Budget 2024: Some suggestions for amendment / clarification on S.80-IAC related to eligible Start-up.

[DEV KUMAR KOTHARI]

Budget 2024: Some suggestions for amendment / clarification on S.80-IAC related to eligible  Start-up.

Start-up a continuing feature in economy:

Setting up of start-up is a continuing feature in economy wherein people have talent and enterprenuership. Unorganised start-up is a ground reality. Many people start some activity in nature of business and / or profession. There may be different results over a period of time.

 An enterpreneur who is first genertion enterpreneur faces more difficulties in comparison to second generation enterpreneur. An enterprenuer expanding a business in same or similar lines or related line to his family business have more chances of success then a new entrat in new line of adventure.

Success and failure are common phenomena  in any enterprenuership.

Many of present days large busienss houses were at some time just start-up in initial stage wherein  one enterpreneur made a beginning.

Organised start-up:

To avail benefit of government policies,  an enterprenuer has to follow rules and regulations that require organised start-up as per rules and regualtions.

Therefore, provisions relating to start-ups must be clear and certain beside being more practial and long-term so that people who intend to  become enterpreneur in future has also some degree of certainity as to his eligibility for setting up  a start-up.

For example , suppose a student  of B.tech or M.tech who intend to set up a start-up either individually or as a team of friend must have clear idea about  whether he will be eligible to set up an eligible start-up after he  complete his coursess  few year thereafter.

At present the provision provides that   “  it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, [2024];”

The terminal year is being amended from time to time so one cannot be sure whether he will be eligible to set- up a start-up after few year. For example, now we are hope full that in the budget 2023 the number 2024 is likely to be substituted by 2025.

Otherwise , a new entrant  has to incorporate his start-up by 31st Mach, 2024 if he intend to avail benefits in future.

If he so does, real start-up may or may not frurctify in future. This will add to so many start-up which will face closure within few years or some may close without any activity.

As discussed earlier, start-up is a common and regular feature and ground reality. Therefore, there should not be limitation for setting –up startup. Therefore, the following words  need to beommitted

 but before the 1st day of April, [2024];

Other forms should also be permitted:

At present  only  two form  of  organisation are  prescribed namely (1)  a company and (2) limited liability partnership.

Other forms of organisations like partnership firm, AOP and proprieterhip firms can  also be made eligible.

Period of deduction:

At present one can avail deduction for any three consecutive assessment years.

This should be made any three years. Furthermore deduction for at least any five years should be allowed to make benefit in real sense.

Business includes  profession must be clarified:

Languge used in provision is ‘ includes any profits and gains derived from eligible business’’.

To make provision sure  that deduction is also allowable for people like engineers, scientists, technocrats ,who are professionally qualified and are more likely to set up start-ups and run them in long run it is desirable that for clarification phrase”  profits and gains derived from eligible business or profession  be subsittituted

Although as per definition clause business is defined in   inclusive manner and  a start-upset up by a professional being commercial  activity and an adventure in nature of commerce is include However, inspite of that ,disputes arises as to whether a professional carrying organised and large activity is carrying a busieness or not and whether the benefit is allowable to a professional or not. In  this regard following definons are relevant:

Definitions. [Clause (1) to Clause (15)]

2. In this Act, unless the context otherwise requires,-

(13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture ;

 (36) "profession" includes vocation ;

Problem may be grave due to reason that in case of many professionals like engineers who engage in designing and product development, tax may be deducted as from payment for professional or technical fees. Therforre, tax officer can take a view that income  is not from  business as it is from a profession.

Earlier article:

Provisions to provide incentives for start-up must be simple, clear and liberal- even the proposal in Finance Bill 2020 will not serve intended purposes.