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TMI BlogNotes on clauses - Income taxX X X X Extracts X X X X X X X X Extracts X X X X ..... ion of tax at source during the financial year 2013-14 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 2013-14 from income other than "Salaries". In view of the proposed amendment to section 115A, it is proposed to provide that the income by way of royalty or fees for technical services shall be taxable at a uniform rate of twenty-five per cent; if such income has been received by the non-resident (not being a company) or a foreign company under an agreement entered on or after 1st day of April, 1976. Subject to these modifications, the rates of deduction are the same, as those specified in Part II of the First Schedule to the Finance Act, 2012 for the purposes of deduction of income-tax at source during the financial year 2012-13. The amount of tax so deducted shall be increased by a surcharge in the case of- (i) every non-resident (other than a company) at the rate of ten per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees; (ii) every company other than a domestic company at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of every co-operative society. In such cases, the rates of tax will continue to be the same as those specified for assessment year 2013-14. The surcharge in cases of co-operative societies, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph C of this Part specifies the rate of income-tax in the case of every firm. In such cases, the rate of tax will continue to be the same as that specified for assessment year 2013-14. The surcharge in cases of firms, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph D of this Part specifies the rate of income-tax in the case of every local authority. In such cases, the rate of tax will continue to be the same as that specified for the assessment year 2013-14. The surcharge in cases of local authorities, having income above one crore rupees shall be levied at the rate of ten per cent. Marginal relief will be provided. Paragraph E of this Part specifies the rates of income-tax in the case of companies. In both the cases of domestic companies and companies other than domestic companies, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural income. It is proposed to amend item (B) of clause (ii) of the proviso to sub-clause (c) of clause (1A) of section 2 so as to provide that if the land is situated in any area within the distance, measured aerially, (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh, the income derived from such building on, or in the immediate vicinity of such land will not be agricultural income. An Explanation has been inserted to define the expression "population". The provisions contained in clause (14) of the said section, define the term "capital asset" as property of any kind held by an assessee, whether or not connected with his business or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with disability or a person with severe disability as referred to in section 80U; or (ii) suffering from disease or ailment as specified in the rules made under section 80DDB. This proviso shall apply in respect of an insurance policy, issued on or after 1st day of April, 2013. Clause (10D) of the said section, inter alia, exempts any sum received under a life insurance policy other than a Keyman insurance policy. Explanation 1 to clause (10D) defines a Keyman insurance policy to mean a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person. It is proposed to amend the said Explanation 1 to provide that a Keyman insurance policy which has been assigned to a person during its term, with or without consideration, shall continue to be treated as a Keyman insurance policy for the purposes of clause (10D) of section 10. It is further proposed to insert a new clause (23DA) to provide for exemption in respect of any income of a securitisation trust from the activity of securitisation. It is also proposed to inse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. It is further proposed to insert a new clause (34A) in section 10 so as to provide for exemption in respect of any income arising to an assessee being a shareholder on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA. It is also proposed to insert a new clause (35A) in section 10 so as to provide for exemption in respect of any income by way of distributed income referred to in section 115TA received from a securitisation trust by any person being an investor of the said trust. An Explanation has been inserted to define the expressions 'investor' and 'securitisation trust' occurring in the proposed amendment. These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Government, of any previous year relevant to any assessment year commencing on or before 1st April, 2014. This amendment will take effect retrospectively from 1st April, 2013 and will, accordingly, apply in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that for the purposes of this section "new asset" means any new plant or machinery (other than ship or aircraft) but does not include-- (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years. Clause 6 of the Bill seeks to amend section 36 of the Income tax Act relating to other deductions. The proposed amendment seeks to insert Explanation 2 to the clause (vii) of sub-section (1) of the said section so as to clarify that for the purposes of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Income-tax Act to provide for a special provision for full value of consideration for transfer of assets other than capital assets in certain cases. The proposed sub-section (1) of the aforesaid section seeks to provide that where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for the purposes of computing profits and gains from transfer of such asset. The proposed sub-section (2) of the aforesaid section seeks to provide that the provisions of sub-section (2) and subsection (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1). The proposed sub-section (3) of the aforesaid section provides that where the date of agreement fixing the value of considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso so as to provide that the first proviso, shall apply only in a case where the amount of the consideration, or a part thereof, has been paid in a mode other than cash on or before the date of the agreement for the transfer of such immovable property. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 10 of the Bill seeks to amend section 80C of the Incometax Act relating to deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. Under the existing provisions contained in sub-section (3A) of the aforesaid section, the deduction is available in respect of any premium or other payment made on an insurance policy up to ten per cent. of the "actual capital sum assured". It is proposed to insert a proviso in aforesaid sub-section (3A), so as to provide a higher limit of fifteen per cent. where the policy referred to in sub-section (3A) is for the insurance on life of any person who is,-(a) a person with disability or a person with severe disability as referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bill seeks to amend section 80D of the Incometax Act relating to deduction in respect of health insurance premia. The existing provisions of clause (a) of sub-section (2) of section 80D provide that the whole of the amount paid in the previous year out of the income of the assessee, being an individual, to effect or to keep in force an insurance on his health or the health of his family or any contribution made towards the Central Government Health Scheme or any payment made on account of preventive health check-up of the assesssee or his family, as does not exceed in the aggregate fifteen thousand rupees, is allowed to be deducted in computing the total income of the assessee. It is proposed to amend the said clause so as to allow the benefit of deduction under section 80D within the said limit, in respect of any payment or contribution made by the assessee to any other health scheme which may be notified by the Central Government. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 13 of the Bill seeks to insert a new section 80EE in the Income-tax Act relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and institutions. The deduction is allowed at the rate of fifty per cent. of the amount of donations made except in the case of donations made to certain funds and institutions specified in clause (i) of sub-section (1) of section 80G, where deduction is allowed at the rate of one hundred per cent. In the case of donations made to the National Children's Fund, deduction is allowed at the rate of fifty per cent. of the amount so donated. It is proposed to allow hundred per cent. deduction in respect of any sum paid to the National Children's Fund in computing the total income of an assessee. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years. Clause 15 of the Bill seeks to amend section 80GGB of the Income-tax Act relating to deductions in respect of contributions given by companies to political parties. Under the existing provisions of the said section, any sum contributed by an Indian company to any political party or an electoral trust in the previous year, is allowed as deduction in computing the total income of such Indian company. It is proposed to amend the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. Clause 18 of the Bill seeks to amend section 80JJAA of the Income-tax Act relating to deduction in respect of employment of new workmen. The existing provisions contained in sub-section (1) of section 80JJAA provide for a deduction of an amount equal to thirty per cent. of additional wages paid to the new regular workmen employed in any previous year by an Indian company engaged in manufacture or production of article or thing. The deduction is available for three assessment years including the assessment year relevant to the previous year in which such employment is provided. It is proposed to substitute the said sub-section (1) of section 80JJAA so as to provide that where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from the manufacture of goods in a factory, there shall, be allowed a deduction of an amount equal to thirty per cent. of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013. It is proposed to insert a new sub-section (2A) in the aforesaid section 90 so as to provide that the provisions of newly inserted Chapter X-A shall apply even if such provisions are not beneficial to the assessee. This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to assessment year 2016-17 and subsequent assessment years. It is also proposed to insert a new sub-section (5) in the aforesaid section 90 so as to provide that the certificate of being a resident in a country outside India or specified territory outside India, as the case may be, referred to in sub-section (4), shall be necessary but not a sufficient condition for claiming any relief under the agreement referred to therein. This amendment will take effect retrospectively from 1st April, 2013 and will accordingly apply, in relation to the assessment year 2013-14 and subsequent assessment years. Clause 22 of the Bill seeks to amend section 90A of the Income-tax Act relating to adoption by Central Government of agreement between specified associations for double taxation relief. The existing provisions of the aforesaid section 90A provides that any specified asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of obtaining tax benefit. The proposed section 97 provides for circumstances under which an arrangement shall be deemed to lack commercial substance. The period or time for which the arrangement exists; the fact of payment of taxes; and the fact that an exit route is provided by the arrangement, may be relevant but shall not be sufficient for determining whether an arrangement lacks commercial substance or not. The proposed section 98 provides for method of determination of consequences in relation to tax of an arrangement after it is declared to be an impermissible avoidance arrangement. It provides for certain illustrative but not exhaustive methods for determination of tax consequences. The proposed section 99 provides that in determining whether there is a tax benefit the parties who are connected persons in relation to each other may be treated as one and the same person, any accommodating party may be disregarded, such accommodating party and any other party may be treated as one and the same person, and the arrangement may be considered or looked through by disregarding any corporate structure. The proposed section 100 provides that provisions of newly inse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee would have been chargeable had its total income been reduced by the amount of aforesaid income by way of dividends. It is further provided that no deductions in respect of any expenditure or allowance shall be allowed for computing its income by way of dividend. It is proposed to extend the applicability of taxation provisions in respect of dividends received from foreign subsidiaries to the income by way of dividends received during the financial year 2013-14 also. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15. Clause 27 of the Bill seeks to amend section 115-O of the Income-tax Act relating to tax on distributed profits of domestic companies. Under the existing provisions contained in sub-section (1A) of section 115-O, the amount of dividends referred to in subsection (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if- (a) such amount of dividend is received from its subsidiary; and (b) the subsidiary has paid tax payable under this section on such dividend. The said sub-section also provides that the same amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of interest, in case of failure to pay tax within the time provided, at the rate of one per cent. for every month and part thereof for such failure. The proposed new section 115QC provides that in case of failure on payment of tax, the principal officer of the company and the company shall be deemed to be an assessee in default in respect of the amount of tax payable and all provisions of the Act relating to recovery and collection of taxes shall apply. This amendment will take effect from 1st June, 2013. Clause 29 of the Bill seeks to amend section 115R of the Income-tax Act relating to tax on distributed income to unit holders. The existing provisions contained in sub-section (2) of the aforesaid section provides that any amount of income distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and under clause (ii) thereof such specified company or Mutual Fund shall be liable to pay additional income-tax on such distributed income at the rate of twelve and one-half per cent. on income distributed to any person being an individual or a Hindu undivided family by a fund other than a money market mutual fund or a liquid fund. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every month and part thereof on such failure. The proposed new section 115TC provides that in case of failure on payment of tax, the person responsible for making payment of income distributed by the securitisation trust and the securitisation trust shall be deemed to be an assessee in default in respect of the amount of tax payable and all provisions of the Act relating to recovery and collection of taxes shall apply. This amendment will take effect from 1st June, 2013. Clause 31 of the Bill seeks to amend section 132B of the Income-tax Act relating to application of seized or requisitioned assets. The existing provisions of the aforesaid section 132B, inter alia, provide that the assets seized under section 132 or requisitioned under section 132A may be adjusted against the amount of any "existing liability" under this Act, the Wealth-tax Act, 1957, the Expenditure-tax Act,1987, the Gift-tax Act, 1958 and the Interest-tax Act, 1974 and the amount of liability determined on completion of assessment pursuant to the search, including penalty levied or interest payable in connection with such assessment and in respect of which, such person is in default or is deemed to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act (as inserted by section 62 of the Finance Act, 2012) relating to reference to Commissioner in certain cases. This amendment will take effect from 1st April, 2014. Clause 35 of the Bill seeks to insert a new section 144BA in the Income-tax Act relating to reference to Commissioner in certain cases. The proposed sub-section (1) of the aforesaid new section 144BA provides that the Assessing Officer, if at any stage of assessment or reassessment proceedings considers it necessary to invoke provisions of the newly inserted Chapter X-A, shall refer the matter to the Commissioner. The proposed sub-section (2) of the aforesaid new section provides that if the Commissioner, on receipt of a reference from the Assessing Officer, is of the opinion that the provisions of newly inserted Chapter X-A are required to be invoked, he shall issue notice to the assessee seeking objections within the time specified in notice not exceeding sixty days. The proposed sub-section (3) of the aforesaid new section provides that if the assessee does not object or respond to the notice, the Commissioner may issue such directions as he deems fit in respect of declaration of the arrangement as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the issue would not be required. The proposed sub-section (12) of the aforesaid new section provides that assessment or reassessment order where provisions of Chapter X-A are invoked shall be passed by the Assessing Officer only with prior approval of the Commissioner. The proposed sub-section (13) of the aforesaid new section provides that the Approving Panel shall issue directions within a period of six months from the end of the month in which the reference is received by it. The proposed sub-section (14) of the aforesaid new section provides that the directions, issued by the Approving Panel shall be binding on the assessee and the Commissioner and no appeal under the Act shall lie against such directions. The proposed sub-section (15) of the aforesaid new section provides that the Central Government shall constitute one or more Approving Panels as may be necessary and each Approving Panel shall consist of a Chairperson and two members. The proposed sub-section (16) of the aforesaid new section provides that the Chairperson of the Approving Panel shall be a person who is or has been a judge of a High Court and one member shall be a member of Indian Revenue Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od during which the proceeding of the Approving Panel is stayed by an order or injunction of any court shall also be excluded. Further, where immediately after the exclusion of the aforesaid time or period, the period available to the Approving Panel for issue of directions is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of six months shall be deemed to have been extended accordingly. This amendment will take effect from 1st April, 2016 and will, accordingly apply in relation to the assessment year 2016-2017 and subsequent assessment years. Clause 36 of the Bill seeks to amend section 144C of the Income-tax Act relating to reference to dispute resolution panel. It is proposed to omit sub-section (14A) of the said section. This amendment will take effect retrospectively from 1st April, 2013. It is proposed to insert a new sub-section (14A) in the aforesaid section 144C so as to provide that the provisions of section 144C shall not apply to an assessment or reassessment order passed by the Assessing Officer with the approval of the Commissioner in accordance with sub-section (12) of newly inserted section 144BA. This a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to insert clause (ix) in Explanation 1 of subsection (4) of the aforesaid section so as to provide for exclusion of time period starting from receipt of reference by the Commissioner under sub-section (1) of newly inserted 144BA and ending on date on which a direction under sub-section (3) or subsection (6) or an order under sub-section (5) of newly inserted section 144BA is received by the Assessing Officer. This amendment will take effect from 1st April, 2016. Clause 38 of the Bill seeks to amend section 153B of the Income-tax Act relating to time limit for completion of assessment under section 153A. The existing provisions contained in Explanation to section 153B provide that certain periods specified therein are to be excluded while computing the period of limitation laid down in the said section for completion of assessment under section 153A. It is proposed to substitute clause (ii) in the aforesaid Explanation so as to provide that the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142, and ending with the last date on which the assessee is required to furnish a report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner. It is proposed to amend the said section 153D to provide that where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA then the conditions of this section shall not apply. This amendment will take effect from 1st April, 2016. Clause 40 of the Bill seeks to amend section 167C of the Income-tax Act relating to liability of partners of limited liability partnership in liquidation. The existing provisions of the aforesaid section 167C provide that where any tax is due from a limited liability partnership in respect of any income of any previous year or from any other person in respect of any income of any previous year during which such other person was a limited liability partnership cannot be recovered, then, every person who was a partner of the limited liability partnership at any time during the relevant previous year, shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeks to amend section 194LC of the Income-tax Act relating to income by way of interest from Indian company. The existing provisions of sub-section (2) of the aforesaid section 194LC provide the nature of borrowings, interest on which would be eligible for concessional rate of tax (at the rate of five per cent.) to be deducted in accordance with sub-section (1) of the said section. The interest should be in respect of borrowings made by an Indian company in foreign currency from a source outside India either under a loan agreement or by way of issue of long-term infrastructure bonds, as approved by the Central Government. It is proposed to amend the said sub-section (2) so as to provide that where a non-resident (not being a company) or a foreign company has deposited any sum of money in foreign currency in a designated account through which such sum, as converted in rupees, is utilised by the non-resident or the foreign company, as the case may be, to subscribe to any long term infrastructure bonds issued by the specified company in India, then, such borrowing for the purposes of section 194LC shall be deemed to have been made by the specified company in foreign currency. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of the aforesaid section so as to omit "or an order referred to in sub-section (12) of section 144BA" therefrom. It is also proposed to amend clause (c) of sub-section (1) of the aforesaid section so as to omit "except where it is in respect of an order as referred to in sub-section (12) of section 144BA" therefrom. This amendment will take effect retrospectively from 1st April, 2013. It is proposed to amend clauses (a), (b), (ba) and (c) of subsection (1) of the aforesaid section 246A to provide that an order of assessment or reassessment passed with approval of Commissioner under sub-section (12) of newly inserted 144BA or any order under section 154 or section 155 passed in relation to such an order shall not be appealable before Commissioner (Appeals). This amendment will take effect from 1st April, 2016. Clause 47 of the Bill seeks to amend section 253 of the Incometax Act relating to appeals to the Appellate Tribunal. It is proposed to omit clause (e) of sub-section (1) of the said section. This amendment will take effect retrospectively from 1st April, 2013. It is further proposed to amend the aforesaid sub-section (1) to insert clause (e) in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the existing clause (ee) as (e) to provide that the rules may be made with regard to the matters specified in Chapter X-A. It is further proposed to insert clause (eed) to provide that the rules may also be made to provide for remuneration of the Chairperson and members of the Approving Panel under subsection (18) and procedure and manner for constitution of, functioning and disposal of references by the Approving Panel under sub-section (21) of section 144BA. These amendments will take effect from 1st April, 2016. Clause 50 of the Bill seeks to amend Part A of the Fourth Schedule to the Income-tax Act relating to recognised provident funds. Rule 3 in Part A of the Fourth Schedule provides that the Chief Commissioner or Commissioner may accord recognition to any provident fund which, in his opinion, satisfies the conditions specified under rule 4 of Part A of the said Fourth Schedule and any other conditions, which the Board may specify by rules. The first proviso to sub-rule (1) of the said rule 3 provides that in a case where recognition has been accorded to any provident fund on or before 31st March, 2006 and such provident fund does not satisfy the conditions set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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