Amendment of section 115JB.
31. In section 115JB of the Income-tax Act, in sub-section (2),––
(a) in Explanation 1,––
(i) in clause (fb), in sub-clause (B), for the words “interest, royalty”, the words “interest, dividend, royalty” shall be substituted;
(ii) in the long line, in clause (iid), in sub-clause (B), for the words “interest, royalty”, the words “interest, dividend, royalty” shall be substituted;
(b) after sub-section (2C), the following sub-section shall be inserted, namely: ──
“(2D) In the case of an assessee being a company, where there is an increase in book profit of the previous year due to income of past year or years included in the book profit on account of an advance pricing agreement entered into by the assessee under section 92CC or on account of secondary adjustment required to be made under section 92CE, the Assessing Officer shall, on an application made to him in this behalf by the asssessee, recompute the book profit of the past year or years and tax payable, if any, by the assessee during the previous year under sub-section (1), in such manner as may be prescribed and the provisions of section 154 shall, so far as may be, apply and the period of four years specified in sub-section (7) of that section shall be reckoned from the end of the financial year in which the said application is received by the Assessing Officer.”.
Notes on Clauses:
Clause 31 of the Bill seeks to amend section 115JB of the Income-tax Act relating to special provision for payment of tax by certain company.
The said section provides for levy of tax on the basis of book profit which is determined after making certain adjustments to the net profit disclosed in the profit and loss account prepared in accordance with the provisions of the Companies Act, 2013.
Clause (iid) of Explanation 1 of the said section provides that the amount of income in the nature of capital gains, interest, royalty or fee for technical services accruing or arising to an assessee, being a foreign company, will be reduced from the book profit if such income is credited to the statement of profit and loss and tax on such income is at a rate less than the rate specified under that section. Further such assessee will be allowed expenses relatable to such income mentioned in the said clause under sub-clause (B) of clause (fb) of the said Explanation.
It is proposed to amend the said clause (fb) and clause (iid), occurring in the long line of Explanation 1, so as to provide similar relief to dividend as already there for capital gains, interest, royalty and fee for technical services as provided in these clauses.
It is further proposed to insert a new sub-section (2D) in the said section so as to provide that where in the case of the company there is an increase in book profit of the previous year due to income of past year or years included in the book profit on account of an advance pricing agreement entered into by the assessee under section 92CC or on account of secondary adjustment required to be made under section 92CE, the Assessing Officer shall, on an application made to him in this behalf by the asssessee, recompute the book profit of the past year or years and tax payable, if any, by the assessee during the previous year under sub-section (1), in such manner as may be provided by rules and the provisions of section 154 shall, so far as may be, apply and the period of four years specified in sub-section (7) of that section shall be reckoned from the end of the financial year in which the said application is received by the Assessing Officer.
These amendments will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
