CHAPTER III
DIRECT TAXES
Income-tax
3. Amendment of section 2.
In section 2 of the Income-tax Act,––
(a) in clause (22), after Explanation 2, the following Explanation shall be inserted, namely:––
“Explanation 2A.–– In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation.”;
(b) with effect from the 1st day of April, 2019,––
(i) in clause (24),––
(A) after sub-clause (xii), the following sub-clause shall be inserted, namely:––
“(xiia) the fair market value of inventory referred to in clause (via) of section 28;”;
(B) after sub-clause (xviia), the following sub-clause shall be inserted, namely:––
“(xviib) any compensation or other payment referred to in clause (xi) of sub-section (2) of section 56;”;
(ii) in clause (42A), in Explanation 1, in clause (i), after sub-clause (b), the following sub-clause shall be inserted, namely:––
“(ba) in the case of a capital asset referred to in clause (via) of section 28, the period shall be reckoned from the date of its conversion or treatment;”.
Notes on Clauses:
Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.
Clause (22) of the said section provides the definition of the term “dividend”. Explanation 2 to the said clause clarifies the expression “accumulated profits” for the purposes of the said clause.
It is proposed to insert a new Explanation to the said clause to provide that in the case of an amalgamated company, accumulated profits or loss in the hands of the amalgamated company shall be increased by the accumulated profits of the amalgamating company, whether capitalised or not, on the date of amalgamation.
This amendment will take effect from 1st April, 2018 and will accordingly apply in relation to the assessment year 2018-2019 and subsequent years.
Clause (24) of the said section defines the expression “income”.
It is proposed to insert a new sub-clause (xiia) in the said clause (24) so as to include the fair market value of inventory referred to in Clause (via) of section 28, also within the definition of income.
It is further proposed to insert a new sub-clause (xviib) in the said clause (24) so as to include any compensation or other payment referred to in clause (xi) of sub-section (2) of section 56, also within the definition of income.
Clause (42A) of the said section, inter alia, provides for determination of period for which the capital asset is held by the assessee.
It is proposed to insert a new sub-clause (ba) in clause (i) of Explanation 1 of the said clause (42A) so as to provide that in case inventory is converted into or treated as a capital asset under the proposed new clause (via) of section 28, the period shall be reckoned from the date of its conversion or the treatment.
These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019- 2020 and subsequent years.
