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TMI BlogFinance Act, 2000—Explanatory notes on provisions relating to direct taxesX X X X Extracts X X X X X X X X Extracts X X X X ..... nd 24 of the Wealth-tax Act, 1957 ; amended section 4 of the Interest-tax Act, 1974 ; amended sections 88 and 90 of the Finance Act, 1998 ; amended Part III of the First Schedule of the Finance Act, 1998. 3. Provisions in brief : 3.1. The provisions of the Act in the sphere of direct taxes relate to the following matters : (i) Prescribing the rates of income-tax on incomes liable to tax for the assessment year 2000-2001 ; the rates at which tax will be deductible at source in the financial year 2000-2001 from interest (including interest on securities), winnings from lotteries or cross-word puzzles, winnings from horse races, insurance commission and other categories of income liable for tax deduction at source under the Income-tax Act, rates for computing "advance tax", deduction of income-tax from "salaries" and charging of income-tax on current incomes in certain cases for the financial year 2000-2001. (ii) Clarification of the definition of "agricultural income" ; —changing the conditions for demergers arising out of splitting up or the reconstruction of any authority or a body or a local authority or a public sector company ; —definition of the phrase "computer softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company ; —rationalisation of the definition of cost inflation index. —modification in the definition of "net worth" in case of slump sale; —providing sunset clauses in sections 54EA and 54EB and introduction of a new section 54EC to ensure focussed investments of capital gains for agricultural finance and development of highways infrastructure ; —extension of scope of section 54F ; —clarification regarding value of assets in amalgamation ; —enhancement of the deduction in respect of repayment of loans taken by a student for pursuing higher studies ; —amendment of the provisions of section 80G to allow as deduction, any sum paid as donation to the Indian Olympic Association or any other notified institutions for development of sports and games ; —modification of various provisions of the Income-tax Act for phasing out of tax concessions in respect of foreign exchange earnings ; —amendment of provision of section 80HHF to extend the benefit to non-corporate entities ; —amendment of the provisions of section 80-IA to include "solid waste management and water treatment system" within the definition of "infrastructure facilities" ; —amendment of section 80-IB to extend tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998" to clarify that the time limit of payment within 30 days will commence from the date of receipt of the order of the designated authority determining the sum payable ; —amendment of Part III of the First Schedule to the Finance Act, 1999, so as to provide that surcharge shall be charged on the income referred to in section 115ACA instead of section 115AC. (iii) Amendment of the Wealth-tax Act, 1957, to, —make consequential amendments to sections 23, 24, 31, 34A and 35 of the Wealth-tax Act. (iv) Amendment of the Interest-tax Act, 1994, with a view to, —withdraw the levy of interest-tax from the assessment year 2001-2002. Income-tax 4. Rate structure : 4.1. Rates of income-tax in respect of incomes liable to tax for the assessment year 2000-2001. In respect of incomes of all categories of taxpayers (corporate as well as non-corporate) liable to tax for the assessment year 2000-2001, the rates of income-tax have been specified in Part I of the First Schedule to the Act and are the same as those laid down in Part III of the First Schedule to the Finance Act, 1999. 4.2. Rates for deduction of income-tax at source during the financial year 2000-2001 from income other th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... celerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during that financial year or assessment of persons who are likely to transfer property to avoid tax, etc. The salient features of the rates specified in the said Part III are indicated in the following paragraphs : 4.3.1. Individuals, Hindu undivided families, etc. Paragraph A of Part III of the First Schedule specifies the rates of income-tax in the case of individuals, Hindu undivided families, association of persons, etc. There is no change in the rate structure. However, the tax payable would be enhanced by a surcharge for the purposes of the union at the rate of ten per cent. of the tax payable (after allowing rebate under Chapter VIII-A of the Income-tax Act) in cases of persons having total income exceeding Rs. 60,000 but not exceeding Rs. 1,50,000. The tax payable would be enhanced by a surcharge for the purposes of the union at the rate of fifteen per cent. of the tax payable (after allowing rebate under Chapter VIII-A of the Income-tax Act) in cases of persons having total income exceeding Rs. 1,50,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.54 1,51,460 21,382 22,354 972 4.55 1,52,000 21,560 22,540 980 4.55 2,00,000 37,400 39,100 1,700 4.55 3,00,000 70,400 73,600 3,200 4.55 4,00,000 1,03,400 1,08,100 4,700 4.55 5,00,000 1,36,400 1,42,600 6,200 4.55 4.3.3. Co-operative societies : In the case of co-operative societies the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Act. These rates are the same as those specified in the corresponding Paragraph of Part I of the First Schedule to the Act. However, the tax payable would be enhanced by a surcharge for the purposes of the Union at the rate of ten per cent. of the tax payable. 4.3.4. Firms : In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Act. This rate remains at 35 per cent. However, the tax payable by resident firms would be enhanced by a surcharge for the purposes of the union at the rate of ten per cent. of the tax payable. 4.3.5. Local authorities : In the case of local authorities, the rate of income-tax has been specified in Paragraph D of Part III of the First Schedule to the Act. This rate is 30 per cent. w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any authority or a body or a local authority or a public sector company to be covered under demerger : 6.1. Explanation 4 of section 2(19AA) as inserted by the Finance Act of 1999, provided that the splitting up or reconstruction of any authority or body constituted under a Central, State or Provincial Act or a local authority or a public sector company into separate bodies or authorities shall be deemed to be demerger on fulfilling the conditions specified in sub-clauses (i) to (vii), to the extent possible. It was pointed out that in case of splitting of these authorities, boards or companies, the conditions specified in the section may not be relevant in relation to such authorities or boards, in as much as all properties and liabilities may not be transferred; there may not be any consideration for demerger by way of issue of shares; the transfer may not be on going concern basis, etc. 6.2. The Act, therefore, amends Explanation 4 to provide that such splitting up or reconstruction shall be subject to conditions as may be specified by the Central Government. 6.3. This amendment takes effect retrospectively from the 1st day of April, 2000. [Section 3] 7. Income deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 5(a)] 9. Tax exemption to certain bonds issued by local authorities : 9.1. The local authorities such as Municipal Corporations, Municipal authorities, etc. need large amounts of funds to finance urban infrastructure projects such as potable water supply, sewerage and sanitation, drainage, solid waste management, roads, bridges and flyovers, urban transport, etc. 9.2. Clause (15) of section 10 exempts interest payable in certain cases. To enable the local authorities to have access to funds for financing urban infrastructure projects, it has been provided by the Act to accord a tax-free status to the interest on such bonds issued by such authorities, each year. These bonds are to be specified by the Central Government, by way of notification in the Official Gazette. 9.3. The amendment will take effect from the 1st day of April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 5(b)] 10. Exemption of interest on external borrowings : 10.1. Under the existing provisions, sub-clause (iv) of clause (15) of section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computing the total income. 12.4. However, where any amount standing to the credit of the fund and not charged to income-tax during any previous year is shared, wholly or partly with a recognized stock exchange, the amount shared shall be deemed to be the income of the previous year in which such amount is so shared. 12.5. The amendment will take effect from the 1st day of April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 5(d)] 13. Measures for incentives to venture capital : 13.1. The Act inserts a new clause (23FB) in section 10 to provide that any income of a venture capital fund or a venture capital company set up to raise funds for investments in a venture capital undertaking will not be included in computing the total income. 13.2. The venture capital fund or the venture capital company would require to be registered under the Securities and Exchange Board of India Act, 1992, or regulations issued by SEBI with the approval of the Central Government by way of notification in the Official Gazette. 13.3. The term "venture capital company" has been defined to mean a company that has obtained a certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company or the venture capital fund will be required to furnish within the prescribed time a statement in the prescribed form and verified in the prescribed manner giving details of the nature of income distributed during the previous year. This statement is to be furnished to the person receiving such income and to the prescribed income-tax authority ; (iii) the income paid by the venture capital company and the venture capital fund shall be deemed to be of the same nature and in the same proportion in the hands of the person receiving such income as it had been received by or accrued to the venture capital company or the venture capital fund, as the case may be during the previous year ; (iv) the provisions of Chapter XII-D or XII-E or XVII-B shall not apply to the income paid by a venture capital company or venture capital fund under this Chapter. This means that no tax shall be payable under section 115-O and section 115-R and no tax deduction at source shall be made under the provisions contained in Chapter XVII-B from income paid by a venture capital company or a venture capital fund to an investor. 13.9. These amendments will take effect from the 1st April, 2001, and wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-year tax holiday to export oriented undertakings (EOUs), which manufacture or produce any article or thing. The provision of section 10B was introduced by the Finance Act, 1988. The Finance Act, 1993, extended the tax holiday under section 10A to industrial units in approved Electronic Harware Technology Parks (EHTP) or Software Technology Parks (STP). 15.2. With a view to rationalize the concessions and to phase these out by the end of the assessment year 2009-2010, the provisions of section 10A and section 10B have been substituted by new provisions. The main features of the new sections are explained in the following paragraphs— 15.3. The new provisions provide for deduction in respect of profits and gains derived by an undertaking from export of articles or things or computer software. This deduction is available for a period of ten consecutive assessment years in a graded manner. The deduction would be granted with reference to the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software. Thus an undertaking set up on or before 31th March, 2000, shall be entitled to the deduction for a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking to which the provisions apply. The working formula for arriving at the export profits will be as under : Export Turnover Export Profits = Profits of the undertaking × Total Turnover Total turnover The export turnover and the total turnover for the purposes of section 10A and 10B shall be of the undertaking located in specified zones or 100 per cent. export oriented undertaking as the case may be and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision. 15.7. Proviso to sub-section (1) further provides that profits on domestic sales to the extent of 25 per cent. of total sales shall be deemed to be the profits and gains derived from export of articles or things or computer software. The profits on such domestic sales shall be separately worked out proportionately and further added to the amount of export profits for the purposes of deduction under these provisions. 15.8. Sub-section (5) of the new provision provides that the assessee must furnish in the prescribed form a report by an accountant with effect from assessment year 2001-2002 certifying that the deduction has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted provision in sub-section (7) also refers to sub-sections (8) and (10) of section 80-IA of the Income-tax Act, to enable the Assessing Officer to make adjustment to certain transactions entered into by the eligible business, and in respect of transactions which are not at arm's length between closely connected parties. 15.12. By retaining sub-section (8), the assessee is given an option of not being regulated under the provisions of this section. 15.13. In the Explanation below the newly inserted provision, the meaning of "computer software" is enlarged to include customized electronic data or such other services as may be notified by the Board. 15.14. The provisions of newly substituted section 10B shall apply mutatis mutandis in respect of hundred per cent. export oriented units. 15.15. The proviso to sub-section (1) provides that no deduction under these sections would be available for and after the assessment year 2010-11. 15.16. The newly substituted sections will be applicable with effect from April 1, 2001, and will apply to the assessment year 2001-2002 and subsequent years. [Sections 6 and 7] 16. Charitable trust not to lose exemption, if funds remain invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified as one of the eligible modes for investment. 17.3. The term "urban infrastructure" has been defined to mean a project for providing potable water supply, sanitation and sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport. 17.4. The amendment will take effect from 1st April, 2001, and will accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 8] 18. Charitable trusts not to lose exemption if educational or medical facilities provided to specified person : 18.1. The existing provisions provide that the income of a charitable or religious trust will not be exempt if any part of such income or any property of the trust is used or applied directly or indirectly for the benefit of any person such as the author of the trust, trustee or any relative of such persons or any concerns in which such persons have a substantial interest (referred to as a specified person). 18.2. The Act has inserted a new sub-section in section 13 to provide that a trust running an educational institution or a medical institution or a hospital shall not lose the benefit of exemption of any income, other than the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be the consideration received by the employee in this regard. 19.4. These amendments will take effect from the 1st April, 2001, and shall be applicable for the assessment year 2001-2002 and subsequent years. [Sections 17, 21 22 and 23] 20. Extension of the terminal date in respect of the enhanced deduction of interest on loans taken to acquire or construct self-occupied house property: 20.1. By the Finance Act, 1999, deduction available for interest on capital borrowed for construction or acquisition of a self-occupied house property was enhanced to Rs. 75,000 if the loan is taken on or after 1st April, 1999, and the construction or acquisition of the house in question is completed before 1st April, 2001. The Act amends the second proviso to sub-section (2) of section 24 to extend this terminal date to 31st March, 2003 to make it co-terminous with the relevant provisions of section 80-IB where tax holiday has been extended to housing projects which are approved till 31st March, 2001 and completed by 31st March, 2003, and to increase the limit of deduction allowable in respect of such interest to Rs. 1,00,000. 20.2. These amendments will take effect from 1st April, 2001, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has dispensed with the condition of continuance of same business for the purposes of carry forward and set off of unabsorbed depreciation. 22.3. This amendment will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 14] 23. Incentives for shipping industry : 23.1. Under the existing provisions of section 33AC of the Income-tax Act, a Government company or a public company with the main object of carrying on the business of operation of ships is allowed a deduction of an amount not exceeding 50 per cent. of profits derived from the business of operation of ships, subject to certain conditions. 23.2. In order to enable the shipping industry to go in for fleet expansion, acquisition and modernisation, the Act has enhanced the existing deduction up to the whole of the profits derived from such business for a period of five years. 23.3. This amendment will take effect from the 1st April, 2001, and will, accordingly, apply in relation to the assessment years 2001-2002 to 2005-2006. [Section 15] 24. Enhancement of weighted deduction for research and development expenditure : 24.1. Under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly before the demerger. However, if such book value of assets exceeds their written down value, the excess shall be reduced. The above provisions have the effect of denying depreciation to the demerged company on a part of the actual cost. 26.2. The Act, therefore, amends Explanations 2A and 2B of clause (6) of section 43 to provide that the written down value of the assets, being transferred, shall be the uniform basis of adjustment in the hands of the demerged company as well as the resulting company. The "written down value" for the purposes of these Explanations shall be the written down value as defined in the provisions. 26.3. This amendment will take effect retrospectively from the 1st April, 2000, and shall accordingly apply in relation to the assessment year 2000-2001 and subsequent years. [Section 19] 27. Condition provided in relation to demerger of foreign company holding shares of Indian company made uniform with the condition relating to Indian company : 27.1. Under the existing provisions contained in clause (vic) of section 47, in the case of demerger of a foreign company holding shares in the Indian company, there shall be no liability of capital gains, if at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth" of the undertaking or division for the purpose of calculating capital gains. "Net worth" has been defined to be the net worth as per the Sick Industrial Companies (Special Provisions) Act, 1985, meaning paid up capital and free reserves. In Form No. 3CEA notified subsequently, it has been provided that the "net worth" of an undertaking or division shall be derived from the net worth of the transferor-company in a proportional manner on the basis of the fixed assets. It has been pointed out that the above method of calculating the net worth will not be appropriate in all cases. The slump sale may be of a unit or division which has no separate share capital or reserves. Further, the definition of "net worth" appearing in SICA will have no application to non-corporate entities effecting slump sale. 29.2. The Act, therefore, substitutes the definition of "net worth" in sub-section (2) of section 50B to now define "net worth" as the aggregate of the cost of depreciable assets as reduced from the block of assets of the transferor company in accordance with section 43(6)(c)(i)(C) and the value of other assets transferred as appearing in the books of account ignoring any revaluation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer or conversion of bonds into money during the lock-in period will make the amount so converted deemed capital gains taxable in the year of transfer or conversion. Such deemed capital gains will also arise, if any loan or advance is taken on the security of these bonds. Further, any amount invested in these bonds will not be eligible for deduction under section 88 of the Income-tax Act. 30.4. These amendments will take effect from the 1st day of April, 2001, and will accordingly apply to the assessment year 2001-2002 and subsequent years. [Sections 25, 26 and 27] 31. Extension of scope of section 54F : 31.1. Section 54F of the Income-tax Act, exempts tax on long-term capital gains arising from transfer of any long-term capital asset (not being a residential house), if invested in a residential house. There is, however, a stipulation that the above exemption cannot be availed if there is a house in existence on the date of transfer or if the person goes for a second house within the stipulated period. The above condition stands in the way of a large number of taxpayers from availing of the deduction under section 54F. The existing house may be a small house or a tenanted h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twenty-five thousand to rupees forty thousand. 33.3. The modified provision will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 30] 34. Phasing out of tax concessions in respect of foreign exchange earnings —Sections 80HHB, 80HHBA, 80HHC, 80HHD, 80HHE, 80HHF, 80R, 80RR and 80RRA : 34.1. A large number of fiscal concessions are not compatible with a regime of low tax-rates. The Act, therefore, seeks to rationalize provisions relating to deductions in respect of foreign exchange earnings. 34.2. Under Chapter-VI-A of the Income-tax Act, fiscal concessions for earnings in foreign exchange may be availed of by assessees. Under sections 80HHB, 80HHBA and 80-O of the Income-tax Act, an assessee, being an Indian company or a person (other than a company) who is a resident in India and has derived income from the business of a foreign project or a housing project awarded to it on the basis of a global tender, or from export of patent, copyright, etc., is entitled to a deduction of an amount equal to 50 per cent. of income. 34.3. Similarly, under the existing provisions of sections 80HHC, 80HHE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2001-2002, forty-five per cent. in the assessment year 2002-2003, thirty per cent. in the assessment year 2003-2004 and fifteen per cent. in the assessment year 2004-2005. Thus, all the benefits would be phased out by the assessment year 2004-2005. 34.9. No deduction shall be available under any of these provisions for the assessment year 2005-2006 and subsequent years. 34.10. These amendments shall take effect from 1st April, 2001, and shall, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Sections 32, 33, 34, 35, 36, 37, 41, 42, 43 and 44] 35. Export benefits under section 80HHF extended to non-corporate entities : 35.1. Under the existing provisions of section 80HHF, corporate assessees engaged in the business of export of film software, television software, music software and television news software including telecast rights are entitled to a full deduction of such profits, received in converti-ble foreign exchange. 35.2. The provision has been amended to include assessees other than companies. 35.3. The amendment will be effective from 1st April, 2000, and will, accordingly, apply in relation to the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, provided for a five year tax holiday for industrial undertakings set up in industrially backward States and Union Territories specified in the Eighth Schedule, which start manufacture or production during the period beginning on the 1st day of April, 1993, but before the 31st day of March, 2000. After the first five years, a deduction of 30 per cent. of profits in the case of companies (25 per cent. in the case of other assessees) is allowed for the subsequent five years. Similarly, a five year tax holiday is available to undertakings set up in notified industrially backward districts of Category "A" and a three year tax holiday to those set up in industrially backward districts of Category "B", which begin manu-facture or production after 1st October, 1994, but on or before 31st March, 2000. 37.3. The Act extends the tax holiday to undertakings set up in industrially backward States and Union Territories as specified in the Eighth Schedule, which start manufacture/production even after 31st March, 2000, but on or before 31st March, 2002. It also seeks to extend the tax holiday to undertakings set up in industrially backward districts on or before 31st March, 2002. 37.4. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-payment of loan for purchase or construction of a residential house up to Rs. 10,000. 40.2. The Act raises the limit of investment in infrastructure bonds from Rs. 10,000 to Rs. 20,000 thereby raising the ceiling in such cases to Rs.80,000. The limit for repayment of loan for purchase or construction of a residential house is also raised from Rs. 10,000 to Rs. 20,000 within the overall limit of Rs. 60,000. 40.3. The amendments shall take effect from 1st April, 2001 and shall, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 46] 41. Tax rebate for women : 41.1. To encourage women to become financially independent, new section, namely, section 88C has been inserted in the Income-tax Act. Under the provision, an assessee being a woman, who has not attained the age of sixty-five years in the previous year, shall be entitled to a tax rebate of an amount equal to the income-tax payable by her or an amount of rupees five thousand, whichever is less. 41.2. The amendment will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Section 48] 42. Concessional ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stem of allowing credit for MAT in future. However, the taxes paid under the existing provisions of section 115JA shall get the credit. 43.5. The export profits under sections 10A, 10B, 80HHC, 80HHE and 80HHF are kept out of the purview of this provision as these are being phased out. The new provisions also exempt companies registered under section 25 of the Companies Act. 43.6. Certificate from an auditor has also been prescribed with a view to ascertaining the extent of book profits 43.7. These amendments will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. [Sections 50, 51 and 52] 44. Tax on distributed profits of domestic companies : 44.1. Under the existing provisions of section 115-O, in addition to the income tax chargeable in respect of the total income of a domestic company, any amount declared, distributed or paid by way of dividends is charged to additional income tax at the rate of ten per cent. 44.2. The Act amends this section, so as to increase the tax on distributed profits of domestic companies from ten per cent. to twenty per cent. 44.3. The existing provisions of section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing provisions, section 115S of the Income-tax Act, 1961, provides for the levy of simple interest at the rate of two per cent. per month or part thereof, if the tax on distributed income is not paid within the time allowed under sub-section (3) of section 115R. 45.4. The Act amends section 115S to reduce the rate of interest to be charged under section 115S from two per cent. per month to one half per cent. per month with effect from 1st June, 2000, so that there is uniformity of the rate of penal interest being charged under the Income-tax Act under different provisions. [Sections 55 and 56] 46. Power delegated to the Central Government to notify class or classes of persons for whom it will be obligatory to apply for permanent account number (PAN) : 46.1. Sub-section (1) of section 139A of the Income-tax Act lays down the circumstances where it is mandatory to apply for PAN and also the circumstances where PAN can otherwise be allotted. It is obligatory to apply for PAN under the following circumstances,— (i) persons who have taxable income beyond the threshold limit of exemption ; (ii) persons carrying on any business or profession where the total sales/turnover/gros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid or likely to be credited or paid during the financial year to the payee does not exceed Rs. 2,500. 48.2. As a measure of rationalisation, the Act has amended section 194A(3) so as to enhance the said monetary limit from Rs. 2,500 to Rs.5,000. 48.3. This amendment will take effect from 1st June, 2000. [Section 60] 49. Modification of provision regarding tax deduction at source of payment of compensation relating to compulsory acquisition of a capital asset: 49.1. Section 194L of the Income-tax Act was inserted by the Finance Act, 1999, to provide for deduction of income-tax at source on payment of compensation or consideration on account of compulsory acquisition of any capital asset. Under the existing provisions of section 194L, any person responsible for paying to a resident any sum being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any capital asset shall at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 10 per cent. of such sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-resident, and (ii) a determination of any question of law or fact arising out of a transaction undertaken or proposed to be undertaken by a resident with a non-resident, and (iii) a determination or decision of any question of law or fact relating to the computation of total income pending before any income-tax authority or the Appellate Tribunal." 50.4. Similarly, an applicant will include a non-resident, a resident in relation to a transaction with a non-resident and a resident falling in a class or category of persons notified by the Central Government. 50.5. Under the existing provisions contained in the proviso to sub-section (2) of section 245R, it is, inter alia, provided that the Authority shall not allow an application if the question raised in the application is pending before any income-tax authority, the Appellate Tribunal or any court. However, such exclusion does not apply to resident applicants. 50.6. The Act substitutes the first proviso in sub-section (2) of section 245R to provide that the Authority shall not allow the application where the question raised is already pending in the applicant's case before any income-tax authority, Appellate Tribunal or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction as required under the Act. In the list of orders against which appeal lies before the Commissioner (Appeals) under section 246A, there is no reference to orders under section 201 of the Income-tax Act. In some cases, Commissioners of Appeals have declined to entertain appeals against orders under section 201. The Act amends section 246A to insert a reference to an order under section 201 and provide that any appeal filed against an order under section 201 on or after the 1st day of October, 1998, but before the 1st day of June, 2000, shall be deemed to have been filed under this section. The Act further inserts sub-section (2A) in section 249 to provide that where an order has been made under section 201 after the 1st day of October, 1998, but before the 1st day of June, 2000, and the assessee in default has not presented any appeal within the time specified in the sub-section, he may do so before the 1st day of July, 2000. 52.2. These amendments take effect from the 1st day of June, 2000. {Sections 66 and 67] 53. Advisory time limit for the Appellate Tribunal to decide appeals extended to Departmental appeals : 53.1. Sub-section (2A) of section 254 provides that the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g from the date of receipt of the order. 55.2. To give statutory recognition to the judicial opinion, and to remove hardship, the Act retrospectively amends sub-section (2) of section 90 of the Finance (No. 2) Act, 1998, to clarify that the time limit of payment within 30 days will commence from the date of receipt of the order of the designated authority determining the sum payable. 55.3. Section 88 of the Finance (No. 2) Act, 1998, provides for determination of the amount payable for the settlement of tax arrears under various enactments. Clause (e) of this section deals with the determination of amount payable for the settlement of tax arrears under the Interest-tax Act, 1974. Sub-clause (i) of clause (e) provides that, where the tax arrear consists of chargeable interest, the sum payable shall be determined at two per cent. of the disputed chargeable interest. In sub-clause (ii) of clause (e), it is provided that where the tax arrear includes interest and penalty along with disputed interest, the amount payable will be determined at two per cent. of the tax arrear. There is a patent anomaly between the two sub-clauses capable of unintended interpretation even though the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st day of June, 2000. [Section 72] 58. Advisory time limit for the Appellate Tribunal to decide appeals extended to the Departmental appeals : 58.1. Sub-section (5A) of section 24 of the Wealth-tax Act provided that the Appellate Tribunal where it is possible, may hear and decide appeals within a period of four years from the end of the financial year in which the appeal is filed under sub-section (1) of the section. This advisory time limit referred to appeals filed by the assessee. 58.2. The Act amends sub-section (5A) of section 24 to extend the advisory time limit to appeals filed also by the Commissioner under sub-section (2) of section 24. 58.3. This amendment takes effect from the 1st day of June, 2000. [Section 73] 59. Insertion of reference to section 23A in some sections in the Wealth-tax Act : 59. 1. In view of the introduction of section 23A of the Wealth-tax Act by the Finance (No. 2) Act, 1998, an appeal lies before the Commissioner (Appeals) under this section on or after 1st October, 1998. Consequential reference to this section is required at some places in the Wealth-tax Act. 59.2. The Act makes the necessary amendments to insert a reference to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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