Amendment of section 10
5. In section 10 of the Income-tax Act, with effect from the 1st day of April, 2015,–– (a) in clause (23C),––
(i) after sub-clause (iiiac), the following Explanation shall be inserted, namely:––
“Explanation.––For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.”;
(ii) after the seventeenth proviso, the following proviso and the Explanation shall be inserted, namely:––
‘Provided also that where the fund or institution referred to in sub-clause (iv) or the trust or institution referred to in sub-clause (v) has been notified by the Central Government or approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), has been approved by the prescribed authority, and the notification or the approval is in force for any previous year, then, nothing contained in any other provision of this section [other than clause (1) thereof] shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year.
Explanation.––In this clause, where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year;’;
(b) after clause (23FB), the following clauses shall be inserted, namely:––
‘(23FC) any income of a business trust by way of interest received or receivable from a special purpose vehicle.
Explanation.—For the purposes of this clause, the expression “special purpose vehicle” means an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may be required by the regulations under which such trust is granted registration;
(23FD) any distributed income, referred to in section 115UA, received by a unit holder from the business trust, not being that proportion of the income which is of the same nature as the income referred to in clause (23FC);’;
(c) in clause (38),––
(i) after the words “unit of an equity oriented fund”, the words “or a unit of a business trust” shall be inserted;
(ii) after the proviso but before the Explanation, the following proviso shall be inserted, namely:––
“Provided further that the provisions of this clause shall not apply in respect of any income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47.”.
Notes on Clauses:
Clause 5 of the Bill seeks to amend section 10 of the Income- tax Act relating to incomes not included in total income.
Under the existing provisions contained in clause (23C) of the aforesaid section, exemption is provided in respect of income of university or other educational institutions, hospital or any other institution mentioned therein, if such university or other educational institution, hospital or any other institution are wholly or substantially financed by the Government.
It is proposed to amend the aforesaid clause so as to insert an Explanation to provide that any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.
It is further proposed to amend the said clause to provide that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), has been notified by the Central Government or approved by the prescribed authority and the notification or the approval is in force for any previous year, then nothing contained in any other provision of this section [other than clause (1) thereof] shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year.
It is also proposed to provide that income for the purposes of application shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under clause (23C) of section 10 or section 11 in any previous year.
It is proposed to insert a new clause (23FC) in section 10 so as to provide that any income of a business trust by way of interest received or receivable from a special purpose vehicle would not be included in the total income of the trust. It is further proposed to define the term “special purpose vehicle” to mean an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may be required by the regulations under which such trust is granted registration.
It is proposed to insert a new clause (23FD) in section 10 so as to provide that any distributed income, referred to in section 115UA, received by a unit holder from the business trust, not being that proportion of the income which is of the same nature as the income referred to in clause (23FC) of this section, shall not be included in the total income of such unit holder.
It is proposed to amend clause (38) of section 10 so as to provide that the provisions of the said clause shall also be applicable to units of a business trust as it is applicable to units of an equity oriented fund. It is also proposed to provide that the provisions of this clause shall not apply in respect of any income arising from transfer of any units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47.
These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.
