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TMI BlogINSERTION OF NEW SECTIONS IN INCOME TAX ACT, 1961 - PROPOSED BY FINANCE BILL, 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... INSERTION OF NEW SECTIONS IN INCOME TAX ACT, 1961 - PROPOSED BY FINANCE BILL, 2017 - By: - Mr. M. GOVINDARAJAN - Budget - Dated:- 9-2-2017 - - The Finance Bill, 2017 ( BILL for short) proposes to insert the following sections in the Income Tax Act, 1961 - Special provision for full value of consideration for transfer of share other than quoted share Clause 26 of the Bill seeks to insert Section 50CA with effect from 01.04.2018. This is a special provision for full value of consideration for transfer of share other than quoted share. The new Section provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being share of a company other than a quote share, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s less than the fair market value of such share determined in such manner as may be prescribed, the value so determined shall for the purposes of Section 48 , be deemed to be the full value of consideration received or accruing as a result of such transfer. The explanation to this section defines the term quoted share as the share quoted on any recognized stock exchange with regularly from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business. Limitation on interest deduction in certain cases Section 94B Clause 43 seeks to insert this section with effect from 01.04.2018. Section 94B(1) provides that notwithstanding anything contained in this Act, where an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian company, or a permanent establishment of a foreign company in India, being the borrower, pays interest or similar consideration exceeding ₹ 1 crore which is deductible in computing income chargeable under the head Profits and gains of business or profession in respect of any debt issued by a non-resident, being an associated enterprise of such borrower, the interest shall not be deductible in computation of income under the said head to the extent that it arises from excess interest, as specified in sub-section ( 2 ). Where the debt is issued by a lender which is not associated but an associated enterprise either provides an implicit or explicit guarantee to such lender or deposits a corresponding and matching amount of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds with the lender, such debt shall be deemed to have been issued by an associated enterprise. Section 94B (2) provides that for the purposes of Section 94B (1) the excess interest shall mean an amount of total interest paid or payable in excess of 30% of earnings before interest, taxes, depreciation and amortization of the borrower in the previous year or interest paid or payable to associated enterprises for that previous year, whichever is less. Section 94B (c) provides the non applicability of Section 94 B (1). According to this Section, Section 94B (1) shall apply to an Indian company or a permanent establishment of a foreign company which is engaged in the business of banking or insurance. Section 94B (d) provides that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re for any assessment year, the interest expenditure is not wholly deducted against income under the head Profits and gains of business or profession , so much of the interest expenditure as has not been so deducted, shall be carried forward to the following assessment year or assessment years, and it shall be allowed as a deduction against the profits and gains, if any, of any business or profession carried on by it and assessable for that assessment year to the extent of maximum allowable interest expenditure in accordance with Section 94B (2). No interest expenditure shall be carried forward under this sub-section for more than eight assessment years immediately succeeding the assessment year for which the excess interest expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as first computed. Section 94B (5) provides definition for the following terms associated enterprise shall have the meaning assigned to in Section 92A (1) and (2); debt means any loan, financial instrument, finance lease, financial derivative, or any arrangement that gives rise to interest, discounts or other finance charges that are deductible in the computation of income chargeable under the head Profits and gains of business or profession ; permanent establishment includes a fixed place of business through which the business of the enterprise is wholly or partly carried on. Payment of rent by certain individuals or HUF Clause 63 of the Bill seeks to insert Section 194-IB with effect from 01.06.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 194-IB (1) provides that any person, being an individual or a HUF (other than those referred to in the second proviso to Section 194-I ) responsible for paying to a resident any income by way of rent exceeding ₹ 50,000/- for a month or part of a month during the previous year shall deduct an amount equal to 5% of such income as income tax thereon. Section 194-IB (2) provides that the income tax above shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hichever is earlier. Section 194-IB (3) provides that the provisions of Section 203A shall not apply to a person required deducting tax in accordance with the provisions of this Section. Section 194-IB (4) provides that in a case where the tax is required to be deducted as per the provisions of Section 206AA . Such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be. The explanation to this section defines the term rent as any payment, by whatever name called, under any lease, sub lease, tenancy or any other agreement or arrangement for the use of any land or building or both. Payment under specified agreement Clause 64 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides to seek a new Section 194-IC. This Section provides that notwithstanding anything contained in section 194-IA , any person responsible for paying to a resident any sum by way of consideration, not being consideration in kind, under the agreement referred to in Section 45(5A), shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 10% of such sum as income-tax thereon. Requirement to furnish PAN by collectee Clause 72 seeks to insert a new Section 206CC. This section provides the consequences for non furnishing of PAN by collectee. Section 206 CC (1) provides th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is collectible at source under Chapter XVII-BB shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at the higher of the following rates, namely:- at twice the rate specified in the relevant provision of this Act; or at the rate of five per cent. Section 206 CC (2) provides that no declaration under Section 206C (1A) shall be valid unless the person furnishes his Permanent Account Number in such declaration. In case any declaration becomes invalid, the collector shall collect the tax at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource in accordance with the provisions of sub-section ( 1 ). No certificate under Section 206C (9) shall be granted unless the application made under that section contains the PAN of the applicant. The collectee shall furnish his PAN to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other. Where the PAN provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his PAN to the collector and the provisions of sub-section ( 1 ) shall apply accordingly. The provisions of this section shall not apply to a non-resident who does not have permanent establishment in India, which is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined as including a fixed place of business through which the business of the enterprise is wholly or partly carried on. Fee for default in furnishing return Clause 75 of the Bill seeks to insert Section 234F which will come into effect form 01.04.2018. The new Section provides for paying fee for filing the return belatedly. This Section provides that without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139 , fails to do so within the time prescribed in sub-section ( 1 ) of said section, he shall pay, by way of fee, a sum of, - Rs.5000/- if the return is furnished on or before 31 st December of the assessment year; Rs.10,000/- in any other case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the total income of the person does not exceed ₹ 5 lakhs, the fee payable under this section shall not exceed ₹ 1,000/- The provisions of this section shall apply in respect of return of income required to be furnished for the assessment year commencing on or after the 1st day of April, 2018. Withholding of refund in certain cases Clause 76 of the bill seeks to insert Section 241A. According to this section for every assessment year commencing on or after the 1st day of April, 2017, where refund of any amount becomes due to the assessee under the provisions of Section 143 (1) and the Assessing Officer is of the opinion, having regard to the fact that a notice has been issued under Section 143(2) in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such return, that the grant of the refund is likely to adversely affect the revenue, he may, for reasons to be recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, as the case may be, withhold the refund up to the date on which the assessment is made. Mode of undertaking transactions Clause 83 of the Bill seeks to insert Section 269 ST. According to this section no person shall receive an amount of ₹ 3 lakhs or more- in aggregate from a person in a day; or in respect of a single transaction; or in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tronic clearing system through a bank account. This provision is not applicable to- any receipt by- Government Any banking company, post office savings bank or co-operative bank; Transactions of the nature referred to in Section 269SS ; Such other persons of class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify. Penalty for failure to comply with the provisions of Section 269 ST Clause 84 seeks to insert Section 269 ST which provides penalty for failure to comply with the provisions of Section 269 ST discussed as above. This Section provides that if a person receives any sum in contravention of the provisions of section 269ST, he shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to pay, by way of penalty, a sum equal to the amount of such receipt. No penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention. Any penalty imposable shall be imposed by the Joint Commissioner. Penalty for furnishing incorrect information in reports or Certificates Clause 86 of the Bill seeks to insert Section 271J which provides penalty for furnishing incorrect information in reports or certificates. According to this section without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed incorrect information in any report or certificate furnished under any provision of this Act or the rules made there under, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ₹ 10,000/- for each such report or certificate. The explanation to this section defines the following terms- accountant means an accountant referred to in the Explanation below Section 288 (2) ; which defines merchant banker means Category I merchant banker registered with SEBI; registered valuer means a person defined in Section 2(oaa) of Wealth Tax Act, 1975 . - - Scholarly articles for knowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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