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TMI BlogRATIONALISATION MEASURES - DIRECT TAXESX X X X Extracts X X X X X X X X Extracts X X X X ..... for computation of minimum alternate tax (MAT) liability under section 115JB for Ind AS compliant companies in the year of adoption and thereafter. The Committee submitted first interim report on 18th March, 2016 which was placed in public domain by the CBDT for wider public consultations. The Committee submitted the second interim report on 5th August, 2016 which was also placed in public domain. The comments/suggestions received in respect of the first and second interim report were examined by the Committee. After taking into account all the suggestions/comments received, the Committee submitted its final report on 22nd December, 2016. In view of the above, it is proposed to amend section 115JB so as to provide the framework for computation of book profit for Ind AS compliant companies in the year of adoption and thereafter. The main features of this proposed framework are as under: A. MAT on Ind AS compliant financial statement (i) No further adjustments to the net profits before other comprehensive income of Ind AS compliant companies, other than those already specified under section 115JB of the Act shall be made. (ii) The other comprehensive income includes certain items th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequently be reclassified to the profit and loss, shall be included in book profits in the year in which these are reclassified to the profit and loss; (II) Those adjustments recorded in other comprehensive income and which would never be subsequently reclassified to the profit and loss shall be included in book profits as specified hereunder- SI. No. Items Point of time 1 Changes in revaluation surplus of PPE and Intangible assets (Ind AS 16 and Ind AS 38) To be included in book profits at the time of realisation/disposal/retirement or otherwise transferred 2 Gains and losses from investments in equity instruments designated at fair value through other comprehensive income (Ind AS 109) To be included in book profits at the time of realisation/disposal/retirement or otherwise transferred 3 Remeasurements of defined benefit plans (Ind AS 19) To be included in book profits equally over a period of five years starting from the year of first time adoption of Ind AS 4 Any other item To be included in book profits equally over a period of five years starting from the year of first time adoption of Ind AS (III) All other adjustments recorded in Reserves and Surplus (excluding Capital Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of disposal of foreign operations as mentioned in paragraph 48 of Ind AS 21. (ii) All other adjustments to retained earnings at the time of transition (including for example, Decommissioning Liability, Asset retirement obligations, Foreign exchange capitalisation/decapitalization, Borrowing costs adjustments etc.) shall be included in book profits, equally over a period of five years starting from the year of first time adoption of Ind AS. (iii) Section 115JB of the Act already provides for adjustments on account of deferred tax and its provision. Any deferred tax adjustments recorded in Reserves and Surplus on account of transition to Ind AS shall also be ignored. C. Reference year for first time adoption adjustments In the first year of adoption of Ind AS, the companies would prepare Ind AS financial statement for reporting year with a comparative financial statement for immediately preceding year. As per Ind AS 101, a company would make all Ind AS adjustments on the opening date of the comparative financial year. The entity is also required to present an equity reconciliation between previous Indian GAAP and Ind AS amounts, both on the opening date of preceding year as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment will take effect, retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. [Clause 150] Rationalization of rebate allowable under Section 87A The existing provisions of section 87A provide for a rebate up to ₹ 5000 from the income-tax payable to a resident individual if this total income does not exceed ₹ 5,00,000. In view of proposed rationalisation of tax rates for individuals in the income slab of ₹ 2,50,000 to ₹ 5,00,000,it is proposed to amend section 87A so as to reduce the maximum amount of rebate available under this section from existing ₹ 5000 to ₹ 2500. It is also proposed to provide that this rebate shall be available to only resident individuals whose total income does not exceed ₹ 3,50,000. This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. [Clause 38] Rationalisation of provisions of Section 10AA Under the existing provisions of the section 10AA, deduction is allowed from the total income of an assessee, in respect of profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, inter alia, provides that in the case of credit or payment of any sum chargeable under the provisions of this Act, the 'person responsible for paying' shall be the payer himself, or, if the payer is a company, the company itself including the principal officer thereof. However, the said section does not cover in respect of payment of any sum as per sub-section (6) of section 195. Which mandates the 'person responsible for paying' to furnish information relating to payment of any sum, whether chargeable to tax or not. Thus in order to bring clarity to the meaning of 'person responsible for paying' in case of payment by a resident to a non-resident in accordance with section 195(6) of the Act, it is proposed to amend the said section of the Act to provide that in the case of furnishing of information relating to payment to a non-resident, not being a company, or to a foreign company, of any sum, whether or not chargeable under the provisions of this Act, 'person responsible for paying' shall be the payer himself, or, if the payer is a company, the company itself including the principal officer thereof. This amendment will take effect from 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in terms of Sub-section (7B) of section 35AD The existing provisions of Section 35AD of the Act, inter alia provides for investment linked deduction on amount of capital expenditure incurred, wholly or exclusively, the purposes of business, during the previous year for a specified business excluding capital expenditure incurred for acquisition of any land or goodwill or financial instrument. Further sub-section (7B) of Section 35AD provides that where any asset on which benefit of section 35AD is claimed and allowed, is used for a purpose other than specified business, the benefit of deduction already granted under section 35AD shall be deemed to be the income of the assessee. However, it further provides that the deemed income shall be net of normal depreciation as would be entitled. Clause (1) of section 43 defines actual cost for the purposes of claiming depreciation under section 32 of the Act in certain situations. However, there is no clarity on determination of actual cost for the purposes of allowance of depreciation of such assets in respect of which the deduction which is already allowed in a previous year under section 35AD of the Act, is withdrawn in terms of sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner. Further, as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years. [Clauses 9 10] Cost of Acquisition of capital assets of entities in case of levy of tax on accreted income under section 115TD The exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate under sub section (9) of section 206C shall be granted unless it contains the Permanent Account Number of the applicant. V. the collector knows about the correct PAN of the collectee it is also proposed to provide for mandatory quoting of PAN of the collectee by both the collector and the collectee in all correspondence, bills and vouchers exchanged between them. VI. that the collectee shall furnish his Permanent Account Number to the collector who shall indicate the same in all its correspondence, bills, vouchers and other documents which are sent to collectee. VII. where the Permanent Account Number provided by the collectee is invalid or it does not belong to the collectee, then it shall be deemed that Permanent Account Number has not been furnished to the collector. VIII. to exempt the non-resident who does not have permanent establishment in India from the provisions of this proposed section 206CC of the Act. This amendment will take effect from 1st April, 2017. [Clause 72] Rationalization of deduction under section 80CCG. Under the existing provisions of section 80CCG, deduction for three consecutive assessment years is allowed upto ₹ 25,000 to a resident indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income-tax authority so authorised. Confidentiality and sensitivity are the hallmarks of proceedings under section 132 and section 132A. However, certain judicial pronouncements have created ambiguity in respect of the disclosure of 'reason to believe' or 'reason to suspect' recorded by the income-tax authority to conduct a search under section 132 or to make requisition under section 132A. It is therefore proposed to insert an Explanation to sub-section (1) and to sub-section (1A) of section 132 and to sub-section (1) of section 132A to declare that the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal. These amendments will take effect retrospectively from the date of enactment of the said provisions viz. to sub-section (1) of section 132 from 1st day of April, 1962 and to sub-section (1A) of section 132 and to sub-section (1) of section 132A from 1st day of October, 1975. [Clauses 50 51] Power of provisional attachment and to make reference to Valuation Officer to authorised officer Section 132 of the Act provides the power of search and seizure subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the authorities working in the Investigation Directorate, it is proposed to amend the first proviso of the said section and provide that the power in respect of inquiry or proceeding under the Act, as referred to in clause (6) of the said section, may also be exercised by the Joint Director, the Deputy Director and the Assistant Director. It is further proposed to amend the second proviso of the said section to provide that the Joint Director, the Deputy Director or the Assistant Director may exercise the powers in respect of such inquiry, without seeking prior approval of higher authorities. These amendments will take effect from 1st April, 2017. [Clause 52] Extension of the power to survey The existing provisions of section 133A empower an income-tax authority to enter any place, at which a business or profession is carried on, or at which any books of account or other documents or any part of cash or stock or other valuable article or thing relating to the business or profession are kept, for the purposes of conducting a survey. It is proposed to widen the scope of the said section by amending sub-section (1) to include any place, at which an activity for charitable purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar or years beyond the sixth assessment year already provided upto the tenth assessment year if- (i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year); (ii) such income escaping assessment is represented in the form of asset; (iii) the income escaping assessment or part thereof relates to such year or years. It is however proposed that the amended provisions of section 153A shall apply where search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. It is also proposed to consequentially amend section 153C to provide a reference to the relevant assessment year or years as referred to in section 153A. These amendments will take effect from 1st April, 2017. [Clauses 59, 61, 150] Exemption of income of Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund Under the existing provisions contained in clause (23C) of section 10, exemption is provide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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