Amendment of section 115U.
54. In section 115U of the Income-tax Act,—
(i) with effect from the 1st day of April, 2013,—
(a) in sub-section (1), for the words “income received”, at both the places where they occur, the words “income accruing or arising to or received” shall respectively be substituted;
(b) in sub-section (2),—
(i) for the words “The person responsible for making”, the words “The person responsible for crediting or making” shall be substituted;
(ii) for the words “to the person receiving such income”, the words “to the person who is liable to tax in respect of such income” shall be substituted;
(iii) for the words “income paid”, the words “income paid or credited” shall be substituted;
(c) in sub-section (3),—
(i) for the words “income paid”, the words “income paid or credited” shall be substituted;
(ii) for the words “the person receiving such income as it had been”, the words, brackets and figure “the person referred to in sub-section (1) as it had been” shall be substituted;
(iii) for the words “had accrued”, the words “had accrued or arisen” shall be substituted;
(d) for sub-section (4), the following sub-section shall be substituted, namely:—
“(4) The income accruing or arising to or received by the venture capital company or venture capital fund, during a previous year, from investments made in venture capital undertaking if not paid or credited to the person referred to in sub-section (1), shall be deemed to have been credited to the account of the said person on the last day of the previous year in the same proportion in which such person would have been entitled to receive the income had it been paid in the previous year.”;
(ii) the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted with effect from the 1st day of July, 2012, namely:—
“Explanation 2.—For the removal of doubts, it is hereby declared that any income which has been included in total income of the person referred to in sub-section (1) in a previous year, on account of it having accrued or arisen in the said previous year, shall not be included in the total income of such person in the previous year in which such income is actually paid to him by the venture capital company or the venture capital fund.”.
Notes on Clauses:
Clause 54 of the Bill seeks to amend section 115U of the Income-tax Act relating to tax on income in certain cases.
The existing provisions of sub-section (1) of the aforesaid section 115U provide that any income received by a person out of investments made in a venture capital company or venture capital fund shall be chargeable to income-tax in the same manner as if it were the income received by such person had he made investments directly in the venture capital undertaking.
It is proposed to amend the aforesaid sub-section (1) to substitute the words “income received” with the words “income accruing or arising to or received” so as to provide that any income accruing or arising to or received by a person out of investment made in a venture capital company or a venture capital fund shall be taxed as if it were income accrued, arisen to or received by such person from investment directly in the venture capital undertaking.
The existing provisions of sub-section (2) of the aforesaid section provide that the person responsible for making payment of the income on behalf of a venture capital company or a venture capital fund and the venture capital company or venture capital fund shall furnish, within such time as may be prescribed, to the person receiving such income and to the prescribed income-tax authority, a statement in the prescribed form and verified in the prescribed manner, giving details of the nature of the income paid during the previous year and such other relevant details as may be prescribed.
It is proposed to amend the aforesaid sub-section (2) so as to provide that the person responsible for crediting or making payment of the income on behalf of a venture capital company or venture capital fund and the venture capital company or venture capital fund shall furnish a statement in the prescribed form, giving details of the nature of the income paid or credited during the period, to the person who is liable to tax in respect of such income and to the prescribed income-tax authority.
The existing provisions of sub-section (3) of the aforesaid section provide that the income paid by the venture capital company and the venture capital fund shall be deemed to be of the same nature and in the same proportion in the hands of the person receiving such income as it had been received by, or had accrued to, the venture capital company or the venture capital fund, as the case may be, during the previous year.
It is proposed to amend the aforesaid sub-section (3) so as to provide that the income paid or credited by the venture capital company and the venture capital fund shall be deemed to be of the same nature and in the same proportion in the hands of the person referred to in sub-section (1) as it had been received by, or had accrued or arisen to, the venture capital company or the venture capital fund, as the case may be, during the previous year.
The existing provisions of sub-section (4) of the aforesaid section provide that the provisions of Chapter XII-D or Chapter XII-E or Chapter XVII-B shall not apply to the income paid by a venture capital company or venture capital fund under the Chapter “Special Provisions Relating to Tax on Income Received from venture capital companies and venture capital funds”.
It is proposed to substitute the aforesaid sub-section so as provide that the income accruing or arising to or received by the venture capital company or venture capital fund, during a previous year, from investments made in venture capital undertaking if not paid or credited to the person referred to in sub-section (1) shall be deemed to have been credited to the account of the said person on the last day of the previous year in the same proportion in which such person would have been entitled to receive the income had it been paid in the previous year.
These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.
It is also proposed to insert a new Explanation so as to clarify that any income which has been included in total income of the person referred to in sub-section (1) in a previous year, on account of it having accrued or arisen in the said previous year, shall not be included in the total income of such person in the previous year in which such income is actually paid to him by the venture capital fund or venture capital company.
This amendment will take effect from 1st July, 2012.
