TMI BlogNOTES ON CLAUSES - DIRECT TAXESX X X X Extracts X X X X X X X X Extracts X X X X ..... alaries and charging of income-tax on current incomes in certain cases for the financial year 2014-2015. 3 . The substance of the main provisions of the Bill relating to direct taxes is explained in the following paragraphs: DIRECT TAXES A. RATES OF INCOME-TAX I. Rates of income-tax in respect of income liable to tax for the assessment year 2014-2015. In respect of income of all categories of assessees liable to tax for the assessment year 2014-2015, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2013, for the purposes of computation of advance tax , deduction of tax at source from Salaries and charging of tax payable in certain cases. (1) Surcharge on income-tax Surcharge shall be levied in respect of income liable to tax for the assessment year 2014-2015, in the following cases: (a) in the case of every individual or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne crore rupees. The total amount payable as income-tax and surcharge on total income exceeding ten crore rupees, shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees. Also, in the case of every company having total income chargeable to tax under section 115JB of the Act and where such income exceeds one crore rupees but does not exceed ten crore rupees, or exceeds ten crore rupees, as the case may be, surcharge at the rates mentioned above shall be levied and marginal relief shall also be provided. (d) In other cases (including sections 115-O, 115QA, 115R or 115TA), the surcharge shall be levied at the rate of ten percent. (2) Education Cess For assessment year 2014-2015, additional surcharge called the Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall continue to be levied at the rate of two per cent. and one per cent., respectively, on the amount of tax computed, inclusive of surcharge, in all cases. No marginal relief shall be available in respect of such Cess. II. Rates for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc. The salient features of the rates specified in the said Part III are indicated in the following paragraphs A. Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person. Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:- (i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act (not being a case to which any other Paragraph of Part III applies) are as under: Upto ₹ 2,50,000 Nil. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s one crore rupees. C. Firms In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for financial year 2013-2014. The amount of income-tax shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a firm having a total income exceeding one crore rupees . However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. D. Local authorities The rate of income-tax in the case of every local authority is specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the financial year 2013-2014. The amount of income-tax shall be increased by a surcharge at the rate of ten percent. of such income-tax in case of a local authority having a total income exceeding one crore rupees . However, the total amount pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Distribution Tax Section 115-O of the Act provides that a domestic company shall be liable for payment of additional tax at the rate of 15 percent. on any amount declared, distributed or paid by way of dividends to its shareholders. This tax on distributed profits is final tax in respect of the amount declared, distributed or paid as dividends and no credit in respect of it can be claimed by the company or the shareholder. Section 115 R of the Act similarly provides for levy of additional income-tax in respect of income distributed by the mutual funds to its investors at the rates provided. Prior to introduction of dividend distribution tax (DDT), the dividends were taxable in the hands of the shareholder. The gross amount of dividend representing the distributable surplus was taxable, and the tax on this amount was paid by the shareholder at the applicable rate which varied from 0 to 30%. However, after the introduction of the DDT, a lower rate of 15% is currently applicable but this rate is being applied on the amount paid as dividend after reduction of distribution tax by the company. Therefore, the tax is computed with reference to the net amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irty six months immediately preceding the date of its transfer. However, in the case of a share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India or a unit of a Mutual Fund or a zero coupon bond, the period of holding for qualifying it as short-term capital asset is not more than twelve months. The shorter period of holding of not more than twelve months for consideration as short-term capital asset was introduced for encouraging investment on stock market where prices of the securities are market determined. Accordingly, it is proposed to amend the aforesaid clause (42A) of section 2 so as to provide that an unlisted security and a unit of a mutual fund (other than an equity oriented mutual fund) shall be a short-term capital asset if it is held for not more than thirty-six months. These amendments will take effect from 1st April, 2015 and will accordingly apply, in relation to the assessment year 2015-16 and subsequent assessment years. [Clause 3] Tax on long-term capital gains on units Under the existing provisions of section 112 of the Act, where tax payable on lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litated. Similarly, securitization of income earning real estate assets needs to be facilitated. Certainty in the taxation aspects of these trusts is necessary. It is proposed to amend the Act to put in place a specific taxation regime for providing the way the income in the hands of such trusts is to be taxed and the taxability of the income distributed by such business trusts in the hands of the unit holders of such trusts. Such regime has the following main features: (i) The listed units of a business trust, when traded on a recognised stock exchange, would attract same levy of securities transaction tax (STT), and would be given the same tax benefits in respect of taxability of capital gains as equity shares of a company i.e., long term capital gains, would be exempt and short term capital gains would be taxable at the rate of 15%. (ii) In case of capital gains arising to the sponsor at the time of exchange of shares in SPVs with units of the business trust, the taxation of gains shall be deferred and taxed at the time of disposal of units by the sponsor. However, the preferential capital gains regime (consequential to levy of STT) available in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew plant and machinery, Finance Act, 2013 inserted section 32AC in the Act to provide that where an assessee, being a company, is engaged in the business of manufacture of an article or thing and invests a sum of more than ₹ 100 crore in new assets (plant and machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then the assessee shall be allowed a deduction of 15% of cost of new assets for assessment years 2014-15 and 2015-16. As growth of the manufacturing sector is crucial for employment generation and development of an economy, it is proposed to extend the deduction available under section 32AC of the Act for investment made in plant and machinery up to 31.03.2017. Further, in order to simplify the existing provisions of section 32AC of the Act and also to make medium size investments in plant and machinery eligible for deduction, it is also proposed that the deduction under section 32AC of the Act shall be allowed if the company on or after 1st April, 2014 invests more than ₹ 25 crore in plant and machinery in a previous year. It is also proposed that the assessee who is eligible to claim deduction under the existing co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 70 20 Deduction both u/s 32AC(1) 32AC(1A) Deduction allowable 22.5 3 10.5 Nil These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years. [Clause 11] Extension of the sunset date under section 80-IA for the power sector Under the existing provisions of clause (iv) of sub-section (4) of section 80-IA of the Income-tax Act, a deduction of profits and gains is allowed to an undertaking which, (a) is set up for the generation and distribution of power if it begins to generate power at any time during the period beginning on 1st April, 1993 and ending on 31st March, 2014; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2014; (c) undertakes substantial renovation and modernization of existing network of transmission or distribution lines at any time during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating an inland container depot or a container freight station notified or approved under the Customs Act, 1962; (x) bee-keeping and production of honey and beeswax; and (xi) setting up and operating a warehousing facility for storage of sugar; It is proposed to include two new businesses as specified business for the purposes of the investment-linked deduction under section 35AD so as to promote investment in these sectors, which are :- (a) laying and operating a slurry pipeline for the transportation of iron ore; (b) setting up and operating a semiconductor wafer fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines. It is also proposed to provide that the date of commencement of operations for availing investment linked deduction in respect of the two new specified businesses shall be on or after 1st April, 2014. II . The existing provisions of section 35AD do not provide for a specific time period for which capital assets on which the deduction has been claimed and allowed, are to be used for the specified business. With a view to ensure that the capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10AA also provides for profit linked deduction in respect of units set-up in Special Economic Zones, it is proposed to amend section 35AD so as to provide that where any deduction has been availed of by the assessee on account of capital expenditure incurred for the purposes of specified business in any assessment year, no deduction under section 10AA shall be available to the assessee in the same or any other assessment year in respect of such specified business. As a consequence of this amendment, section 10AA is also proposed to be amended so as to provide that no deduction under section 35AD shall be available in any assessment year to a specified business which has claimed and availed of deduction under section 10AA in the same or any other assessment year. These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years. [Clauses 6 12] D. RELIEF AND WELFARE MEASURES Raising the limit of deduction under section 80C Under the existing provisions of section 80C of the Act, an individual or a Hindu undivided family, is allowed a deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 10] Concessional rate of tax on overseas borrowing The existing provisions of section 194LC of the Act provide for lower withholding tax rate of 5 per cent. on interest paid by an Indian company to non-residents on monies borrowed by it in foreign currency from a source outside India under a loan agreement or through issue of long-term infrastructure bonds at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015 subject to certain conditions. In order to further incentivise low cost long-term foreign borrowings by Indian companies, it is proposed to amend section 194LC to extend the benefit of this concessional rate of withholding tax to borrowings by way of issue of any long-term bond, and not limited to a long term infrastructure bond. It is further proposed to extend by two years the period of borrowing for which the said benefit shall be available. The concessional rate of withholding tax will now be available in respect of borrowings made before 1st day of July, 2017. Section 206AA of the Act provides for levy of higher rate of withholding tax in case the recipient of income does not provide permanent acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anism for dealing with ALP issues relating to transactions entered into during the period prior to APA. The roll back provisions refers to the applicability of the methodology of determination of ALP, or the ALP, to be applied to the international transactions which had already been entered into in a period prior to the period covered under an APA. However, the roll back relief is provided on case to case basis subject to certain conditions. Providing of such a mechanism in Indian legislation would also lead to reduction in large scale litigation which is currently pending or may arise in future in respect of the transfer pricing matters. Therefore, it is proposed to amend the Act to provide roll back mechanism in the APA scheme. The APA may, subject to such prescribed conditions, procedure and manner, provide for determining the arm s length price or for specifying the manner in which arm s length price is to be determined in relation to an international transaction entered into by a person during any period not exceeding four previous years preceding the first of the previous years for which the advance pricing agreement applies in respect of the international transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction claimed under section 35AD in computing adjusted total income for the purpose of calculating alternate minimum tax, it is proposed to amend the section so as to provide that total income shall be increased by the deduction claimed under section 35AD for purpose of computation of adjusted total income.The amount of depreciation allowable under section 32 shall, however, be reduced in computing the adjusted total income. Example: Total income : ₹ 60 Deduction claimed under Chapter VI-A : ₹ 40 Deduction claimed under section 35AD on a capital asset : ₹ 100 Computation of adjusted total income for the purposes of AMT Total income : ₹ 60 Addition: (i) deduction under Chapter VI-A (on non-specified business) : ₹ 40 (ii) deduction under section 35AD (on specified business) ₹ 100 Less: depreciation under section 32 ₹ 15 : ₹ 85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om non-exempt payments made under life insurance policy Under the existing provisions of section 10(10D) of the Act, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt subject to fulfillment of conditions specified under the said section. Therefore, the sum received under a life insurance policy which does not fulfill the conditions specified under section 10(10D) are taxable under the provisions of the Act. In order to have a mechanism for reporting of transactions and collection of tax in respect of sum paid under life insurance policies which are not exempted under section 10(10D) of the Act, it is proposed to insert a new section in the Act to provide for deduction of tax at the rate of 2 per cent. on sum paid under a life insurance policy, including the sum allocated by way of bonus, which are not exempt under section 10(10D) of the Act. In order to reduce the compliance burden on the small tax payers, it has also been proposed that no deduction under this provision shall be made if the aggregate sum paid in a financial year to an assessee is less than ₹ 1,00,000/-. This amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is regarding the interplay of the general provision of exemptions which are contained in section 10 of the Act vis.-a-vis. the specific and special exemption regime covered in sections 11 to 13. As indicated above, the primary objective of providing exemption in case of charitable institution is that income derived from the property held under trust should be applied and utilised for the object or purpose for which the institution or trust has been established. In many cases it has been noted that trusts or institutions which are registered and have been claiming benefits of the exemption regime do not apply their income, which is derived from property held under trust, for charitable purposes. In such circumstances, when the income becomes taxable, then a claim of exemption under general provisions of section 10 in respect of such income is preferred and tax on such income is avoided. This defeats the very objective and purpose of placing the conditions of application of income etc. in respect of income derived from property under trust in the first place. Sections 11, 12 and 13 are special provisions governing institutions which are being given benefit of tax exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any asset, acquisition of which has been claimed as an application of income under these sections in the same or any other previous year. These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years. [Clauses 5 7] Clarification in respect of section 10(23C) of the Act The existing provisions of sub-clause (iiiab) and (iiiac) of section 10(23C) of the Act provide exemption, subject to various conditions, in respect of income of certain educational institutions, universities and hospitals which exist solely for educational purposes or solely for philanthropic purposes, and not for purposes of profit and which are wholly or substantially financed by the Government. Absence of a definition of the phrase substantially financed by the Government has led to litigation and varying decisions of judicial authorities who have, for this purpose, relied upon various other provisions of the Income-tax Act and other Acts. Thus, there is lack of certainty in this regard. Therefore, it is proposed to amend section 10(23C) by inserting an Explanation that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with provisions of section 10(23C) or the activities of such entity are not genuine or are not being carried out in accordance with all or any of the conditions subject to which it was approved. Therefore, in order to rationalise the provisions relating to cancellation of registration of a trust, it is proposed to amend section 12AA of the Act to provide that where a trust or an institution has been granted registration, and subsequently it is noticed that its activities are being carried out in such a manner that, (i) its income does not enure for the benefit of general public; (ii) it is for benefit of any particular religious community or caste (in case it is established after commencement of the Act); (iii) any income or property of the trust is applied for benefit of specified persons like author of trust, trustees etc.; or (iv) its funds are invested in prohibited modes, then the Principal Commissioner or the Commissioner may cancel the registration if such trust or institution does not prove that there was a reasonable cause for the activities to be carried out in the above manner. This amendment will take effect from 1 st Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction are determined in substance between the other person and the associated enterprise. The sub-section as presently worded has led to a doubt whether or not, for the transaction to be treated as an international transaction, the unrelated person should also be a non-resident. Therefore, it is proposed to amend section 92B of the Act to provide that where, in respect of a transaction entered into by an enterprise with a person other than an associated enterprise, there exists a prior agreement in relation to the relevant transaction between the other person and the associated enterprise or, where the terms of the relevant transaction are determined in substance between such other person and the associated enterprise, and either the enterprise or the associated enterprise or both of them are non-resident, then such transaction shall be deemed to be an international transaction entered into between two associated enterprises, whether or not such other person is a non-resident. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years. [Clause 31] Levy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. Further, it is proposed that no action for reopening of an assessment under section 147 shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. However, the above benefits would not be available in case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled. These amendments will take effect from 1st October, 2014. [Clause 8] Corporate Social Responsibility (CSR) Under the Companies Act, 2013 certain companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2015-16 and subsequent years. [Clause 13] Disallowance of expenditure for non- deduction of tax at source The existing provisions of section 40(a)(i) of the Act provide that certain payments such as interest, royalty and fee for technical services made to a non-resident shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time prescribed under section 200(1) of the Act. The Act contains similar provisions for disallowance of business expenditure in respect of certain payments made to the residents. Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Act. However, in case of disallowance for non-payment of tax from payments made to non-residents, this extended time limit of payment up to the date of filing of return of income under section 139(1) is not available. In or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years. [Clause 14] Tax Deduction at Source Under Chapter XVII-B of the Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. The person deducting tax ( the deductor ) is required to file a quarterly statement of tax deduction at source (TDS) containing the prescribed details of deduction of tax made during the quarter by the prescribed due date. Currently, a deductor is allowed to file correction statement for rectification/updation of the information furnished in the original TDS statement as per the Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013 notified vide Notification No.03/2013 dated 15th January, 2013. However, there does not exist any express provision in the Act for enabling a deductor to file correction statement. In order to bring clarity in the matter relating to filing of correction statement, it is proposed to amend section 200 of the Act to allow the deductor to file correction statements. Consequently, it is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to align the time limit provided under section 201(3)(ii) and section 148 of the Act, it is proposed that time limit provided under section 201(3)(ii) of the Act for passing order under section 201(1) of the Act shall be extended by one more year. The existing provisions of section 271H of the Act provides for levy of penalty for failure to furnish TDS/TCS statements in certain cases or furnishing of incorrect information in TDS/TCS statements. The existing provisions of section 271H of the Act do not specify the authority which would be competent to levy the penalty under the said section. Therefore, provisions of section 271H are proposed to be amended to provide that the penalty under section 271H of the Act shall be levied by the Assessing officer. These amendments will take effect from 1 st October, 2014. [Clauses 58, 59, 60 68] Business of Plying, Hiring or Leasing Goods Carriages The existing provisions of section 44AE of the Act provides for presumptive taxation in the case of an assessee who is engaged in the business of plying, hiring or leasing goods carriages and not owning more than ten goods carriages at any time during the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Final Report of the Committee was placed in public domain for inviting comments from stakeholders and general public. After examining the comments/suggestions, the Committee inter alia recommended that the provisions of section 145 of the Act may be suitably amended to clarify that the notified AS are not meant for maintenance of books of account but are to be followed for computation of income. In order to clarify that the standards notified under section 145(2) of the Act are to be followed for computation of income and disclosure of information by any class of assessees or for any class of income, it is proposed to provide that the Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of or in respect of any class of income. It is further proposed to provide that the Assessing Officer may make an assessment in the manner provided in section 144 of the Act, if the income has not been computed in accordance with the standards notified under section 145(2) of the Act. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2013 made a provision for levy of commodities transaction tax on commodity derivatives in respect of commodities other than agricultural commodities. As a consequence to the levy of commodities transaction tax, clause (e) was inserted in the proviso to clause (5) of section 43 of the Act to provide that eligible transaction in respect of trading in commodity derivatives carried out in a recognised association shall not be considered as speculative transaction. Vide Circular No. 3 dated 24-01-2014 explaining the provisions of the Finance Act, 2013, it was clarified that the eligible transaction shall include only those transactions in commodity derivatives which are liable to commodities transaction tax. Accordingly, it is proposed to amend clause (e) of the proviso to the said clause (5) so as to provide that eligible transaction in respect of trading in commodity derivatives carried out in a recognised association and chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 shall not be considered to be a speculative transaction. This amendment will take effect retrospectively from 1st April, 2014 and will accordingly apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dex (Urban) for the immediately preceding previous year to such previous year. This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to assessment year 2016-17 and subsequent assessment years. [Clause 19] Capital gains exemption in case of investment in a residential house property The existing provisions contained in sub-section (1) of section 54, inter alia, provide that where capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house then the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Act. The existing provisions contained in sub-section (1) of section 54F, inter alia, provide that where capital gains arises from transfer of a long-term capital asset, not being a residential house, and the assessee within a period of one year before or two years af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. [Clause 23] Losses in Speculation Business The existing provisions of section 73 of the Act provide that losses incurred in respect of a speculation business cannot be set off or carried forward and set off except against the profits of any other speculation business. Explanation to section 73 provides that in case of a company deriving its income mainly under the head Profits and gains of business or profession (other than a company whose principal business is business of banking or granting of loans and advances), and where any part of its business consists of purchase or sale of shares, such business shall be deemed to be speculation business for the purpose of this section. Sub-section (5) of section 43 defines the term speculative transaction as a transaction in which a contract for purchase or sale of any commodity, including stocks and shares, is settled otherwise than by way of actual delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval of the Chief Commissioner or Director General therefor, as the case may be. An income-tax authority acting under section 133A has the powers as conferred upon it under sub-section (1) of section 131. With a view to align the time period and the authority for approval beyond the specified time period it is proposed to provide that an income-tax authority under section 133A shall not retain in his custody any such books of account or other documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General or Principal Commissioner or Principal Director or Commissioner or Director therefor, as the case may be. Further, it is also proposed to amend section 133A to provide that an income-tax authority may for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions of Chapter XVII-B or Chapter XVII-BB, as the case may be, enter any office, or a place where business or profession is carried on, within the limits of the area assigned to him, or any such place in respect of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (23D) of section 10 exempts the income of a Mutual Fund, clause (23DA) of section 10 exempts the income of a securitisation trust from the activity of securitisation and clause (23FB) of section 10 exempts the income of a venture capital company (VCC) or venture capital fund (VCF) from investment in a venture capital undertaking. The Mutual Fund or securitization trust or VCC or VCF are not obligated to furnish their return of income under section 139 of the Act. Instead they are required to furnish a statement giving details of the nature of the income paid or credited during the previous year and such other relevant details as may be prescribed. It is proposed to amend sub-section (4C) of section 139 so as to provide that Mutual Fund referred to in clause (23D) of section 10, securitization trust referred to in clause (23DA) of section 10 and Venture Capital Company or Venture Capital Fund referred to in clause (23FB) of section 10 shall, if the total income in respect of which such fund, trust or company is assessable, without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment, require the assistance of a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit the report to him. The Assessing Officer may make a reference whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. The Valuation Officer, shall, for the purpose of estimating the value of the asset, property or investment, have all the powers of section 38A of the Wealth-tax Act, 1957. The Valuation Officer is required to estimate the value of the asset, property or investment after taking into account the evidence produced by the assessee and any other evidence in his possession gathered, after giving an opportunity of being heard to the assessee. If the assessee does not co-operate or comply with the directions of the Valuation Officer he may, estimate the value of the asset, property or investment to the best of his judgment. It is also proposed to provide that the Valuation Officer shall send a copy of his estimate to the Assessing Officer and the assessee within a period of six months from the end of the month in which the reference is made. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Validation of Recovery Proceedings) Act, 1964. It is further proposed to provide that where as a result of an order under sections specified in the first proviso, the amount on which interest was payable under this section had been reduced and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under section 220 is increased, the assessee shall be liable to pay interest under sub-section (2) of the said section on the amount payable as a result of such order, from the day immediately following the end of the period mentioned in the first notice of demand referred to in sub section (1) of the said section and ending with the day on which the amount is paid. These amendments will take effect from the 1st day of October, 2014. [Clause 62] Mode of acceptance or repayment of loans and deposits The existing provisions contained in section 269SS of the Act, inter alia, provide that no person shall take from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft, if the amount of such loan or deposit or aggregate of such loans or deposits is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment or reassessment, in order to protect the interest of revenue may, with the previous approval of the Chief Commissioner of Commissioner, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. Sub-section (2) of the said section provides that the provisional attachment shall cease to have effect after the expiry of six months provided that the Chief Commissioner or Commissioner may extend the period upto a total period of two years. It is proposed to amend the proviso to sub-section (2) so as to provide that the Chief Commissioner, Commissioner, Director General or Director may extend the period of provisional attachment so that the total period of extension does not exceed two years or upto sixty days after the date of assessment or reassessment, whichever is later. This amendment will take effect from 1st October, 2014. [Clause 70] Obligation to furnish statement of Information The existing provisions of section 285BA of the Act provide for filing of an annual information return by specified persons in respect of specified financial transactions which are registered or recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person; or (b) the person knows of the inaccuracy at the time of furnishing the statement of financial transaction or reportable account, but does not inform the prescribed income-tax authority or such other authority or agency; or (c) the person discovers the inaccuracy after the statement of financial transaction or reportable account is furnished and fails to inform and furnish correct information within the time specified under sub-section (6) of section 285BA, then, the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum of fifty thousand rupees. These amendments will take effect from 1st April, 2015. [Clauses 65, 66 71] Assessment of income of a person other than the person who has been searched Section 153C of the Act relates to assessment of income of any other person. The existing provisions contained in sub-section (1) of the said section 153C provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us year. Considering the fact that for employees in the private sector, the date of joining the service is not relevant for joining the New Pension Scheme (NPS), it is proposed to amend the provisions of section 80CCD to provide that the condition of the date of joining the service on or after 1.1.2004 is not applicable to them for the purposes of deduction under the said section. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. [Clause 28 ] Credit of Alternate Minimum Tax The existing provisions of sub-section (1) of section 115JEE of the Act provide that the provisions of Chapter-XII BA shall be applicable to any person who has claimed a deduction under part C of Chapter VI-A or claimed a deduction u/s 10AA. Further the present provisions of sub-section (2) of section 115JEE provide that the Chapter shall not be applicable to an individual or an HUF or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person if the adjusted total income does not exceed twenty lakh rupees. This has creat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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