5) in the aforesaid section 90 so as to provide that the certificate of being a resident in a country outside India or specified territory outside India, as the case may be, referred to in sub-section (4), shall be necessary but not a sufficient condition for claiming any relief under the agreement referred to therein. This amendment will take effect retrospectively from 1st April, 2013 and will accordingly apply, in relation to the assessment year 2013-14 and subsequent assessment years. Clause 22 of the Bill seeks to amend section 90A of the Income-tax Act relating to adoption by Central Government of agreement between specified associations for double taxation relief. The existing provisions of the aforesaid section 90A provides that any specified association in India may enter into an agreement with any specified association in a specified territory outside India and the Central Government may, by notification in the Official Gazette, make necessary provisions for adopting and implementing such agreement for grant of double taxation relief, for avoidance of double taxation or exchange of information for the prevention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks commercial substance or not. The proposed section 98 provides for method of determination of consequences in relation to tax of an arrangement after it is declared to be an impermissible avoidance arrangement. It provides for certain illustrative but not exhaustive methods for determination of tax consequences. The proposed section 99 provides that in determining whether there is a tax benefit the parties who are connected persons in relation to each other may be treated as one and the same person, any accommodating party may be disregarded, such accommodating party and any other party may be treated as one and the same person, and the arrangement may be considered or looked through by disregarding any corporate structure. The proposed section 100 provides that provisions of newly inserted Chapter X-A can be applied in alternative to or in addition to any other basis of determination of tax liability. The proposed section 101 provides for power to prescribe guidelines for application of provisions of newly inserted Chapter X-A. The proposed section 102 provides definition of certain terms relevant for newly inserted Chapter X-A. This amendment will take effect from 1st April, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividends received during the financial year 2013-14 also. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15. Clause 27 of the Bill seeks to amend section 115-O of the Income-tax Act relating to tax on distributed profits of domestic companies. Under the existing provisions contained in sub-section (1A) of section 115-O, the amount of dividends referred to in subsection (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if- (a) such amount of dividend is received from its subsidiary; and (b) the subsidiary has paid tax payable under this section on such dividend. The said sub-section also provides that the same amount of dividend shall not be reduced more than once. It is proposed to amend clause (i) of the aforesaid subsection (1A) so as to provide that in case a domestic company receives any dividend from any of its subsidiary during the financial year and where such subsidiary - (a) is a domestic company, the subsidiary has paid tax, if any payable, on such dividend; or (b) is a foreign company, the tax is payable by the domestic company un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l apply. This amendment will take effect from 1st June, 2013. Clause 29 of the Bill seeks to amend section 115R of the Income-tax Act relating to tax on distributed income to unit holders. The existing provisions contained in sub-section (2) of the aforesaid section provides that any amount of income distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and under clause (ii) thereof such specified company or Mutual Fund shall be liable to pay additional income-tax on such distributed income at the rate of twelve and one-half per cent. on income distributed to any person being an individual or a Hindu undivided family by a fund other than a money market mutual fund or a liquid fund. It is proposed to amend clause (ii) of sub-section (2) of the aforesaid section to provide that the additional income-tax at the rate of twenty-five per cent. shall be leviable on income distributed to an individual or a Hindu undivided family by a fund other than money market mutual fund or a liquid fund. It is further proposed to amend the said sub-section to provide that any income distributed by a mutual fund under an infrastructure debt scheme to a non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 31 of the Bill seeks to amend section 132B of the Income-tax Act relating to application of seized or requisitioned assets. The existing provisions of the aforesaid section 132B, inter alia, provide that the assets seized under section 132 or requisitioned under section 132A may be adjusted against the amount of any existing liability under this Act, the Wealth-tax Act, 1957, the Expenditure-tax Act,1987, the Gift-tax Act, 1958 and the Interest-tax Act, 1974 and the amount of liability determined on completion of assessment pursuant to the search, including penalty levied or interest payable in connection with such assessment and in respect of which, such person is in default or is deemed to be in default. It is proposed to insert a new Explanation in the aforesaid section so as to provide that for the removal of doubts, it is hereby declared that the existing liability does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII of the Act. This amendment will take effect from 1st June, 2013. Clause 32 of the Bill seeks to amend section 139 of the Incometax Act relating to return of income. The existing provisions contained in Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the newly inserted Chapter X-A, shall refer the matter to the Commissioner. The proposed sub-section (2) of the aforesaid new section provides that if the Commissioner, on receipt of a reference from the Assessing Officer, is of the opinion that the provisions of newly inserted Chapter X-A are required to be invoked, he shall issue notice to the assessee seeking objections within the time specified in notice not exceeding sixty days. The proposed sub-section (3) of the aforesaid new section provides that if the assessee does not object or respond to the notice, the Commissioner may issue such directions as he deems fit in respect of declaration of the arrangement as an impermissible avoidance arrangement. The proposed sub-section (4) of the aforesaid new section provides that if the assessee objects to invocation of the provisions of Chapter X-A and the Commissioner, after hearing the assessee, is not satisfied with the reply of the assessee, he shall refer the matter to the Approving Panel. The proposed sub-section (5) of the aforesaid new section provides that if, after hearing the assessee, the Commissioner is satisfied that it is not a fit case for invoking the provisions of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w section provides that the directions, issued by the Approving Panel shall be binding on the assessee and the Commissioner and no appeal under the Act shall lie against such directions. The proposed sub-section (15) of the aforesaid new section provides that the Central Government shall constitute one or more Approving Panels as may be necessary and each Approving Panel shall consist of a Chairperson and two members. The proposed sub-section (16) of the aforesaid new section provides that the Chairperson of the Approving Panel shall be a person who is or has been a judge of a High Court and one member shall be a member of Indian Revenue Service not below the rank of Chief Commissioner of Income-tax and one member shall be an academic or scholar having special knowledge of matters such as direct taxes, business accounts and international trade practices. The proposed sub-section (17) of the aforesaid new section provides that the term of the Approving Panel shall ordinarily be for one year and may be extended up to a period of three years. The proposed sub-section (18) of the aforesaid new section provides that the Chairperson and members of the Approving Panel shall meet, as often ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016-2017 and subsequent assessment years. Clause 36 of the Bill seeks to amend section 144C of the Income-tax Act relating to reference to dispute resolution panel. It is proposed to omit sub-section (14A) of the said section. This amendment will take effect retrospectively from 1st April, 2013. It is proposed to insert a new sub-section (14A) in the aforesaid section 144C so as to provide that the provisions of section 144C shall not apply to an assessment or reassessment order passed by the Assessing Officer with the approval of the Commissioner in accordance with sub-section (12) of newly inserted section 144BA. This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to assessment year 2016-2017 and subsequent assessment years. Clause 37 of the Bill seeks to amend section 153 of the Incometax Act relating to time limit for completion of assessments and reassessments. The existing provisions contained in Explanation 1 to the aforesaid section provide that certain periods specified therein are to be excluded while computing the period of limitation for the purposes of the said section. It is proposed to substitute clause (iii) in the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt under section 153A. The existing provisions contained in Explanation to section 153B provide that certain periods specified therein are to be excluded while computing the period of limitation laid down in the said section for completion of assessment under section 153A. It is proposed to substitute clause (ii) in the aforesaid Explanation so as to provide that the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142, and ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section or where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Commissioner, shall be excluded in computing the period of limitation for the purposes of section 153. The existing provisions contained in clause (viii) of Explanation to section 153B provides for exclusion of the period, commencing from the date on which a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is due from a limited liability partnership in respect of any income of any previous year or from any other person in respect of any income of any previous year during which such other person was a limited liability partnership cannot be recovered, then, every person who was a partner of the limited liability partnership at any time during the relevant previous year, shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership. It is proposed to insert an Explanation to the aforesaid section so as to clarify that the expression tax due includes penalty, interest or any other sum payable under the Act. This amendment will take effect from 1st June, 2013. Clause 41 of the Bill seeks to amend section 179 of the Incometax Act relating to liability of directors of private company in liquidation. The existing provisions in sub-section (1) of section 179 provide that where any tax is due from a private company in respect of any income of any previous year or from any other company in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to amend the said sub-section (2) so as to provide that where a non-resident (not being a company) or a foreign company has deposited any sum of money in foreign currency in a designated account through which such sum, as converted in rupees, is utilised by the non-resident or the foreign company, as the case may be, to subscribe to any long term infrastructure bonds issued by the specified company in India, then, such borrowing for the purposes of section 194LC shall be deemed to have been made by the specified company in foreign currency. The designated account means an account of a person in a bank which has been opened solely for the purpose of deposit of money in foreign currency and utilisation of such money for payment to the specified company for subscription in the long term infrastructure bonds issued by it. This amendment will take effect from 1st June, 2013. Clause 44 of the Bill seeks to amend section 245N of the Income-tax Act relating to definitions in context of Advance Ruling. It is proposed to omit sub-clause (iv) in clause (a) of the said section. It is also proposed to omit sub-clause (iiia) in clause (b) of the said section. These amendments will take effect re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 155 passed in relation to such an order shall not be appealable before Commissioner (Appeals). This amendment will take effect from 1st April, 2016. Clause 47 of the Bill seeks to amend section 253 of the Incometax Act relating to appeals to the Appellate Tribunal. It is proposed to omit clause (e) of sub-section (1) of the said section. This amendment will take effect retrospectively from 1st April, 2013. It is further proposed to amend the aforesaid sub-section (1) to insert clause (e) in the said sub-section to provide that in respect of an order of assessment or reassessment passed with approval of Commissioner under sub-section (12) of newly inserted section 144BA or any order under section 154 or section 155 passed in relation to such an order, an appeal shall lie before the Appellate Tribunal. This amendment will take effect from 1st April, 2016. Clause 48 of the Bill seeks to amend section 271FA of the Income-tax Act relating to penalty for failure to furnish annual information return. The existing provisions contained in section 271FA provides that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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