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TMI BlogSupplementary Memorandum Explaining the Official Amendments Moved in the Finance Bill, 2012 AS REFLECTED IN THE FINANCE ACT, 2012.X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment year 2013-14 and subsequent assessment years. [Clause 5] General Anti-Avoidance Rule (GAAR) In the Finance Bill, 2012, as introduced in the Lok Sabha, General Anti-Avoidance Rules (GAAR) were proposed in the Income-tax Act (Act) by way of insertion of a new Chapter X-A. Further, a procedural section (144BA of the Act) was also proposed, providing, inter alia, for a GAAR Approving Panel comprising of officers of the rank of Commissioner of Income-tax and above. GAAR provisions were first proposed in the Direct Taxes Code Bill, 2010 (DTC) introduced in the Parliament in August 2010. The Report of the Parliamentary Standing Committee on Finance on the DTC Bill was received on 9-3-2012 after the finalization of the proposals of the Finance Bill, 2012. After examining the recommendations of the Standing Committee regarding GAAR provisions as proposed in the DTC Bill, the following amendments to the GAAR provisions proposed in the Finance Bill, 2012 have been carried out in the Finance Act, 2012:- ( i ) The onus on the taxpayer as regards the presumption that obtaining the tax benefit was not the main purpose of the arrangement has been omitted. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inues. [Clause 57] Lower withholding at the rate of 5% for external borrowings under ECB or by way of issue of long term infra-bonds It had been proposed in the Finance Bill, 2012 (by way of insertion of a new section 194LC in the Act) to provide for lower rate of withholding tax at the rate of 5% (instead of 20%) on payment by way of interest paid by an Indian company to a non-resident (including a foreign company) in respect of borrowing made in foreign currency from sources outside India between 1st July, 2012 and 1st July, 2015, under a loan agreement approved by Central Government, if the Indian company was engaged in one of the eight specified businesses. In order to attract low cost borrowings from abroad, this incentive has been extended in the Finance Act, 2012 to all businesses instead of restricting it to the eight specified sectors. Further, this lower rate of withholding tax is proposed to be also available for funds raised in foreign currency outside India by the Indian company through long term infrastructure bonds as approved by the Central Government besides borrowing under a loan agreement. These amendments will take effect from 1st July, 2012. [Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her class of investors as may be notified by the Central Government. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. [Clauses 21, 3] New deduction in respect of investment in equity shares It was announced in the Budget Speech for 2012-13 that a new scheme is proposed to encourage flow of savings in financial instruments and improve the depth of domestic capital market. Accordingly, a new clause has been introduced in the Finance Act, 2012 to insert a new section 80CCG in the Income-tax Act. The provision provides for a one-time deduction of 50 per cent of the amount invested in listed equities by a new retail investor, being a resident individual whose annual income is below Rs. 10 lakh. The aggregate deduction shall be subject to a limit of Rs. 25,000 (corresponding to an investment limit of Rs. 50,000) and the investment shall have a lock-in period of 3 years. The modalities of this provision shall be in accordance with a scheme to be notified by the Central Government in this behalf. This amendment will take effect from 1st April, 2013 and will, accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. Under the existing provisions of the sub-section (1A) of section 206C the seller of these minerals is not required to collect tax if the buyer declares that these minerals are to be utilized for the purposes of manufacturing, processing or producing articles or things. As some of these minerals can also be used for generation of power and the existing provisions do not allow the buyer to file a declaration to this effect, the section has been amended to also provide that the seller of these minerals shall not collect tax if the buyer declares that these minerals are to be utilized for the purposes of generation of power. This amendment will take effect from 1st July, 2012. [Clause 81] Minimum Alternate Tax (MAT) I. Under section 115JB , every company is required to prepare its accounts as per Schedule VI of the Companies Act, 1956 . However, as per the provisions of the Companies Act, 1956 , certain companies, e.g . insurance, banking or electricity companies, are allowed to prepare their profit and loss account in accordance with the provisions specified in their Regulatory Acts. In order to align the provisions of the Income-tax Act with the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 78] II. The Finance Bill, 2012 proposed to provide that the intimation generated after processing of TDS statement under sub-section (1) of section 200A shall be deemed as a notice of demand under section 156 of the Act. Consequently, failure to pay the tax specified in the intimation shall attract levy of interest under section 220 of the Act. However, sub-section (1A) of section 201 already contains provisions for levy of interest for non-payment of tax specified in the intimation issued under sub-section (1) of section 200A. It has therefore been further provided that where interest is charged for any period under sub-section (1A) of section 201 on the tax amount specified in the intimation issued under sub-section (1) of section 200A , then, no interest shall be charged under sub-section (2) of section 220 on the same amount for the same period. This amendment will take effect from 1st July, 2012. [Clause 84] Withdrawal of TDS on transfer of certain immovable properties The Finance Bill, 2012 (clause 73 of the Finance Bill) proposed to provide for deduction of tax at the rate of 1% of the amount paid or payable for transfer of certain immovable proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholding as part of an initial public offer before listing of the company subject to payment of STT at the rate of 0.2 per cent on the transaction. For this purpose, the Finance Bill has been amended so as to provide for levy of STT on the sale of unlisted equity shares under an offer for sale as part of an initial public offer and shares of the company are subsequently listed on the stock exchange. This amendment will take effect from 1st July, 2012 and will accordingly apply to any transaction made on or after that date. [Clause 153] Further clarifications to the Finance Bill, 2012 The following clarifications are with regard to the Memorandum Explaining the Provisions in the Finance Bill, 2012:- I. A clarificatory amendment was proposed in the Finance Bill, 2012 [clause 63] by inserting the following explanation after sub-section (8) of section 144C , which shall be deemed to have been inserted w.e.f. 1st April, 2009, namely:- "Explanation- For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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