9. Amendment of section 28
In section 28 of the Income-tax Act, with effect from the 1st day of April, 2019,––
(I) in clause (ii), after sub-clause (d), the following sub-clause shall be inserted, namely:-
“(e) any person, by whatever name called, at or in connection with the termination or the modification of the terms and conditions, of any contract relating to his business;”;
(II) after clause (vi), the following clause shall be inserted, namely:––
“(via) the fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner;”.
Notes on Clauses:
Clause 9 of the Bill seeks to amend section 28 of the Income-tax Act relating to profits and gains of business or profession.
The said section, inter alia, provides that certain types of compensation receipts as set out in sub-clauses (a) to (d) of clause (ii) of the said section are taxable under the head "Profits and gains of business or profession".
It is proposed to insert a new sub-clause (e) in the said clause (ii) so as to provide that any compensation due or received by any person, by whatever name called, at or in connection with the termination or the modification of the terms and conditions, as the case may be, of any contract relating to his business shall be chargeable to tax under the head "Profits and gains of business or profession".
It is further proposed to amend the said section so as to provide that the fair market value determined in the prescribed manner of the inventory as on the date of its conversion or treatment as capital assets shall be chargeable to tax under the head “Profit and gains of business and profession”.
These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent years.
