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TMI BlogExplanatory Notes to the provisions of the Finance Act 2015X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to Global Depository receipts (GDRs), 32.1-32.10. 6 Power of the Central Board of Direct Taxes to prescribe the manner and procedure for computing the period of stay in India , 6.1-6.4 ; Amendment to the conditions for determining residency status in respect of Companies, 7.1-7.7 . 9 Clarity relating to Indirect transfer provisions , 8.1-8.5 ; Clarity regarding source rule in respect of interest received by the non-resident in certain cases ; 9.1-9.8 . 9A Fund Managers in India not to constitute business connection of offshore funds , 10.1-10.11 . 10 Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme , 20.1-20.4 ; Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund 27.1-27.5 ; Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations , 11.1-11.4 ; Pass through status to Category I and Category II Alternative Investment Funds, 35.1-35.7 ; Taxation Regime for Real Estate Investment Trusts (REIT) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.1 - 22.3. 80D Amendment in section 80D relating to deduction in respect of health insurance premia , 23.1 - 23.5. 80DD Raising the limit of deduction under section 80DD and 80U for persons with disability and severe disability, 24.1 - 24.8. 80DDB Raising the limit of deduction under section 80DDB , 25.1 - 25.6. 80G Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund, 27.1-27.5 ; One hundred per cent deduction for National Fund for Control of Drug Abuse , 26.1-26.3. 80JJAA Deduction for employment of new workmen , 28.1-28.5. 80U Raising the limit of deduction under section 80DD and 80U for persons with disability and severe disability, 24.1 - 24.8. 92BA Raising the threshold for specified domestic transaction , 29.1 - 29.3. 95 Deferment of provisions relating to General Anti Avoidance Rule ( GAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure for appeal by revenue when an identical question of law is pending before Supreme Court , 40.1 - 40.6. 192 Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1-47.20. 192A Simplification of Tax Deduction at Source (TDS) mechanism for Employees Provident Fund Scheme (EPFS) , 41.1- 41.8. 194A Rationalisation of provisions relating to deduction of tax on interest (other than interest on securities), 42.1- 42.11. 194C Clarification regarding deduction of tax from payments made to transporters , 43.1- 43.9. 194-I Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1-34.7. 194LBA Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit), 34.1-34.7. 194LBB Pass throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 246A Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), 47.1-47.20. 253 Orders passed by the prescribed authority under section sub-clauses (vi) and (via) of clause (23C) of section 10 made appealable before Income-tax Appellate Tribunal , 51.1-51.4. 255 Raising the income-limit of the cases that may be decided by single member bench of ITAT , 52.1-52.3. 263 Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue , 53.1-53.3. 269SS Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances , 54.1-54.6. 269T Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances , 54.1-54.6. 271 Amount of tax so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment Trusts (Invit) , 34.1 - 34.7. 101 Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit) , 34.1 - 34.7. 1. Introduction 1.1 The Finance Act, 2015 (hereafter referred to as the Act ) as passed by the Parliament, received the assent of the President on the 14th day of May, 2015 and has been enacted as Act No. 20 of 2015. This circular explains the substance of the provisions of the Act relating to direct taxes. 2. Changes made by the Act 2.1 The Act has- (i) specified the rates of income-tax for the assessment year 2015-16 and the rates of income-tax on the basis of which tax has to be deducted at source and advance tax has to be paid during financial year 2015-16. (ii)amended sections 2, 6, 9, 10, 11, 13, 32, 35, 36, 47, 49, 80C ,80CCC, 80CCD, 80D, 80DD, 80DDB, 80G, 80JJAA, 80U, 92BA, 95, 111A, 115A, 115ACA, 115JB, 115U, 115UA, 132B, 139, 153C, 154, 156, 192, 194A, 194C, 194I, 194LBA, 194LD, 195, 197A, 200, 200A, 203A, 206C, 220, 234B, 245A, 245D, 245H, 245HA, 245K, 245O, 246A, 253, 255, 263, 269T, 271, 271D, 271E, 272A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 5,00,001 - ₹ 10,00,000 20% 20% 20% Exceeding ₹ 10,00,000 30% 30% 30% The amount of income-tax so computed shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a person having a total income exceeding one crore rupees. However, marginal relief shall be available so the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.1.5 Local Authorities In the case of every local authority, the rate of income-tax has been specified at thirty per cent in Paragraph D of Part I of the First Schedule to the Act. The amount of income-tax so computed shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a local authority having a total income exceeding one crore rupees. However, marginal relief shall be available so that the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. The Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of the amount of tax computed, inclusive of surcharge. No marginal relief shall be available in respect of Education Cess and Secondary and Higher Education Cess. 3.2 Rates for deduction of income-tax at source from certain incomes during the financial year 2015-16. 3.2.1 In every case in which tax is to be deducted at the rates in force under the provisions of sections 193, 194, 194A, 194B, 194BB, 194D, 194LBA and 195 of the Income-tax Act, the rates for deduction of income-tax at source during the financial year 2015-16 have been specified in Part II of the First Schedule to the Act. The rates for deduction of income-tax at source during the financial year 2015 -16 will continue to be the same as those specified in Part II of the First Schedule to the Finance (No.2) Act, 2014 except that in case of payments in the nature of income by way of royalty or fee for technical services referred to in section 115A, made to non-residents (other than a company) or a foreign company, the rate shall be ten per cent. of such income instead of twen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source from Salaries , computation of advance tax and charging of income-tax in special cases during the financial year 2015-16. 3.3.1 The rates for deducting income-tax at source from Salaries and computing advance tax during the financial year 2015-16 have been specified in Part III of the First Schedule to the Act. These rates are also applicable for charging income-tax during the financial year 2015-16 on current incomes in cases where accelerated 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, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for short duration, etc. The rates are as follows:- 3.3.2 Individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person Paragraph A of Part III of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Part III of the First Schedule to the Act. The rates are as follows- Income chargeable to tax Rate Up to ₹ 10,000 10% ₹ 10,001 -Rs. 20,000 20% Exceeding ₹ 20,000 30% The amount of income-tax so computed shall be increased by a surcharge at the rate of twelve percent. of such income-tax in case of a co-operative society having a total income exceeding one crore rupees as against the rate of ten per cent. for the financial year 2014-15. However, marginal relief shall be available. Accordingly, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be levied at the rate of two per cent and one per cent respectively of the amount of income-tax computed inclusive of surcharge. No marginal relief shall be avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6 Companies- In the case of a company, the rate of income-tax has been specified in Paragraph E of Part III of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is thirty per cent of the total income. The tax computed shall be enhanced by a surcharge of seven per cent where such domestic company has total income exceeding one crore rupees but not exceeding ten crore rupees as against the rate of five per cent. for the financial year 2014-15. Surcharge at the rate of twelve per cent shall be levied if the total income of the company exceeds ten crore rupees as against the rate of ten per cent. for the financial year 2014-15. In the case of a company other than a domestic company, royalties received from Government or an Indian concern under an approved agreement made after 31-3-1961 but before 1-4-1976, shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964 but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. However, as per the second proviso, this restriction shall not apply if the aggregate value of the receipts from the activities referred above is twenty five lakh rupees or less in the previous year. 4.2 The institutions which, as part of genuine charitable activities, undertake activities like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature were being put to hardship due to first and second proviso to section 2(15). 4.3 The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore the provisions of the Income-tax Act have been amended to include 'yoga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no specific guidance available under the provisions of the Income-tax Act for treatment of other Government grants. During the public consultations for ICDS, the stakeholders suggested that in order to avoid any future controversy in this matter, there should be specific provision in the Income-tax Act for treating these Government grants as income. The Accounting Standard Committee, which drafted the ICDS, has also examined the suggestions/comments received during public consultations and suggested that the issue of legislative amendment for bringing certainty in this matter may be examined. In order to avoid any future litigation and controversy in this matter, the definition of income under clause (24) of section 2 of the Income-tax Act has been amended so as to provide that the income shall include assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assessment years. 7. Amendment to the conditions for determining residency status in respect of Companies 7.1 The provisions of section 6 of the Income-tax Act provide for the conditions under which a person can be said to be resident in India for a previous year. In respect of a person being a company the conditions are contained in clause (3) of section 6 of the said Act. Under the said clause, before its amendment by the Act, a company was said to be resident in India in any previous year, if- (i) it is an Indian company; or (ii) during that year, the control and management of its affairs is situated wholly in India. 7.2 Due to the requirement that whole of control and management should be situated in India and that too for whole of the year, the condition had been rendered practically inapplicable. A company could easily avoid becoming a resident by simply holding a board meeting outside India. This could facilitate creation of shell companies which are incorporated outside but controlled from India. 7.3 'Place of effective management' (POEM) is an internationally recognized concept for determination of residence of a company incorporated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India shall be deemed to accrue or arise in India. 8.2 The Finance Act, 2012 had inserted certain clarificatory amendments in the provisions of section 9. The amendments, inter alia, included insertion of Explanation 5 in section 9(1)(i) w.r.e.f. 1.04.1962 . The Explanation 5 clarified that an asset or capital asset, being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be situated in India if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. 8.3 Considering the concerns raised by various stakeholders regarding the scope and impact of these amendments, an Expert Committee under the Chairmanship of Dr. Parthasarathi Shome was constituted by the Government to go into the various aspects relating to the amendments. 8.4 The recommendations of the Expert Committee were considered and a number of recommendations (either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany or entity . (viii) in case the transfer is of shares or interest in a foreign company or entity which holds the Indian assets indirectly, then the exemption shall be available to the transferor if he along with its associated enterprises, at any time in 12 months preceding the date of transfer,- (a) neither holds the right of management or control in relation to such company or the entity, (b) nor holds any right in, or in relation to, such company or entity which would entitle him to the right of control or management of the direct holding company or entity, nor holds such percentage of voting power, or share capital or interest in such company or entity which entitles him to the voting power, or share capital or interest exceeding five percent. in the direct holding company or entity. (ix) exemption shall be available in respect of any transfer, subject to certain conditions ,in a scheme of amalgamation, of a capital asset, being a share of a foreign company which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company. (x) exemption shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son who is a non-resident, where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in India. 9.2 Section 90 of the said Act provides that Central Government may enter into an agreement with the Government of any country or specified territory outside India among other things for providing relief from double taxation. India has entered into Double Taxation Avoidance Agreements (DTAAs) with more than 90 countries. Further sub-section (2) of the section provides that in respect of an assessee to whom such DTAA applies, the provisions of the Act shall apply to the extent they are more beneficial to him. Therefore, the taxpayer is entitled to relief from the provisions of the Income-tax Act if such relief is available under the DTAA and to that extent the provisions of the Income-tax Act are not applicable. 9.3 Further, income of a non-resident from business activity is taxable in India if it has a business connection in India in accordance with the provisions contained in section 9(1)(i) of the Income-tax Act, and only such income is taxable as is attributable to the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posable under the other provisions of this Convention at a rate which shall not exceed the rate specified in paragraph 2(a) of Article 11 (Interest) 9.6 The Special Bench of the ITAT in the case of Sumitomo Mitsui Banking Corporation [136 ITD- 66 TBOM] had mentioned that there are instances of other countries providing for specific provisions in their domestic law which allows for the taxability of interest paid by a permanent establishment to its head office and other branches and had pointed out absence of such a specific provision in the Income-tax Act. Considering that there were several disputes on the issue which were pending and likely to arise in future, it was essential that necessary clarity and certainty is provided for in the Income-tax Act. 9.7 Accordingly, the Income-tax Act has been amended to provide that in the case of a non-resident, being a person engaged in the business of banking, any interest payable by the permanent establishment in India of such non-resident to the head office or any permanent establishment or any other part of such non-resident outside India shall be deemed to accrue or arise in India and shall be chargeable to tax in addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts outside India for an off-shore fund, the profits made by the fund from such investments could have been liable to tax in India due to the location of fund manager in India and attribution of such profits to the activity of the fund manager undertaken on behalf of the off-shore fund. Therefore, apart from taxation of income received by the fund manager as fees for fund management activity, income of off-shore fund from investments made in countries outside India may have also got taxed in India due to such fund management activity undertaken in, and from, India constituting a business connection. Further, presence of the fund manager under certain circumstances may have led to the off shore fund being held to be resident in India on the basis of its control and management being in India. 10.4 There are a large number of fund managers who are of Indian origin and are managing the investment of offshore funds in various countries. These persons were being discouraged from locating in India due to the above tax consequence in respect of income from the investments of offshore funds made in other jurisdictions. 10.5 In order to facilitate location of fund managers of off-sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fund exceeding ten percent.; (vii) the aggregate participation interest, directly or indirectly, of ten or less members along with their connected persons in the fund, shall be less than fifty percent. ; (viii) the investment by the fund in an entity shall not exceed twenty percent of the corpus of the fund; (ix) no investment shall be made by the fund in its associate entity; (x) the monthly average of the corpus of the fund shall not be less than one hundred crore rupees and if the fund has been established or incorporated in the previous year, the corpus of fund shall not be less than one hundred crore rupees at the end of such previous year; (xi) the fund shall not carry on or control and manage, directly or indirectly, any business in India or from India; (xii) the fund is neither engaged in any activity which constitutes a business connection in India nor has any person acting on its behalf whose activities constitute a business connection in India other than the activities undertaken by the eligible fund manager on its behalf. (xiii) the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent assessment years. 11. Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations 11.1 Under the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC) notified by Securities and Exchange Board of India (SEBI), the Clearing Corporations are mandated to establish a fund, called Core Settlement Guarantee Fund (Core SGF) for each segment of each recognized stock exchange to guarantee the settlement of trades executed in respective segments of the exchange. 11.2 Income by way of contributions to the Investor Protection Fund set up by recognised stock exchanges in India, or by commodity exchanges in India or by a depository is exempt from taxation under the provisions of the Income-tax Act. 11.3 On similar lines, income of the Core SGF arising from (a) contribution received from specified persons;(b) investment made by the fund, and(c) the penalties imposed by the recognised Clearing Corporation has been made exempt from taxation subject to similar conditions as provided in case of Investor Protection Fund set up by a recognised stock exchange or a commodity exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he due date of furnishing the return of income specified under section 139 of the Income-tax Act for the fund or institution. In case the Form is not submitted before this date, then the benefit of accumulation would not be available and such income would be taxable at the applicable rate. Further, the benefit of accumulation would also not be available if return of income is not furnished before the due date of furnishing the return of income. 12.3 Under section 11 of the Income-tax Act, it has also been provided that if the income from the property held under trust and applied to charitable or religious purposes falls short of 85% of the income derived during the previous year for the reason that the income has not been received during that year or any other reason, then on exercise of the option by the trust/institution in writing on or before the due date of furnishing the return of income, such income shall be deemed to have been applied for charitable or religious purpose. There was no standard format for exercising the option. Accordingly, the provisions of section 11 have also been amended to prescribe a format for exercise of option by the trust/institution for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Bihar or the State of Telangana or the State of West Bengal, a new section 32AD has been inserted in the Income-tax Act and also the provisions of section 32 of the Income-tax Act has been amended to provide following incentives: 14.2 Additional Investment Allowance 14.2.1 Section 32AD has been inserted in the Income-tax Act to provide for an additional investment allowance of an amount equal to 15% of the cost of new asset acquired and installed by an assessee, if- (a) he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1st April, 2015 in any notified backward area in the State of Andhra Pradesh or the State of Bihar or the State of Telangana or the State of West Bengal; and (b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from the 1st April, 2015 and ending on 31st March, 2020. 14.2.2 This deduction shall be available over and above the existing deduction available under section 32AC of the Income-tax Act. Accordingly, if a company sets up an undertaking in the notified backward area in the State of Andhra Pradesh or in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of manufacturing units in the notified backward areas in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, a new proviso has been inserted in section 32(1)(iia) of the Income-tax Act to provide for higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new machinery or plant (other than a ship and aircraft) acquired and installed by an assessee for setting up of a manufacturing undertaking or enterprise in the notified backward area of the said States on or after the 1st April, 2015. 14.3.3 This higher additional depreciation shall be available in respect of acquisition and installation of any new machinery or plant for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020. The eligible machinery or plant for this purpose shall not include the machinery or plant which are currently not eligible for additional depreciation as per the existing proviso to section 32(1)(iia) of the Income-tax Act. 14.4 Applicability:- These amendments takes effect from 1st April, 2016 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 16. Alignment of provisions relating to capitalisation of interest and claim of deduction of bad debts with the provisions of the Income Computation and Disclosure Standards (ICDS) 16.1 The Income Computation and Disclosure Standards (ICDS)-IX relating to borrowing costs provides for capitalisation of borrowing costs incurred for acquisition of assets up to the date the asset is put to use. The proviso to clause (iii) of sub-section (1) of section 36 of the Income-tax Act provided for capitalisation of borrowing costs incurred for acquisition of assets for extension of existing business up to the date the asset is put to use. However, the provisions of ICDS-IX do not make any distinction between the asset acquired for extension of business or otherwise. 16.2 Therefore, there was an inconsistency between the provisions of proviso to clause (iii) of sub-section (1) of section 36 of the Income-tax Act and the provisions of ICDS-IX. The general principles for capitalisation of borrowing cost requires capitalisation of borrowing cost incurred for acquisition of an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval of the Government. 17.1 Sugar factories operating in the cooperative sectors in certain states of India pay to sugarcane growers a final amount, often referred to as Final Cane Price (FCP) which is over and above the Statutory Minimum Price (SMP) fixed by the Central Government under the Sugarcane Control Order, 1996. FCP is decided on the basis of the particular factory s working results which take into account all the revenues and expenditure incurred by the factory. 17.2 The payment of FCP by the co-operative sugar factories over and above the SMP for purchase of sugarcane resulted into tax litigation. The co-operative sugar factories were claiming this excess payment as business expenditure whereas the same has been disallowed in the assessment on the ground that the excess price paid for purchase of sugar cane over and above SMP is in the nature of appropriation/distribution of profit and hence not allowable a deduction. 17.3 In order to provide certainty in this matter and to encourage co-operative movement in sugar sector, a new clause (xvii) has been inserted in sub-section (1) of section 36 of the Income-tax Act to provide that the amount paid for purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h merger. 18.4 Applicability: These amendments will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years. 19. Cost of acquisition of a capital asset in the hands of resulting company to be the cost for which the demerged company acquired the capital asset 19.1 Under clause (vib) of section 47 of the Income-tax Act any capital asset transferred by the demerged company to the resulting company in the scheme of demerger is not regarded as transfer if the resulting company is an Indian company. In such cases the cost of such asset in the hands of resulting company should be the cost of such asset in the hands of demerged company as increased by the cost of improvement, if any, incurred by the demerged company or the resulting company as the case may be. Further, the period of holding of such asset in the hands of resulting company should include the period for which the asset was held by the demerged company. 19.2 However, under the provisions of the Income-tax Act, before amendment made by the Finance Act, 2015, there was no express provision to this effect. Accordingly, sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under section 80C of the Income-tax Act. 20.4 Applicability:- These amendments take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. 21. Raising the limit of deduction under 80CCC 21.1 Under the provisions of sub-section (1) of the section 80CCC of the Income-tax Act, before its amendment by the Act, an assessee, being an individual was allowed a deduction upto one lakh rupees in the computation of his total income, of an amount paid or deposited by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme. 21.2 In order to promote social security, sub-section (1) of section 80CCC has been amended to raise the limit of deduction under section 80CCC from one lakh rupees to one hundred and fifty thousand rupees, within the overall limit provided in section 80CCE. 21.3 Applicability:- This amendment will take effect from 1st April, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of health insurance premia 23.1 The provisions contained in section 80D of the Income-tax Act, before its amendment by the Act, inter alia, provided for --- a) deduction upto fifteen thousand rupees to an assessee, being an individual in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme or any other notified scheme or any payment made on account of preventive health check up of the assessee or his family; and b) an additional deduction of fifteen thousand rupees to an individual assessee to effect or to keep in force insurance on the health of the parent or parents of the assessee. 23.2 A similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force insurance on the health of any member of the HUF. The section also provided for a deduction of twenty thousand rupees in both the cases if the individual insured is a senior citizen of sixty years of age or above. 23.3 The quantum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore its amendment by the Act, inter alia, provided for a deduction to an individual or HUF, who is a resident in India, and has incurred- (a) Expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability as defined under the said section; or (b) Paid any amount to LIC or any other insurer in respect of a scheme for the maintenance of a disabled dependant. 24.2 The section provided for a deduction of fifty thousand rupees if the dependant is suffering from disability and one lakh rupees if the dependant is suffering from severe disability (as defined under the said section). 24.3 The provisions of section 80U of the Income-tax Act, before its amendment by the Act, inter alia, provided for a deduction to an individual, being a resident, who, at any time during the previous year, was certified by the medical authority to be a person with disability (as defined under the said section). 24.4 The said section provided for a deduction of fifty thousand rupees if the person is suffering from disability and one lakh rupees if the person is suffering from severe disability (as defined under the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was required. It had been represented that the requirement of a certificate from a doctor working in a Government hospital causes undue hardship to the persons intending to claim the aforesaid deduction. Government hospitals at many places do not have doctors specialising in the above branches of medicine. Therefore, it may be difficult for the taxpayer to obtain a certificate from a Government hospital. 25.4 In view of the above, section 80DDB has been amended to provide that the assessee will be required to obtain a prescription from a specialist doctor for the purpose of availing this deduction. 25.5 Section 80DDB has been amended further to provide for a higher limit of deduction of upto eighty thousand rupees, for the expenditure incurred in respect of the medical treatment of a very senior citizen . A very senior citizen has been defined as an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year. 25.6 Applicability:- These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 26. One hundred per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncourage and enhance people s participation in the national effort to improve sanitation facilities and rejuvenation of river Ganga, section 80G of the Income-tax Act has been amended to incentivise donations to the two funds. It has been provided that donations made by any donor to the Swachh Bharat Kosh and donations made by resident donors to Clean Ganga Fund will be eligible for a deduction of hundred per cent in computing the total income. However, any sum spent on this account in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor. 27.4 The provisions of section 10(23C) of the Income-tax Act provide for exemption from tax in respect of the income of certain charitable funds or institutions like the Prime Minister s National Relief Fund; the Prime Minister s Fund (Promotion of Folk Art); the Prime Minister's Aid to Students Fund; the National Foundation for Communal Harmony. Considering the importance of Swachh Bharat Kosh and Clean Ganga Fund, section 10(23C) of the Income-tax Act has also been amended to exempt the income of Swachh Bharat K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an international transaction, where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum as provided in the said section. Before amendment by the Act, this threshold was rupees five crore. 29.2 In order to address the issue of compliance cost in case of small businesses on account of low threshold of five crore rupees, the said section 92BA has been amended to provide that the aggregate of specified transactions entered into by the assessee in the previous year should exceed a sum of twenty crore rupees for such transaction to be treated as specified domestic transaction . 29.3 Applicability: - This amendment takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 30. Deferment of provisions relating to General Anti Avoidance Rule ( GAAR ) 30.1 The provisions of the General Anti Avoidance Rule (GAAR) introduced by the Finance Act, 2013 are contained in Chapter X-A (consisting of section 95 to 102) and section 144BA of the Income-tax Act. Chapter X-A provides the substantive provision of GAAR whereas section 144BA provides the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This amendment takes effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 32. Amendments relating to Global Depository receipts (GDRs) 32.1 The Depository Receipts Scheme, 2014 was notified by the Department of Economic affairs (DEA) vide Notification F.No.9/1/2013 ECB dated 21st October, 2014. This scheme replaces Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through depository receipt mechanism) Scheme, 1993 . 32.2 The taxation scheme of income arising in respect of depository receipts under section 115AC of the Income-tax Act, before amendment by the Act, was aligned with the earlier scheme which was limited to issue of Global Depository Receipts (GDRs) based on the underlying shares of the company issued for this purpose (i.e sponsored GDR) or FCCB of the issuing company and where the company was either a listed company or was to list simultaneously. Besides, the holder of such GDRs was a non-resident only. Further, section 47(viia) provided exemption from capital gains arising from transfer of GDRs by one non-resident to another non-resident made outside India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent assessee on redemption of Global Depositary Receipts (GDR) held by him, then the cost on acquisition of the share shall be the price of such share prevailing on any recognized stock exchange in India on the date on which a request for redemption was made. 32.8 In view of the process of conversion of GDR into underlying shares referred to above, it is hereby clarified that the date on which a request for redemption was made for purposes of Section 49(2ABB), shall be the date on which the instruction from foreign depositary is received by the local custodian in India requesting the release of underlying shares in favour of the non-residence assessee. 32.9 It is also clarified that GDRs which qualify for special treatment under the Income-tax Act constitute a subset of Depository receipts which can be issued under the Depository Scheme, 2014. Therefore, the benefit under section 115 AC, section 47 and section 49 (2ABB) of the Income-tax Act are available only if the GDR has been issued against the ordinary shares of the issuing company, being a company listed on a recognized stock exchange in India ( sponsored issue). The benefit of these sections would not be availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits. 33.3 In view of the above, section 115JB has been amended to provide that the share of a member of an AOP, in the income of the AOP, on which no income tax is payable in accordance with the provisions of section 86 of the Act, should be excluded while computing the MAT liability of the member under 115JB of the Act. The expenditures, if any, debited to the profit loss account, corresponding to such income (which is to be excluded from the MAT liability) shall also be added back to the book profit for the purpose of computation of MAT. 33.4 The provisions of section 115JB have also been amended to provide that the amount of income from (i) capital gains arising on transactions in securities; or (ii) interest, royalty or fees for technical services chargeable to tax at the rates specified in Chapter XII, accruing or arising to a foreign company shall not be liable to MAT if such income is credited to the profit and loss account and the income-tax payable in accordance with the other provisions of the Income-tax Act, is less than the rate specified in section 115JB. The expenditures, if any, debited to the profit loss account, corresponding to such income (which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following illustration:- Company A is holding 100 shares of Special Purpose Vehicle (SPV) which are carried at ₹ 2000 in the books of the company as on 1st April, 2015. During the financial year 2015-16, these 100 shares are exchanged with the 100 units of Business Trust (BT) and the same is recorded at the fair value of ₹ 3000 resulting into a notional gain of ₹ 1000. At the end of financial year 2016-17, the carrying amount of the units has been recorded at ₹ 2500 resulting into a notional loss of ₹ 500. During the financial year 2017-18, these units are sold for ₹ 4000. In the above illustration, the notional gain of ₹ 1000 shall be excluded from the book profit of the financial year 2015-16. Similarly, the notional loss of ₹ 500 shall be excluded from the book profit of the financial year 2016-17. For computation of book profit for the financial year 2017-18, the actual gain of ₹ 2000, computed by taking into account the carrying cost of shares i.e. ₹ 2000 and the actual sale price of unit i.e. ₹ 4000 shall be included in the book profit of financial year 2017-18 for the purposes of levying MAT und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to non-resident unit holders, and at the rate of 10 per cent. in respect of payment of interest component of distributed income to a resident unit holder is required to be effected by the trust. (viii) The dividend received by the trust is subject to dividend distribution tax at the level of SPV and is exempt in the hands of the trust, and the dividend component of the income distributed by the trust to the unit holders is also exempt. 34.3 The deferral of capital gains provided to the sponsor of business trust had placed such a sponsor at a disadvantageous tax position vis-a vis direct listing of the shares of the SPV. In case the sponsor holding the shares of the SPV decides to exit through the Initial Public Offer (IPO) route, then the benefit of concessional tax regime relating to capital gains arising on transfer of shares subject to levy of STT is available to him. The tax on short term capital gains (STCG) in such cases is levied @ 15% and the long term capital gain (LTCG) is exempt under section 10(38) of the Act. However, the benefit of concessional regime was not available to the sponsor at the time it offloads units of business trust acquired in exchange of its s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be deducted at rate in force as applicable for deduction of tax on payment to the non-resident of any sum chargeable to tax . (iv) no deduction shall be made under section 194-I of the Income-tax Act where the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset held directly by such REIT. 34.7 Applicability: - These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 35. Pass through status to Category I and Category II Alternative Investment Funds 35.1 The provisions of section 10(23FB) of the Income-tax Act provide that any income of a Venture Capital Company (VCC) or a Venture Capital Fund (VCF) from investment in a Venture Capital Undertaking (VCU) shall not form part of its total income. Section 115U of the said Act provides that income accruing or arising or received by a person out of investment made in a VCC or VCF shall be taxable in the same manner, on current year basis, as if the person had made direct investment in the VCU. 35.2 These sections provide a tax pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in the same manner as if it were the income accruing or arising to, or received by, such person had the investments, made by the investment fund, been made directly by him. (ii) income in the hands of investment fund, other than income from profits and gains of business, shall be exempt from tax. The income in the nature of profits and gains of business or profession shall be taxable in the case of investment fund. (iii) income in the hands of investor which is of the same nature as income by way of profits and gains of business or profession at investment fund level, shall be exempt. (iv) where any income, other than income which is taxable at investment fund level, is payable to a unit holder by an investment fund, the fund shall deduct income-tax at the rate of ten per cent. (v) the income paid or credited by the investment fund shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as if it had been received by, or had accrued or arisen to, the investment fund. (vi) if in any year there is a loss at the fund level either current loss or the loss which had remained to be set off, the loss shall not be allowed to be pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 37. Return of Income is to be filed by beneficial owner or beneficiary of a foreign asset 37.1 Sub-section (1) of section 139 of the Income-tax Act specifies the category of tax payers who are required to furnish their return of income. Fourth proviso to sub-section (1) of section 139 of the said Act provides that a resident who is not required to furnish a return of income but who during the previous year has any asset (including any financial interest in any entity) located outside India or signing authority in any account located outside India shall furnish, on or before the due date, his return of income. 37.2 In the budget announcement of 2015 it was stated that the requirement of furnishing of return of income will be extended to beneficial owner of assets. Before the amendment made by the Act, there was no requirement of furnishing the return if the asset was held by a person as a beneficial owner or he is a beneficiary of the foreign asset. It has been found that in a large number of cases foreign assets are held in the name of trusts/entities where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment year without the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 38.3 Applicability: This amendment has taken effect from 1st day of June, 2015. 39. Assessment of income of a person other than the person in whose case search has been initiated or books of account, other documents or assets have been requisitioned. 39.1 Section 153C of the Income-tax Act relates to assessment of income of any person other than the person in whose case search has been conducted or requisition has been made. The provisions contained in sub-section (1) of the section 153C, before amendment made by the Act, provided that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 of the Income-tax Act, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to any person, other than the person referred to in section 153A of the Income-tax Act, then the books of account or documents or assets seized or requisitioned shall be handed ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department is in appeal on the same question of law for an earlier year. As a result, appeals had been filed by the revenue year after year on the same question of law until it is finally decided by the Supreme Court thus, multiplying litigation. 40.3 Accordingly, a new section 158AA has been inserted to provide that where any question of law arising in the case of an assessee for any assessment year(relevant case) is identical with a question of law arising in his case for another assessment year which is pending before the Supreme Court, in an appeal or in a special leave petition under Article 136 of the Constitution filed by the revenue, against the order of the High Court, the Commissioner or Principal Commissioner may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal under sub-section (2) or sub-section (2A) of section 253 (normal provisions of appeal by revenue to Appellate Tribunal), direct the Assessing Officer to make an application to the Appellate Tribunal in the prescribed form within sixty days from the date of receipt of order of the Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to discourage pre-mature withdrawal and to promote long term savings, it has been provided that such withdrawal shall be taxable if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc.) and does not opt for transfer of accumulated balance to any recognised provident fund maintained by the new employer. Rule 9 of the said Schedule further provides computation mechanism for determining tax liability of the employee in respect of such pre-mature withdrawal. For ensuring collection of tax in respect of these withdrawals, rule 10 of Schedule IV-A provides that the trustees of the RPF, at the time of payment, shall deduct tax as computed in rule 9 of Schedule IV-A. 41.3 Rule 9 of Schedule IV-A to the Income-tax Act provides that the tax on withdrawn amount is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made by treating the same as contribution to unrecognized provident fund. The trustees of PPFS, being generally part of the employer group, have access to or can easily obtain the information regarding taxabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid by these employees either by requesting their new employer to deduct balance tax or through payment of advance tax / self-assessment tax. For ensuring the payment of balance tax by these employees, furnishing of valid Permanent Account Number (PAN) by them to the EPFS is a prerequisite. The existing provisions of section 206AA of the Income-tax Act provide for deduction of tax @ 20% in case of non-furnishing of PAN where the rate of deduction of tax at source is specified. As mentioned earlier, there may be employees who may be liable to pay tax at the highest slab rate. In order to ensure the collection of balance tax from these employees, it has also been provided that non-furnishing of PAN to the EPFS for receiving these payments shall attract deduction of tax at the maximum marginal rate. 41.8 Applicability:- These amendments take effect from 1st June, 2015. 42. Rationalisation of provisions relating to deduction of tax on interest (other than interest on securities) 42.1 Section 194A(1) read with section 194A(3)(i) of the Income-tax Act provides for deduction of tax on interest (other than interest on securities) over a specified threshold, i.e. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 194A(3)(v) of the Income-tax Act. This is because the specific provision of tax deduction provided under section 194A(3)(i)(b) and 194A(3)(viia)(b) of the Income-tax Act for co-operative banks override the general exemption provided to all co-operative societies for non-deduction of tax from interest payment to members under section 194A(3)(v) of the Income-tax Act. 42.4 As there is no difference in the functioning of the co-operative banks and other commercial banks, the Finance Act, 2006 and Finance Act, 2007 amended the provisions of the Income-tax Act to provide for co-operative banks a taxation regime which is similar to that for the other commercial banks. Therefore, there is no rationale for treating the co-operative banks differently from other commercial banks in the matter of deduction of tax and allowing them to avail the exemption meant for smaller credit co-operative societies formed for the benefit of small number of members. However, as mentioned earlier, a doubt has been created regarding the applicability of the specific provisions mandating deduction of tax from the payment of interest on time deposits by the co-operative banks to its members by claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time deposit. In view of this, the definition of time deposits as provided in Explanation 1 below clause (xi) of sub-section (3) of section 194A of the Income-tax Act has been amended so as to include recurring deposits within its scope for the purposes of deduction of tax under section 194A of the Income-tax Act. However, the existing threshold limit of ₹ 10,000 for non-deduction of tax shall also be applicable in case of interest payment on recurring deposits to safeguard interests of small depositors. 42.9 The proviso to clause (i) of sub-section (3) of section 194A of the Income-tax Act provides that the interest income for the purpose of deduction of tax by the banking company or the co-operative society engaged in carrying on the business of banking or the public company shall be computed with reference to a branch of these entities. As currently, most of these entities are computerised and follow core banking solutions for crediting interest, there is no rationale for continuing branch wise calculation of interest by the entities which have adopted core banking solutions. Therefore, a new proviso has been inserted to section 194A(3)(i) of the Income-tax Act so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year exceeds ₹ 75,000. Prior to 1.10.2009, section 194C of the Income-tax Act provided for exemption from TDS to an individual transporter who did not own more than two goods carriage at any time during the previous year. 43.2 The Finance (No.2) Act, 2009 substituted section 194C of the Income-tax Act with effect from 1.10.2009, which inter alia provided for non- deduction of tax from payments made to the contractor during the course of plying, hiring and leasing goods carriage if the contractor furnishes his Permanent Account Number (PAN) to the payer. The memorandum explaining the provisions of Finance (No.2) Bill, 2009 indicates that the intention was to exempt only small transport operators (as defined in section 44AE of the Act) from the purview of TDS on furnishing of Permanent Account Number (PAN). Thus, the intention was to reduce the compliance burden on the small transporters. However, the language of sub-section (6) of section 194C of the Income-tax Act did not convey the desired intention and as a result all transporters, irrespective of their size, were claiming exemption from TDS under the existing provisions of sub-section (6) of section 194C of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than ten goods carriages. However, as the provisions of section 194C(6) were amended with effect from 1st June, 2015, for determining the aggregate payments for the financial year 2015-16, the payments made on or after 1st June, 2015 shall only be taken into account. This is explained by way of following illustration:- T , an individual owns five goods carriages from 1st April, 2015 to 31st October, 2015. On 1st November, 2015, he purchased 6 more goods carriages. On 1st January, 2016, he sold 8 goods carriages. P makes following payment of transport charges to T during the financial year 2015-16: 15th April, 2015 - ₹ 35,000 15th July, 2015 - ₹ 40,000 15th November, 2015 - ₹ 20,000 15th December, 2015 - ₹ 20,000 15th February, 2016 - ₹ 50,000 No tax is deductible on payment made on 15th April, 2015 if T furnishes his PAN as per the pre-amended provisions of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby declare that I/We do not own more than ten goods carriage and also did not own more than ten goods carriage at any time duringthe period from 1st April .. to ..My Permanent Account Number (PAN) is .I hereby enclose a self-attested photocopy of my PAN Card. . .. Signature of the person making declaration Place: 43.8 It may be mentioned here that the person responsible for paying to transporter is required to report the particulars of payment made to transporters without deduction of tax in compliance to the provision of section 194C(6) of the Income-tax Act in the statement of deduction of tax (Form 26Q) as per the provision of rule 31A(4)(vi) of the Income-tax Rules, 1962. Non-furnishing or incomplete furnishing of this information shall make the deductor liable for penalty as per the provision of section 271H of the Income-tax Act. 43.9 Applicability:- This amendment takes effect from 1st June, 2015. 44. Extension of eligible period of concessional tax rate under section 194LD of the Income-tax Act 44.1 The prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act shall also be eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A of the Income-tax Act. 45.4 Applicability:- This amendment takes effect from 1st June, 2015. 46. Relaxing the requirement of obtaining TAN for certain deductors 46.1 Under the provisions of section 203A of the Income-tax Act, every person deducting tax (deductor) or collecting tax (collector) is required to obtain Tax Deduction and Collection Account Number (TAN) and quote the same for reporting of tax deduction/collection to the Income-tax Department. However, currently, for reporting of tax deducted from payment over a specified threshold made for acquisition of immovable property (other than rural agricultural land) from a resident transferor under section 194-IA of the Income-tax Act, the deductor is not required to obtain and quote TAN and is allowed to report the tax deducted by quoting his Permanent Account Number (PAN). 46.2 The obtaining of TAN creates a compliance burden for those individuals or Hindu Undivided Family (HUF) who are not liable for audit under section 44AB of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing provisions of section 200A of the Income-tax Act did not provide for determination of fee payable under section 234E of the Income-tax Act at the time of processing of TDS statements. Therefore, the provisions of section 200A of the Income-tax Act has been amended so as to enable computation of fee payable under section 234E of the Income-tax Act at the time of processing of TDS statement under section 200A of the Income-tax Act. 47.4 Currently, the provisions of sub-section (3) of section 200 of the Income-tax Act enable the deductor to furnish TDS correction statement and consequently, section 200A of the Income-tax Act inter alia provides processing of the TDS correction statement. However, there did not exist any provision in the Income-tax Act for allowing a collector to file correction statement in respect of TCS statement already furnished. Therefore, the provision of section 206C of the Income-tax Act has been amended so as to allow the collector to furnish TCS correction statement. 47.5 The Income-tax Act contains detailed provisions for processing of TDS statements, however, there did not exist any provision for processing of TCS statement. As the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS and TCS, Government deductors/collectors are allowed to make payment of tax deducted/collected by them without production of challan i.e. through book entry. For payment of tax deducted/collected through book entry, the Drawing and Disbursing Officer (DDO) intimates the TDS/TCS amount to the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer (PAO/TO/CDDO) who credits the TDS/TCS amount to the credit of Central Government through book entry. For granting credit to the deductee for TDS/TCS paid through book entry by the Government deductors, a system of capturing information about the credit by PAO/TO/CDDO has been introduced by amending rule 30 and rule 37CA of the Income-tax Rules, 1962 with effect from 1st April, 2010. 47.9 The said rules provide that the PAO/TO/CDDO shall file the details of payment of TDS/TCS made through book entry in Form 24G. This system of reporting of payment of TDS/TCS made through book entry has improved the mechanism of reporting of TDS/TCS by the Government deductor to some extent. 47.10 However, in the absence of any specific provisions in the Income-tax Act for enforcing the furnishing of Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47.15 In order to bring uniformity and certainty in this matter, the provisions of section 192 of the Income-tax Act have been amended so as to provide that the person responsible for paying, for the purposes of estimating income of the assessee or computing tax deductible under section 192(1) of the Income-tax Act, shall obtain from the assessee evidence or proof or particulars of the prescribed claim (including claim for set-off of loss) under the provisions of the Income-tax Act in the prescribed form and manner. 47.16 The existing provisions of sub-section (6) of section 195 of the Income-tax Act, prior to its amendment by the Act, provided that the person referred to in section 195(1) of the Income-tax Act shall furnish prescribed information. Section 195(1) of the Income-tax Act provides that any person responsible for paying any interest (other than interest referred to in sections 194LB or 194LC or 194LD of the Income-tax Act) or any sum chargeable to tax (not being salary income) to a non-resident, not being a company, or to a foreign company, shall deduct tax at the rates in force. 47.17 The mechanism of obtaining of information in respect of remittances fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 143 or on regular assessment and ending on the date of reassessment under section 147 or section 153A of the Income-tax Act. 48.2 Interest is charged under section 234B on the principle that the amount of tax determined on the total income determined under section 143(1) or on assessment or reassessment or total income declared in a settlement application was the tax payer s true liability right from the beginning and it was with reference to that amount the advance tax should have been paid within the prescribed due date. Accordingly, clause (3) of section 234B of the Income-tax Act has been amended so as to provide that the period for which the interest is to be computed will begin from the 1st day of April next following the financial year and end on the date of determination of total income under section 147 or section 153A. 48.3 The provision contained in sub-section (4),prior to its amendment by the Act, provided that where on an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or sub-section (3) is increased or reduced, the interest shall be increased or reduced acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r settlement can be made in a case, for which, any proceeding for assessment is pending before an Assessing Officer on the date of application. The assessment proceedings in a case of re-assessment under section 147, before amendments made by the Act, were defined to commence from the date of issue of notice under section 148 of the Act. 49.2 It was observed that issue relating to escapement of income often involves more than one assessment year. Therefore, before amendment made by the Act, in such case the assessee was eligible to approach Settlement Commission only for the assessment year for which notice under section 148 has been issued. For all other assessment years where there is escapement, the assessee was eligible to file settlement application only after notice under section 148 has been issued for all such assessment years. 49.3 In order to obviate the need for issue of notice in all such assessment years, clause (i) of the Explanation to clause (b) of section 245A of the Income-tax Act has been amended to provide that where a notice under section 148 is issued for any assessment year, the assessee can approach Settlement Commission for other assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was passed, at any time within a period of six months from the end of month in which such application was made. 49.7 The provision contained in sub-section (1) of section 245H of the Income-tax Act, before its amendment by the Act, provided that the Settlement Commission may, if it is satisfied that any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, immunity from prosecution. With a view to provide for justification for grant of immunity from penalty and prosecution, sub-section (1) of section 245H of the Income-tax Act has been amended to provide that the Settlement Commission while granting immunity from prosecution to any person shall record the reasons in writing in the order passed by it. 49.8 The provision contained in sub-section (1) of section 245HA of the Income-tax Act, before its amendment by the Act, provided for abatement of proceedings in different situations. Sub-section (1) of section 245HA of the Income-tax Act has been amended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djusted against the amount of existing liability under the Income-tax Act, the Wealth-tax Act etc. and the amount of liability determined on completion of assessment. It was observed that in many cases applicants request the Settlement Commission to direct the Commissioner to adjust seized cash in their cases towards the tax liability arising on additional income disclosed in the application. Since such liability was not an existing liability and in the absence of specific provision, the Assessing Officer was unable to adjust the same. 49.12 Accordingly, section 132B of the Income-tax Act, has been amended to provide that the asset seized under section 132 or requisitioned under section 132A may also be adjusted against the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C of the Income-tax Act. 49.13 Applicability: These amendments have taken effect from 1st day of June, 2015. 50. Eligibility for appointment as Law Member in the Authority for Advance Rulings (AAR) 50.1 The provision of section 245-O of the Income-tax Act, before its amendment by the Act, provided that a person from Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability: This amendment has taken effect from 1st day of June, 2015. 52. Raising the income-limit of the cases that may be decided by single member bench of ITAT 52.1 The provision contained in sub-section (3) of section 255 of the Income-tax Act, before amendment by the Act, provided for disposal of appeals by single member bench of Tribunal in cases where total income of assessee as computed by the Assessing Officer did not exceed five lakh rupees. This limit of total income of five lakh rupees for a single member bench was last revised in 1998. 52.2 Considering the rise in number of cases before ITAT where total income of assessee exceeded five lakh rupees, sub-section (3) of section 255 of the Income-tax Act has been amended to provide that a single member bench may dispose of a case where the total income of assessee as computed by the Assessing Officer does not exceed fifteen lakh rupees. 52.3 Applicability: This amendment has taken effect from 1st day of June, 2015. 53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan or deposit is twenty thousand rupees or more. 54.3 In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269SS of the Income-tax Act has been amended to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property(specified sum) otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more. 54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act. 55.4 Accordingly, section 271 of the Income-tax Act has been amended so as to provide that the amount of tax sought to be evaded shall be the summation of tax sought to be evaded under the general provisions and the tax sought to be evaded under the provisions of section 115JB or 115JC of the Income-tax Act. However, if an amount of concealment of income on any issue is considered both under the general provisions and provisions of section 115JB or 115JC then such amount shall not be considered in computing tax sought to be evaded under provisions of section 115JB or 115JC. Further, in a case where the provisions of section 115JB or 115JC are not applicable, the computation of tax sought to be evaded under the provisions of section 115JB or 115JC shall be ignored. 55.5 Applicability: This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years. 56. Certain accountants not to give reports/certificates 56.1 The Income-tax Act contains several provisions (e.g. section 44AB, section 80-IA, section 92E, section 115JB, etc.) which mandate the taxpayers to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countant ineligible for attending income-tax proceeding referred to in sub-section (1) of section 288 of the Income-tax Act as authorised representative on behalf of that assessee. It has been further provided that the person convicted by a court of an offence involving fraud shall not be eligible to act as authorised representative for a period of 10 years from the date of such conviction. The definition of accountant in Explanation below section 288(2) of the Income-tax Act has also been revised on the lines of definition of chartered accountant in the Companies Act, 2013. 56.5 Applicability:- These amendments takes effect from 1st June, 2015. 57. Enabling the Board to notify rules for giving foreign tax credit 57.1 Sub-section (1) of section 91 of the Income-tax Act provides relief to Indian residents in respect of income-tax on the income which is taxed in India as well as in the country with which there is no Double Taxation Avoidance Agreement (DTAA) by providing a deduction from the Indian income-tax of a sum calculated on such doubly taxed income, at the Indian rate of tax or the rate of tax of said country, whichever is lower. In cases of countries with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created a significant amount of compliance burden on the assessees as well as administrative burden on the department. This is because the assessees are required to value the assets as per the provisions of Wealth-tax Rules for computation of net wealth and for certain assets like jewellery, they are required to obtain valuation report from the registered valuer. 58.4 Further, the assets which were specified for levy of wealth-tax, being unproductive, such as jewellery, luxury cars, etc. are difficult to be tracked and this gives an opportunity to the assessees to under report/under value the assets which are liable for wealth-tax. Due to this, the collection of wealth-tax over the years has not shown any significant growth and has only resulted into disproportionate compliance burden on the assessees and administrative burden on the department. 58.5 Therefore, the levy of wealth tax under the Wealth-tax Act, 1957 has been abolished with effect from the 1st April, 2016. It has also been provided that the objective of taxing high net worth persons shall be achieved by levying a surcharge on tax payer earning higher income as levy of surcharge is easy to collect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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