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Rationalisation Measures- DIRECT TAXES

H - Bill - Memorandum Explaining the Provisions in The Finance Bill, 2016 - Bill - H - H. Rationalisation Measures Rationalization of tax deduction at source provisions relating to payments by Category-I and Category-II Alternate Investment Funds to its investors. The Finance Act, 2015 had inserted a special taxation regime in respect of Category-I and II Alternative Investment Funds (investment fund) registered with SEBI. The special taxation regime is intended to ensure tax pass through status .....

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hands of investors is in the same manner and in the same proportion as it would have been, had the investor received such income directly and not through the investment fund. The existing provisions of section 194LBB provides that in respect of any income credited or paid by the investment fund to its investor, a tax deduction at source (TDS) shall be made by the investment fund @ 10% of the income. Under section 197 of the Act, facility for certificate for deduction of tax at lower rate or no .....

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and deduction of tax @10% is to be undertaken mandatorily even if under DTAA, the income is not taxable in India. There is no facility for any investor to approach the Assessing Officer for seeking certificate for TDS at a lower or NIL rate in respect of deductions made under section 194LBB. In order to rationalise the TDS regime in respect of payments made by the investment funds to its investors, it is proposed to amend section 194LBB to provide that the person responsible for making the payme .....

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tes in force" so as to include section 194LBB in it. These amendments will take effect from 1st June, 2016. [Clause 3, 81 & 83] New Taxation Regime for securitisation trust and its investors Under the existing provisions of Chapter-XII-EA of the Act consisting of sections 115TA, 115TB and 115TC, special taxation regime in respect of income of the securitisation trusts and the investors of such trusts has been provided. The regime provides that income distributed by the securitisation tr .....

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itisation trust, is exempt under section 10(35A) of the Act and the income of securitisation trust itself is exempt under section 10(23DA) of the Act. It has been represented that under the current regime, the trusts set up by reconstruction companies or the securitisation companies are not covered although such trusts are also engaged in securitisation activity. These companies are established for the purposes of the Securitisation and Reconstruction of Financial Assets and Enforcement of Secur .....

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ts of their specific tax status. In order to rationalise the tax regime for securitisation trust and its investors, and to provide tax pass through treatment, it is proposed to amend the provisions of the Act to substitute the existing special regime for securitisation trusts by a new regime having the following elements: - (i) The new regime shall apply to securitisation trust being an SPV defined under SEBI (Public Offer and Listing of Securitised Debt Instrument) Regulations, 2008 or SPV as d .....

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trust shall be taxable in the hands of investor in the same manner and to the same extent as it would have happened had investor made investment directly in the underlying assets and not through the trust; (iv) Tax deduction at source shall be effected by the securitisation trust at the rate of 25% in case of payment to resident investors which are individual or HUF and @ 30% in case of others. In case of payments to non-resident investors, the deduction shall be at rates in force; (v) The facil .....

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58, 59, 82 & 83] BEPS action plan - Country-By-Country Report and Master file Sections 92 to 92F of the Act contain provisions relating to transfer pricing regime. Under provision of section 92D, there is requirement for maintenance of prescribed information and document relating to the international transaction and specified domestic transaction. The OECD report on Action 13 of BEPS Action plan provides for revised standards for transfer pricing documentation and a template for country-by- .....

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local file referring specifically to material transactions of the local taxpayer; and (iii) a country-by-country report containing certain information relating to the global allocation of the MNE's income and taxes paid together with certain indicators of the location of economic activity within the MNE group. The report mentions that taken together, these three documents (country-by-country report, master file and local file) will require taxpayers to articulate consistent transfer pricing .....

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, profit before income tax and income tax paid and accrued. It also requires MNEs to report their total employment, capital, accumulated earnings and tangible assets in each tax jurisdiction. Finally, it requires MNEs to identify each entity within the group doing business in a particular tax jurisdiction and to provide an indication of the business activities each entity engages in. The Country-by-Country (CbC) report has to be submitted by parent entity of an international group to the prescri .....

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rovide a high-level overview in order to place the MNE group's transfer pricing practices in their global economic, legal, financial and tax context. The master file shall contain information which may not be restricted to transaction undertaken by a particular entity situated in particular country. In that aspect, information in master file would be more comprehensive than the existing regular transfer pricing documentation. The master file shall be furnished by each entity to the tax autho .....

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international group having consolidated revenue above a threshold to be prescribed. (ii) the parent entity of an international group, if it is resident in India shall be required to furnish the report in respect of the group to the prescribed authority on or before the due date of furnishing of return of income for the Assessment Year relevant to the Financial Year (previous year) for which the report is being furnished; (iii) the parent entity shall be an entity which is required to prepare con .....

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to the prescribed authority on or before the prescribed date; (v) the report shall be furnished in prescribed manner and in the prescribed form and would contain aggregate information in respect of revenue, profit & loss before Income-tax, amount of Income-tax paid and accrued, details of capital, accumulated earnings, number of employees, tangible assets other than cash or cash equivalent in respect of each country or territory along with details of each constituent's residential status .....

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ion with India even though there is an agreement; and (c) this fact has been intimated to the entity by the prescribed authority; (vii) If there are more than one entities of the same group in India, then the group can nominate (under intimation in writing to the prescribed authority) the entity that shall furnish the report on behalf of the group. This entity would then furnish the report; (viii)If an international group, having parent entity which is not resident in India, had designated an al .....

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be required to make submission within thirty days of receipt of notice or further period if extended by the prescribed authority, but extension shall not be beyond 30 days; (x) For non-furnishing of the report by an entity which is obligated to furnish it, a graded penalty structure would apply:- (a) if default is not more than a month, penalty of ₹ 5000/- per day applies; (b) if default is beyond one month, penalty of ₹ 15000/- per day for the period exceeding one month applies; (c) .....

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default beyond date of service of penalty order; (xii) If the entity has provided any inaccurate information in the report and,- (a) the entity knows of the inaccuracy at the time of furnishing the report but does not inform the prescribed authority; or (b) the entity discovers the inaccuracy after the report is furnished and fails to inform the prescribed authority and furnish correct report within a period of fifteen days of such discovery; or (c) the entity furnishes inaccurate information or .....

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d in the rules. The rules shall thereafter prescribe the information and document as mandated for master file under OECD BEPS Action 13 report; (ii) the information and document shall also be furnished to the prescribed authority within such period as may be prescribedand the manner of furnishing may also be provided for in the rules; (iii) for non-furnishing of the information and document to the prescribed authority, a penalty of ₹ 5 lakh shall be leviable. However, reasonable cause defe .....

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. Therefore, CbC reporting for an international group having Indian parent, for the previous year 2016-17, shall apply only if the consolidated revenue of the international group in previous year 2015-16 exceeds ₹ 5395 crore (the equivalent would be determinable based on exchange rate as on the last day of previous year 2015-16). The amendments will be effective from 1st April, 2017 and shall apply for the Assessment year 2017-18 and subsequent assessment years. [Clause 47, 100, 102, 106 & .....

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te Government or any authority or body or agency in cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43 of the Income-tax Act. As a result grant or cash assistance or subsidy etc. provided by the Central Government for budgetary support of a trust or any other entity formed specifically for operationalizing certain .....

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scope of section 43B to include certain payments made to Railways The existing provisions of section 43B of the Act, inter alia, provide that any sum payable by the assessee by way of tax, cess, duty or fee, employer contribution to Provident Fund, etc., is allowable as deduction of the previous year in which the liability to pay such sum was incurred (relevant previous year) if the same is actually paid on or before the due date of furnishing of the return of income irrespective of method of a .....

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ncome Section 115 BBE of the Act, inter-alia provides that the income relating to section 68 or section 69 or section 69A or section 69B or section 69C or section 69D is taxable at the rate of thirty per cent and further provides that no deduction in respect of any expenditure or allowances in relation to income referred to in the said sections shall be allowable. Currently, there is uncertainty on the issue of set-off of losses against income referred in section 115BBE of the Act. The matter ha .....

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respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D. This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years. [Clause 51] Taxation of Non-compete fees and exclusivity rights in case of Profession The existing provision of clause (va) of section 28 of the Act includes within the scope of "profit and gains of business or profession" any s .....

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ure, produce or process any article or thing or right to carry on any business, which are chargeable to tax under the head "Capital gains", would not be taxable as profits and gains of business or profession. Under section 45 of the Act, any capital receipt arising out of transfer of any business or commercial rights is taxable under the head "Capital gains". The amount of "Capital gains" is computed according to section 48 of the Act. For this purpose, 'cost of .....

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or profession. Further, it is also proposed to amend the proviso to clarify that receipts for transfer of right to carry on any profession, which are chargeable to tax under the head "Capital gains", would not be taxable as profits and gains of business or profession. It is also proposed to amend section 55 so as to provide that the 'cost of acquisition' and 'cost of improvement' for working out "Capital gains" on capital receipts arising out of transfer of ri .....

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ransfer of securities, whether listed or unlisted. The expression "securities" for the purpose of the said provision has the same meaning as in clause (h) of section 2 of the Securities Contracts (Regulations) Act, 1956 (32 of 1956)('SCRA'). A view has been taken by the courts that shares of a private company are not "securities". With a view to clarify the position so far as taxability is concerned, it is proposed to amend the provisions of clause (c) of sub-section .....

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d set off of such loss under section 73A of the Income-tax Act The existing provisions of section 73A of the Act provide that any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business. Further, section 80 of the Act inter-alia provides that a loss which has not been determined in pursance of return filed in accordance with the provisions of sub-section (3) of section 130, shal .....

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ss determined as per section 73A of the Act shall not be allowed to be carried forward and set off if such loss has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139. It is also proposed to amend the said sub-section (3) of section 139 so as to give reference of sub-section (2) of section 73A in the said sub-section. These amendments will take effect retrospectively from 1stApril, 2016 and will, accordingly, apply in relation t .....

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her spectrum is an intangible asset and the spectrum fees paid is eligible for depreciation under section 32 of the Act or whether it is in the nature of a 'license to operate telecommunication business' and eligible for deduction under section 35ABB of the Act. In order to provide clarity and avoid any future litigation and controversy, it is proposed to insert a new section 35ABA in the Act to provide for tax treatment of spectrum fee. The section seeks to provide,- (i) any capital exp .....

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allowed in the previous year in which the spectrum has been transferred. (iii) if the spectrum is transferred and proceeds of the transfer exceed the amount of expenditure remaining unallowed, theexcess amount shall be chargeable to tax as profits and gains of business in the previous year in which the spectrum has been transferred. (iv) unallowed expenses in a case where a part of the spectrum is transferred would be amortised. (v) under the scheme of amalgamation, if the amalgamating company s .....

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ax at source as provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit. In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at sou .....

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00,000 194LA Payment of Compensation on acquisition of certain Immovable Property Insurance commission 2,00,000 2,50,000 194D Commission on sale of lottery tickets 20,000 15,000 194G Commission or brokerage 1,000 15,000 194H Commission or brokerage 5,000 15,000 Table-4 : Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act: Present Section Heads Existing Rate of TDS (%) Proposed Rate of TDS (%) 194DA Payment in respect of Life Insuranc .....

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f Capital Asset To be omitted w.e.f 01.06.2016 These amendments will take effect from 1st June, 2016. [Clause 70 to 79] Enabling of Filing of Form 15G/15H for rental payments The provision of sub-section 194-I of the Act, inter alia, provides for tax deduction at source (TDS) for payments in the nature of rent beyond a threshold limit. The existing provisions provide threshold of ₹ 1,80,000 per financial year for deduction of tax under this section. In spite of providing higher threshold f .....

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In order to reduce compliance burden in such cases, it is proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194-I also eligible for filing self-declaration in Form no 15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A. This amendment will take effect from 1st June, 2016. [Clause 84] Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to the date of .....

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ny relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. when an immovable property is sold as a stock-in-trade. It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable propert .....

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ement for the transfer of such immovable property. These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years. [Clause 30] Rationalization of conversion of a company into Limited Liability Partnership (LLP) Existing provisions of clause (xiiib) of Section 47 provides that conversion of a private limited or unlisted public company into Limited Liability Partnership (LLP) shall not be re .....

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in which the conversion takes place, should not exceed five crore rupees. These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years. [Clause 28] Rationalisation of tax treatment of Recognised Provident Funds, Pension Funds and National Pension Scheme Under the existing provisions of the Income-tax Act, tax treatment for the National Pension System (NPS) referred to in section 80CCD i .....

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ment Pension and superannuation fund is exempt from taxation. The monthly contribution, annual accrued income, advances/ withdrawals for specific purposes and final withdrawal from the Recognised Provident Funds (RPFs) on superannuation are also accorded EEE status i.e. Exempt, Exempt, Exempt. In order to bring greater parity in tax treatment of different types of pension plans, it is proposed to amend section 10 so as to provide that in respect of the contributions made on or after the 1stday o .....

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nd the said provisions so as to provide that any payment in commutation of an annuity purchased out of contributions made on or after the 1st day of April, 2016, which exceeds forty per cent of the annuity, shall be chargeable to tax. Under the existing provisions of section 80CCD, any payment from National Pension System Trust to an employee on account of closure or his opting out of the pension scheme is chargeable to tax. It is proposed to provide that any payment from National Pension System .....

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tion fund by the employer in the hands of the assessee. Under the Part A of Fourth Schedule to the Income-tax Act contributions made by employer to the credit of an employee participating in a recognised provident fund, which are in excess of twelve percent of the salary of the employee, are liable to tax in the hands of the employee. However, there is no monetary limit for the contribution made by the employer though there is a monetary ceiling for employee's contribution. The limit of cont .....

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sion plans under one umberalla, it is also proposed to amend:- (i) the said schedule so as to provide exemption to one-time portability from a recognised provident fund to National Pension System; (ii) clause (13) of section 10 so as to provide that any payment from an approved superannuation fund by way of transfer to the account of the employee under NPS referred to in section 80CCD and notified by the Central Government shall be exempt from tax. These amendments are proposed to be made effect .....

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, whether incorporated or not or any artificial juridical person, if his total income or of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to provisions of section 10A or section 10B or section 10BA or Chapter VI-A, exceeds the maximum amount which is not chargeable to income tax shall be liable to furnish return on or before the due date. Existing provision of sub-section (4) of section 139 provides that a person who has not .....

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issued under sub-section (1) of section 142 discovers any omission or any wrong statement therein, he may furnish a revised return at any time before one year from the end of the relevant assessment year or completion of assessment, whichever is earlier. Clause (aa) of Explanation to sub-section (9) of the section 139 provides that a return of income shall be regarded as defective unless the self-assessment tax together with interest, if any, payable in accordance with the provisions of section .....

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r clause (38) of section 10 and income of such person without giving effect to the said clause of section 10 exceeds the maximum amount which is not chargeable to tax, shall also be liable to file return of income for the previous year within the due date. It is also proposed to substitute sub-section (4) of the aforesaid section to provide that any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time .....

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e expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. It is also proposed to omit clause (aa) of the Explanation to sub-section (9) of aforesaid section to provide that a return which is otherwise valid would not be treated defective merely because self-assessment tax and interest payable in accordance with the provisions of section 140A has not been paid on or before the date of furnishing of the return. These amendme .....

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king an assessment under sub-section (3) of section 143, a return shall be processed under sub-section (1) of section 143. The amendment will take effect from the 1st day of April, 2017 and will, accordingly apply in relation to assessment year 2017-2018 and subsequent years. [Clause 66] Rationalisation of time limit for assessment, reassessment and recomputation The existing statutory time limit for completion of assessment proceedings is two years from the end of the assessment year in which t .....

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mpletion of assessment under section 143 or section 144 be changed from existing two years to twenty-one months from the end of the assessment year in which the income was first assessable; (ii) the period for completion of assessment under section 147 be changed from existing one year to nine months from the end of the financial year in which the notice under section 148 was served; (iii) the period for completion of fresh assessment in pursuance of an order under section 254 or section 263 or .....

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260 or 262 or 263 or 264 or an order of the Settlement Commission under sub-section (4) of section 245D, where effect can be given wholly or partly otherwise than by making a fresh assessment or reassessment shall be three months from the end of the month in which order is received or passed, as the case may be, by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. It is also proposed that in a case where it is not possible for the Assessing Officer .....

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n is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Income-tax Act, then such assessment, reassessment or recomputation shall be made on or before the expiry of twelve months from the end of the month in which such order is received by the Principal Commissioner or Commiss .....

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he firm is passed. However, for cases pending as on 1.6.2016, the time limit for taking requisite action is proposed to be 31.3.2017 or twelve months from the end of the end of the month in which order in case of firm is passed, whichever is later. It is also proposed to make consequential changes in time limit for completion of assessment or reassessment by the Assessing Officer in accordance with the extension of time limit provided to the Transfer Pricing Officer in certain cases by amendment .....

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ection 153C cases to bring it in sync with the new time limits provided for other cases. In order to simplify the provisions of existing section 153B by retaining only those provisions that are relevant to the current provisions of the Act, section 153B is proposed to be substituted with the following changes in time limit from the existing time limits as under: (i) The limitation for completion of assessment under section 153A, in respect of each assessment year falling within sixassessment yea .....

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erson referred to in section 153C shall be changed from existing two years to twenty-one months from the end of the financial year in which the last of the authorisation for search under Section 132 or requisition under section 132A was executed or nine months (changed from the existing one year) from the end of the financial year in which the books of account or documents or assets seized or requisition are handed over under section 153C to the Assessing Officer having jurisdiction over such ot .....

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section 211, the advance tax payment schedule for a company is fifteen per cent, forty-five per cent, seventy-five per cent and hundred per cent of tax payable on the current income to be paid by 15th June, 15th September, 15th December and 15th March respectively. For other assessees, the advance tax payment schedule is thirty per cent, sixty per cent and hundred per cent of tax payable on current income to be paid by 15th September, 15th December and 15th March respectively. Based on the recom .....

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osed that an eligible assessee in respect of eligible business referred to in section 44AD opting for computation of profits or gains of business on presumptive basis, shall be required to pay advance tax of the whole amount in one instalment on or before the 15th March of the financial year. Consequential amendments are also proposed to be made to section 234C which provides for chargeability of interest for deferment of advance tax to bring it in sync with the amendments proposed in section 21 .....

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e tax, tax deducted or collected at source. It also provides that the period for which the interest is paid on such excess payment of tax begins from the 1st April of the assessment year and ends on the date on which refund is granted. In order to ensure filing of return within the due date it is proposed to amend section 244A to provide that in cases where the return is filed after the due date, the period for grant of interest on refund may begin from the date of filing of return. In the inter .....

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e a refund arises out of appeal effect being delayed beyond the time prescribed under sub-section (5) of section 153, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1) of section 244A, an additional interest on such refund amount calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted .....

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he appointment and powers of Senior Vice- President of the Appellate Tribunal. In view of the fact that there are no extra-judicial or administrative duties or difference in the pay scale attached with the post of Senior Vice-president in the Tribunal, it is proposed to omit the reference of "Senior Vice-President". Sub-section (2A) of section 253 provides that the Principal Commissioner or Commissioner may, if he objects to any direction issued by the Dispute Resolution Panel (DRP) un .....

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-section (5) of section 144C. In line with the decision of the Government to minimise litigation, it is proposed to omit the said sub-sections (2A) and (3A) of section 253 to do away with the filing of appeal by the Assessing Officer against the order of the DRP. Consequent amendments are proposed to be made to sub-section (3A) and (4) of the said provision also. These amendments will take effect from 1st day of June, 2016. It is also proposed to provide that in cases where Department is already .....

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order of ITAT, it is proposed to amend sub-section (2) of section 254 to provide that the Appellate Tribunal may rectify any mistake apparent from the record in its order at any time within six months from the end of the month in which the order was passed. The existing provision of sub-section (3) of section 255, inter alia, provides that a single member bench may dispose of any case which pertains to an assessee whose total income as computed by the Assessing Officer does not exceed fifteen la .....

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existing provisions, penalty on account of concealment of particulars of income or furnishing inaccurate particulars of income is leviable under section 271(1)(c) of the Income-tax Act. In order to rationalize and bring objectivity, certainty and clarity in the penalty provisions, it is proposed that section 271 shall not apply to and in relation to any assessment for the assessment year commencing on or after the 1st day of April, 2017 and subsequent assessment years and penalty be levied under .....

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sessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143; (b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished; (c) the income reassessed is greater than the income assessed or reassessed immediately before such re-assessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or 115JC, as thecase may be, is grea .....

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ent scenarios as discussed herein. In a case where return is furnished and assessment is made for the first time the amount of under reported income in case of all persons shall be the difference between the assessed income and the income determined under section 143(1)(a). In a case where no return has been furnished and the return is furnished for the first time, the amount of under-reported income is proposed to be: (i) for a company, firm or local authority, the assessed income; (ii) for a p .....

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nation of deemed total income in accordance with the provisions of section 115JB or section 115JC, the amount of total under reported income shall be determined in accordance with the following formula- (A - B) + (C - D) where, A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions); B = the total income that would have been chargeable had the total income assessed as per the general provisions b .....

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d under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D. It is clarified that in a case where an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income, the amount of under reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed. Calculation of under-reported income in a case where .....

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rmined on the basis of an estimate, if the accounts are correct and complete but the method employed is such that the income cannot properly be deducted therefrom; (iii) where the assessee has, on his own, estimated a lower amount of addition or disallowance on the issue and has included such amount in the computation of his income and disclosed all the facts material to the addition or disallowance; (iv) where the assessee had maintained information and documents as prescribed under section 92D .....

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of two hundred per cent of the tax payable on such misreported income. The cases of misreporting of income have been specified as under: (i) misrepresentation or suppression of facts; (ii) non-recording of investments in books of account; (iii) claiming of expenditure not substantiated by evidence; (iv) recording of false entry in books of account; (v) failure to record any receipt in books of account having a bearing on total income; (vi) failure to report any international transaction or deem .....

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of penalty in the case of the person for the same or any other assessment year. These amendments will take effect from 1st day of April, 2017 and will, accordingly apply in relation to assessment year 2017-2018 and subsequent years. Consequential amendments have been proposed in sections 119, 253, 271A, 271AA, 271AAB, 273A and 279 to provide reference to newly inserted section 270A. The provisions of section 270A are illustrated through examples as below: Example 1. Case is of a firm liable to .....

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me (150-110) = 40 (180-150) = 30 Tax Payable on under-reported Income 30 % of 40 = 12 30 % of 30 = 9 Penalty Leviable* 50 % of 12 = 6 50 % of 9 = 4.5 * Considering under-reported income is not on account of misreporting Example 2. Case is of an individual below 60 years of age and no return of income has been furnished: (Figures in Rs) Total Income assessed under section 143(3) 10,00,000 Under-reported Income 10,00,000-2,50,000* =7,50,000 Tax Payable on under-reported Income 30 % of 7,50,000 = 2 .....

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ons or disallowances made in assessment or reassessment as above qualifies under sub-section (6) of section 270A, the penalty would be calculated as under: Assessment under section 143 (3) Re-assessment under section 147 Under-reported Income (-)40 minus (-)90 = 50 20 minus (-)40 = 60 Tax Payable on under-reported Income 30 % of 50 = 15 30 % of 60 = 18 Penalty Leviable* 50 % of 15 = 7.5 50 % of 18 = 9 * Considering under-reported income is not on account of misreporting [Clause 62, 93, 96, 98, 9 .....

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the 1st day of July, 2012. In order to rationalise the rate of penalty and to reduce discretion it is proposed to amend that clause (c) of sub-section (1) of section 271AAB to provide for levy of penalty on such undisclosed income at a flat rate of sixty per cent of such income. [Clause 101] Amendment of Section 272A Existing provision of Sub-section (1) provides for levy of penalty of ten thousand rupees for each failure or default to answer the questions raised by an income-tax authority unde .....

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or failure to comply with a direction issued under sub-section (2A) of section 142. It is further proposed to amend sub-section (3) of section 272A to provide that penalty in case of failure referred above shall be levied by the income tax authority issuing such notice or direction. It is also proposed to make consequential amendment to section 288 by insertion of a new clause (d) in sub- section (1) of section 272A in the Income-tax Act relating to penalty for failure to comply with the notice .....

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roval of the income- tax authorities specified therein, if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. Such attachment of property is extendable to a maximum period of two years or sixty days after the date of assessment order, whichever is later. The Income Tax Simplification Committee (Easwar Committee) has recommended that provisional attachment of property could be substituted by a bank guarantee subject to fulfilment of cert .....

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fair market value of the property, the Assessing Officer may, make a reference to the Valuation Officer, who may be required to submit the report of the estimate of the property to the Assessing Officer within a period of thirty days from the date of receipt of such reference. In order to ensure the revocation of attachment of property in lieu of bank guarantee in a time bound manner, it is proposed to provide that an order revoking the attachment be made by the Assessing Officer within fifteen .....

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bank guarantee or fails to furnish a new guarantee from a scheduled bank for an equal amount fifteen days before the expiry of such guarantee, the Assessing Officer may in the interests of the revenue, invoke the bank guarantee. The amount realised by invoking the bank guarantee shall be adjusted against the existing demand which is payable and the balance amount, if any, be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of Reserve Bank of .....

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tee forthwith. These amendments will take effect from lst day of June, 2016. [Clause 108] Rationalisation of the provisions relating to Appellate Tribunal Existing clause (b) of sub-section (3), sub-section (4A) and sub-section (5) of section 252 provide for the appointment and powers of Senior Vice- President of the Appellate Tribunal. In view of the fact that there are no extra-judicial or administrative duties or difference in the pay scale attached with the post of Senior Vice-president in t .....

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b-section (3A) of section 253 provides that every appeal under sub-section (2A) shall be filed within sixty days of the date on which the order sought to be appealed against is passed by the Assessing Officer in pursuance of the directions of the DRP under sub-section (5) of section 144C. In line with the decision of the Government to minimise litigation, it is proposed to omit the said sub-sections (2A) and (3A) of section 253 to do away with the filing of appeal by the Assessing Officer agains .....

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t stood before the amendment of the Finance Act, 2016), no fee shall be payable. This amendment will take effect retrospectively from 1st July, 2012. The existing provisions sub-section (2) of the section 254 of the Act, provide that the Appellate Tribunal may rectify any mistake apparent from the record in its order at any time within four years from the date of the order. In order to bring certainty to the order of ITAT, it is proposed to amend sub-section (2) of section 254 to provide that th .....

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T and to expedite the process of dispute resolution at the level of ITAT, it is proposed to amend the said sub-section (3) so as to provide that a single member bench may dispose of a case where the total income as computed by the Assessing Officer does not exceed fifty lakh rupees. These amendments will take effect from 1st day of June, 2016. [Clause…] Processing under section 143(1) be mandated before assessment Under the existing provision of sub-section (1D) of section 143, processing .....

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ip;] Extension of time limit to Transfer Pricing Officer in certain cases As per the existing provisions, the Transfer Pricing Officer (TPO) has to pass his order sixty days prior to the date on which the limitation for making assessment expires. It is noted that at times seeking information from foreign jurisdictions becomes necessary for determination of arm's length price by the TPO and at times proceedings before the TPO may also be stayed by a court order. It is proposed to amend sub-se .....

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ke effect from 1st day of June, 2016. [Clause 46] Assumption of jurisdiction of Assessing Officer The existing sub-section (3) of the section 124, inter-alia, provides that no person shall be entitled to call in question the jurisdiction of an Assessing Officer in a case where return is filed under section 139, after the expiry of one month from the date on which he was served with a notice issued under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of t .....

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) of the Act. In order to remove any ambiguity in such cases it is proposed to amend sub-section (3) of section 124 to specifically provide that cases where search is initiated under section 132 or books of accounts, other documents or any assets are requisitioned under section 132A, no person shall be entitled to call into question the jurisdiction of an Assessing Officer after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or su .....

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n and analysis of the information and documents so received, it is proposed to amend section 133C to provide adequate legislative backing for processing of information and documents so obtained and making the outcome thereof available to the Assessing Officer for necessary action, if any. It is also proposed to amend Explanation 2 to section 147 to provide for reopening of cases by the AO on the basis of the information so received. Clause (a) of sub-section (1) of section 143 provides that, a r .....

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(1) of section 143. It is proposed that such adjustments can be made based on the data available with the Department in the form of audit report filed by the assessee, returns of earlier years of the assessee, 26AS statement, Form 16, and Form 16A. However, before making any such adjustments, in the interest of natural justice, an intimation shall be given to the assessee either in writing or through electronic mode requiring him to respond to such adjustments. The response received, if any, wi .....

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mposition of penalty under section 270A and initiation of proceedings under section 276C, provided he pays the tax and interest payable as per the order of assessment or reassessment within the period specified in such notice of demand and does not prefer an appeal against such assessment order. The assessee can make such application within one month from the end of the month in which the order of assessment or reassessment is received in the form and manner, as may be prescribed. It is proposed .....

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by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; or (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction to which the provisions of Chapter X apply. It is proposed that the Assessing Officer shall pass an order accepting or rejecting such application within a period of one month from th .....

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