TMI BlogNotes on clauses - Income-taxX X X X Extracts X X X X X X X X Extracts X X X X ..... pecial cases during the financial year 2009-2010. Rates of deduction of tax at source during the financial year 2010-2011 from income other than "Salaries" Part II of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source during the financial year 2010-2011 from income other than "Salaries". The rates are the same as those specified in Part II of the First Schedule to the Finance (No. 2) Act, 2009 for the purposes of deduction of income tax at source during the financial year 2009-2010. The amount of tax so deducted shall be increased by a surcharge at the rate of two and one-half per cent. in the case of a company other than a domestic company. In all other cases, no surcharge would be levied on the tax deducted at source. Rates for deduction of tax at source from "Salaries", computation of "advance tax" and charging of income-tax in special cases during the financial year 2010-2011 Part III of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source from, or paid on, income under the head "Salaries" and also the rates at which "advance tax" is to be paid and income-tax is to be calculate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of companies. In such cases, the rates of tax will continue to be the same as that specified for the assessment year 2010-2011. For the financial year 2010-2011, surcharge in the case of a domestic company having income above one crore rupees is proposed to be reduced to seven and one-half per cent. from the existing rate of ten per cent. Marginal relief will be provided. In case of a company other than a domestic company, the surcharge shall continue to be levied at the rate of two and one-half per cent. and subject to the same conditions as were applicable for the assessment year 2010-2011. In all other cases (including sections 115JB, 115-O, 115R, etc.) where surcharge at the rate of ten per cent. was applicable, the surcharge will be applicable at the rate of seven and one-half per cent. "Education Cess" at the rate of two per cent. and "Secondary and Higher Education Cess" at the rate of one per cent. shall continue to be levied in all cases covered under Part III of the First Schedule. In the cases covered under Part II of the First Schedule, there will be no levy of the Education Cess and Secondary and Higher Education Cess on tax deducted or collected at source in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after sub-section (2) of the aforesaid section provide that, for the removal of doubts, for the purposes of the said section, where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1), such income shall be included in the total income of the non-resident, whether or not, the nonresident has a residence or place of business or business connection in India. It is proposed to substitute the said Explanation so as to provide that the income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of subsection (1) and shall be included in the total income of the nonresident, whether or not,- (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India. This amendment will take effect, retrospectively, from 1st June, 1976 and will, accordingly, apply in relation to the assessment year 1977-1978 and subsequent years. 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 (21) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1), which has been granted registration under sub-section (1), are not genuine or are not being carried out in accordance with the objects of the trust or institution, the Commissioner shall, after giving a reasonable opportunity of being heard to the said trust or institution, pass an order in writing cancelling the registration granted under clause (b) of sub-section (1). It is proposed to amend the said sub-section (3) so as to also provide for cancellation of registration where any trust or institution has obtained registration at any time under section 12A before its amendment. This amendment will take effect from 1st June, 2010. Clause 8 of the Bill seeks to amend section 32 of the Income tax Act relating to depreciation. The existing provisions contained in the aforesaid section provide that the aggregate depreciation allowable to the predecessor and successor business entities in case of succession or amalgamation shall not exceed in any previous year the deduction allowable at prescribed rates as if the succession or amalgamation had not taken place and such deduction shall be apportioned between the two entities in the ratio of the number of days for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Institute of Technology or a specified person for the purpose of an approved scientific research programme. It is proposed to amend the said clause (a) so as to enhance the said weighted deduction from one hundred and twenty-five per cent. to one hundred and seventy-five per cent. Sub-clause (iii) of clause 9 seeks to amend sub-section (2AB) of the aforesaid section 35. The existing provisions contained in clause (1) of sub-section (2AB) of the said section provide for weighted deduction of one hundred and fifty per cent. of the expenditure incurred by a company on scientific research on an approved in-house research and development facility. It is proposed to amend the said clause (1) so as to enhance the said weighted deduction from one hundred and fifty per cent. to two hundred per cent. These amendments will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011- 2012 and subsequent years. Clause 10 of the Bill seeks to amend section 35AD of the Income tax Act relating to deductions in respect of expenditure on specified business. Under the existing provisions of the aforesaid section, deduction in respect of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied by the Central Government should commence its operation on or after 1st April, 2010. The existing provisions of clause (c) of sub-section (8) of the aforesaid section 35AD define the expression "specified business" to mean the business of setting up and operating a cold chain facility, a warehousing facility for storage of agricultural produce and laying and operating a cross-country natural gas or crude or petroleum oil pipeline network. Sub-clause (d) proposes to amend clause (c) of sub-section (8) of the aforesaid section so as to bring the business relating to building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government within the purview of "specified business". These amendments will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 11 of the Bill seeks to amend section 35DDA of the Income-tax Act relating to amortisation of expenditure incurred under voluntary retirement scheme. The existing provisions contained in the aforesaid section provide that where an assessee incurs any expenditure in any previous year b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will be attracted, if, after deduction of tax during the previous year, the same has not been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139. This amendment will take effect retrospectively from 1st April, 2010, and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years. Clause 13 of the Bill seeks to amend section 43 of the Income tax Act relating to definitions of certain terms relevant to income from profits and gains of business or profession. The existing provisions contained in Explanation 13 to clause (1) of the aforesaid section provide that the actual cost of any capital asset on which deduction has been allowed or is allowable under section 35AD shall be treated as 'nil' in specified circumstances. Sub-clause (a) proposes to make a reference of clause (xiiib) of section 47 in sub-clause (iii) of clause (b) of the said Explanation, to provide that in case of succession of a private company or unlisted public company by a limited liability partnership, the actual cost of capital assets on which deduction has been allowed under section 35AD to the predecessor company shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total turnover or gross receipts in previous year does not exceed forty lakh rupees for the purpose of computing profits and gains of business on presumptive basis. It is proposed to enhance the said limit from forty lakh rupees to sixty lakh rupees. This amendment will take effect from 1st April, 2011, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 16 of the Bill seeks to amend section 44BB of the Income tax Act relating to special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. Under the existing provisions contained in sub-section (1) of the aforesaid section, income of a non-resident assessee who is engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils is computed at ten per cent. of the aggregate of the amounts paid or payable to the assessee or to any person on his behalf, whether in or out of India on account of the provisions of such services and facilities. The proviso to the said sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely before the conversion become the assets and liabilities of the limited liability partnership; (b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership, and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion; (c) the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership; (d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent. at any time during the period of five years from the date of conversion; (e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and (f) no amount is paid, either directly or indirectly, to any partner out of balance of accumul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (vii) of sub-section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii). Sub-clause (b) proposes to amend the aforesaid sub-section so as to provide that the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purpose of clause (viia) of sub-section (2) of section 56 also. This amendment is consequential to the amendment made vide sub-clause (b) of clause 21 of the Bill and will take effect from 1st June, 2010 and will, accordingly, apply to the assessment year 2011-2012 and subsequent years. Clause 21 of the Bill seeks to amend section 56 of the Income tax Act relating to income from other sources. Under the existing provisions contained in sub-clause (b) of clause (vii) of sub-section (2) of the aforesaid section, if an assessee being an individual or a Hindu undivided family receives any immovable property without consideration or for inadequate consideration, the value of the said property shall be treated as income in the hands of assessee and shall be liable to tax. It is proposed to subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to amend section 72A of the Income tax Act, relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. Sub-clause (a) proposes to insert a new sub-section (6A) which provides that in case of succession of business, whereby, a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, notwithstanding anything contained in any other provisions of the Act, the accumulated loss and the unabsorbed depreciation of the predecessor company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the successor limited liability partnership for the previous year in which business reorganisation was effected and the other provisions of the Act relating to set off and carry forward loss and allowance for depreciation shall apply accordingly. However, if the conditions stipulated in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation which had been allowed shall be deemed to be the income chargeable to tax of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (7) to provide that where a deduction under any provision of this Chapter under the heading "C.- Deductions in respect of certain incomes" is claimed and allowed in respect of profits of any of the specified business referred to in clause (c) of sub-section (8) of section 35AD for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 24 of the Bill seeks to insert a new section 80CCF in the Income-tax Act relating to deduction in respect of subscription to long-term infrastructure bonds. It is proposed to insert a new section so as to provide that a sum of rupees twenty thousand in addition to the existing limit of rupees one lakh for tax savings under the Income-tax Act may be allowed as a specific deduction in computing the total income of an assessee being an individual or a Hindu undivided family if such sum is paid or deposited at any time during the previous year relevant to the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act relating to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Under the existing provisions contained in sub-section (10) of the aforesaid section, hundred per cent. deduction is available in respect of profits derived by an undertaking from developing and building housing projects approved by a local authority before 31st March, 2008. It is further provided in clause (a) that where a housing project has been, or, is approved by the local authority on or after 1st April, 2004, it shoud be completed within four years from the end of the financial year in which the housing project is approved by the local authority. It is proposed to increase the period for completion of a housing project, approved on or after 1st April, 2005, from four years to five years. Under the existing provisions contained in clause (d) of subsection (10) of the aforesaid section, the built-up area of the shops and other commercial establishments included in the housing project should not exceed five per cent. of the aggregate built-up area of the housing project or 2,000 square feet, whichever is less. It is prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years. Clause 30 of the Bill seeks to amend section 115JB of the Income-tax Act relating to special provision for payment of tax by certain companies. Under the existing provisions contained in sub-section (1) of the aforesaid section in case of a company, if the tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after 1st April, 2010, is less than fifteen per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be fifteen per cent. of such book profit. It is proposed to amend sub-section (1) of the aforesaid section to provide that if the income-tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after 1st April, 2011 is less than eighteen per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. It is proposed to amend the said sub-section (1) so as to also enable the Assessing Officer to make reference to the Valuation Officer for making an estimate of fair market value of any property referred to in sub-section (2) of section 56 of the Act. This amendment will take effect from 1st July, 2010. Clause 34 of the Bill seeks to amend section 143 of the Income tax Act relating to assessment. Under the existing provisions contained in sub-section (1B) of the aforesaid section, the Central Government may, save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A) of that section, by notification in the Official Gazette, direct that any of the provisions of the Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification. However, no direction is to be issued after 31st March, 2010. Sub-clause (a) proposes to extend the time limit from 31st March, 2010 to 31st March, 2011. This amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usand rupees. This amendment will take effect from 1st July, 2010. Clause 37 of the Bill seeks to amend section 194C of the Income-tax Act relating to payments to contractors. Under the existing provisions contained in sub-section (5) of the aforesaid section, no deduction of income-tax shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor if such sum does not exceed twenty thousand rupees. However, if the aggregate of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums shall be liable to deduct income-tax. It is proposed to enhance the said limit from twenty thousand rupees for a single transaction to thirty thousand rupees and from fifty thousand rupees for the aggregate transactions during the financial year to seventy five thousand rupees. These amendments will take effect from 1st July, 2010. Clause 38 of the Bill seeks to amend section 194D of the Income tax Act relating to insurance commission. Under the existing provisions contained in the aforesaid section, no deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usand rupees. It is proposed to enhance the said limit from twenty thousand rupees to thirty thousand rupees. This amendment will take effect from 1st July, 2010. Clause 42 of the Bill seeks to amend section 201 of the Income tax Act relating to consequences of failure to deduct or pay tax. Under the existing provisions contained in sub-section (1A) of the aforesaid section, the person, principal officer and the company referred to in sub-section (1) of the aforesaid section, in case of failure of deduction or payment of tax, are liable to pay simple interest at one per cent. for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200. It is proposed to amend sub-section (1A) of the aforesaid section so as to increase the interest chargeable under that sub-section from one per cent. to one and one-half per cent. for every month or part of a month for tax deducted but not paid. This amendment will take effect from 1st July, 2010. Clause 43 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153B, in case of a person referred to in section 153A or section 153C. It is further proposed to amend the Explanation to specify the date on which the proceedings for assessment or reassessment shall be deemed to have commenced and concluded, in case of a person referred to in section 153A or section 153C. These amendments will take effect from 1st June, 2010. Clause 46 of the Bill seeks to amend section 245C of the Income tax Act relating to application for settlement of cases. Under the existing provisions of the aforesaid section an application can be made before the Settlement Commission, if the additional amount of income-tax payable on the income disclosed in the application exceeds three lakh rupees. It is proposed to substitute the proviso of the said section so as to provide that an application can be made before the Settlement Commission, in cases where proceedings for assessment or reassessment have been initiated as a result of search under section 132 or books of account, other documents or any assets requisitioned under section 132A, if the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for filing of an appeal to the High Court. It is proposed to insert a new sub-section (2A) so as to empower the High Court to admit an appeal after the expiry of said period of one hundred and twenty days if it is satisfied that there was sufficient cause for not filing the appeal within the said period. This amendment will take effect retrospectively from 1st October, 1998. Clause 50 of the Bill seeks to amend section 271B of the Income tax Act relating to failure to get accounts audited. The existing provisions contained in the aforesaid section provide that if any person fails to get his accounts audited in respect of any previous year relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing Officer may impose a penalty equal to one-half per cent. of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or a sum of one lakh rupees, whichever is less. It is proposed to enhance the said limit from one lakh rupees to one lakh fifty thousand rupees. This amendment will take effect from 1st April, 2011, and will, accordingly, appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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