TMI BlogRATIONALISATION MEASURES - DIRECT TAXESX X X X Extracts X X X X X X X X Extracts X X X X ..... ng the framework for computation of minimum alternate tax (MAT) liability under section 115JB for Ind AS compliant companies in the year of adoption and thereafter. The Committee submitted first interim report on 18th March, 2016 which was placed in public domain by the CBDT for wider public consultations. The Committee submitted the second interim report on 5th August, 2016 which was also placed in public domain. The comments/suggestions received in respect of the first and second interim report were examined by the Committee. After taking into account all the suggestions/comments received, the Committee submitted its final report on 22nd December, 2016. In view of the above, it is proposed to amend section 115JB so as to provide the framework for computation of book profit for Ind AS compliant companies in the year of adoption and thereafter. The main features of this proposed framework are as under: A. MAT on Ind AS compliant financial statement (i) No further adjustments to the net profits before other comprehensive income of Ind AS compliant companies, other than those already specified under section 115JB of the Act shall be made. (ii) The other comprehensive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Other Equity at the date of transition to Ind AS. Several of these items would subsequently never be reclassified to the statement of profit and loss/included in the computation of book profits. Accordingly, the following treatment is proposed: (I) Those adjustments recorded in other comprehensive income and which would subsequently be reclassified to the profit and loss, shall be included in book profits in the year in which these are reclassified to the profit and loss; (II) Those adjustments recorded in other comprehensive income and which would never be subsequently reclassified to the profit and loss shall be included in book profits as specified hereunder- SI. No. Items Point of time 1 Changes in revaluation surplus of PPE and Intangible assets (Ind AS 16 and Ind AS 38) To be included in book profits at the time of realisation/disposal/retirement or otherwise transferred 2 Gains and losses from investments in equity instruments designated at fair value through other comprehensive income (Ind AS 109) To be inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive translation differences An entity may elect a choice whereby the cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to Ind AS. Further, the gain or loss on a subsequent disposal of any foreign operation shall exclude translation differences that arose before the date of transition to Ind AS and shall include only the translation differences after the date of transition. In such cases, to ensure that such Cumulative translation differences on the date of transition which have been transferred to retained earnings, are taken into account, these shall be included in the book profits at the time of disposal of foreign operations as mentioned in paragraph 48 of Ind AS 21. (ii) All other adjustments to retained earnings at the time of transition (including for example, Decommissioning Liability, Asset retirement obligations, Foreign exchange capitalisation/decapitalization, Borrowing costs adjustments etc.) shall be included in book profits, equally over a period of five years starting from the year of first time adoption of Ind AS. (iii) Section 115JB of the Act already provides for adjustments on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rify that the share of company in which public are not substantially interested shall also be chargeable to tax at the rate of ten per cent with effect from 1st April, 2017. As the concessional rate was provided with effect from 1st April, 2013, there was uncertainty about the applicability of the amendment to the intervening period. With a view to clarify that the amendment made by Finance Act, 2016 shall also apply to the period from 1st April, 2013 to 31st March, 2017, it is proposed to amend section 50 of the Finance Act, 2016 so as to provide that the effective date of amendment made to section 112(1)(c)(iii) vide Finance Act,2016 shall be 01-04-2013 instead of 01-04-2017. 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 150] Rationalization of rebate allowable under Section 87A The existing provisions of section 87A provide for a rebate up to ₹ 5000 from the income-tax payable to a resident individual if this total income does not exceed ₹ 5,00,000. In view of proposed rationalisation of tax rates for individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olidating plan of mutual fund scheme and period of holding of the units of consolidated plan of mutual fund scheme shall include the period for which the units in consolidating plan of mutual fund scheme were held by the assessee. These amendments will take effect accordingly, from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years. [Clauses 3 25] Definition of 'person responsible for paying' in case of payments covered under sub-section (6) of section 195 The existing provisions of section 204 of Act, has defined the meaning of 'person responsible for paying' to include employer, company or its principal officer or the payer. Further clause (iii) of section 204 of the Act, inter alia, provides that in the case of credit or payment of any sum chargeable under the provisions of this Act, the 'person responsible for paying' shall be the payer himself, or, if the payer is a company, the company itself including the principal officer thereof. However, the said section does not cover in respect of payment of any sum as per sub-section (6) of section 195. Which mandates the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idents. In the light of above discussion and to bring in clarity to avoid litigation , it is proposed to amend the sections 90 and 90A of the Act, to provide that where any 'term' used in an agreement entered into under sub-section (1) of Section 90 and 90A of the Act, is defined under the said agreement, the said term shall be assigned the meaning as provided in the said agreement and where the term is not defined in the agreement, but is defined in the Act, it shall be assigned the meaning as definition in the Act or any explanation issued by the Central Government. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. [Clauses 39 40] Actual cost of asset in case of withdrawal of deduction in terms of Sub-section (7B) of section 35AD The existing provisions of Section 35AD of the Act, inter alia provides for investment linked deduction on amount of capital expenditure incurred, wholly or exclusively, the purposes of business, during the previous year for a specified business excluding capital expenditure incurred for acquisition of any land or goodwill or fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not genuine or are not being carried out in accordance with its objects subsequent to grant of registration. However, at present there is no explicit provision in the Act which mandates said trust or institution to approach for fresh registration in the event of adoption or undertaking modifications of the objects after the registration has been granted. Therefore, it is proposed to amend section 12A so as to provide that where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner. Further, as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the PAN mechanism, it is proposed to insert new section 206CC to provide the following: I. any person paying any sum or amount, on which tax is collectable at source under Chapter XVII BB (hereafter referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (hereafter referred to as collector), failing which tax shall be collected at the twice the rate mentioned in the relevant section under Chapter XVII BB or at the rate of five per cent. whichever is higher. II. that the declaration filed under sub section (1A) of section 206C shall not be valid unless the person filing the declaration furnishes his Permanent Account Number in such declaration. III. that in case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions of sub-section (1). IV. no certificate under sub section (9) of section 206C shall be granted unless it contains the Permanent Account Number of the applicant. V. the collector knows about the correct PAN of the collectee it is also proposed to provide for mandatory quoting of PAN of the collectee by both the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried forward for set-off in subsequent years in accordance with the existing provisions of the Act. This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years. [Clause 31] Reason to believe to conduct a search, etc. not to be disclosed Sub-section (1) and (1A) of section 132 provide that where an authority mentioned therein, based on the information in his possession, has 'reason to believe' or 'reason to suspect' of circumstances referred to in the said sub-sections, he may authorize an authority specified therein to carry out search seizure. Similarly, sub-section (1) of section 132A provides that the specified income-tax authority based on 'reason to believe' can authorise other income-tax authority mentioned therein to requisition from some other officer or authority to deliver books of account, documents or assets of the assessee to the income-tax authority so authorised. Confidentiality and sensitivity are the hallmarks of proceedings under section 132 and section 132A. However, certain judicial pronouncements have created ambiguity in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation report within sixty days of receipt of such reference. It is also proposed to amend Explanation 1 to section 132, so as to provide that for the purposes of sub-sections 9A, 9B and 9D, with respect to execution of an authorisation for search under the provisions of sub-section (2) of section 153B shall apply. These amendments will take effect from 1st April, 2017. [Clause 50] Rationalisation of the provisions in respect of power to call for information The existing provisions of section 133 empower certain income-tax authorities to call for information for the purpose of any inquiry or proceeding under the Act. The second proviso to the said section provides that the power in respect of an inquiry, in a case where no proceeding is pending, shall not be exercised by any income-tax authority below the rank of the Principal Director or Director or the Principal Commissioner or Commissioner without the prior approval of such authorities. Considering the requirement of the work profile of the authorities working in the Investigation Directorate, it is proposed to amend the first proviso of the said section and provide that the power in respect of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer, and provisions of the said Act shall apply accordingly. In view of the various representations received from stakeholders citing genuine hardships if the said provision is made applicable, it is proposed to omit clause (c) of section 197 of the Finance Act, 2016. This amendment will take effect retrospectively from 1st June, 2016. However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset, it is proposed that section 153A relating to search assessments be amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided upto the tenth assessment year if- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent years. [Clause 6] Correct reference to FEMA instead of FERA Existing sub-clause (ii) of clause 4 of section 10 refers to any income of an individual by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999 (42 of 1999), and the rules made thereunder. The proviso to the said sub-clause refers individual to be a person resident outside India, as defined in clause (q) of section 2 of Act 46 of 1973, i.e., Foreign Exchange Regulation Act, 1973, (FERA) which stands repealed and re-enacted as Act 42 of 1999, i.e., the Foreign Exchange Management Act, 1999 (FEMA). The definition of person outside India is occurring in clause (w) of FEMA. With a view to reflect the correct definition of the expression person resident outside India , it is proposed to amend the said proviso. The amendment is clarificatory in nature. This amendment will take effect retrospectively from 1st April, 2013, and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent years. [Clause 6] - - statute, statutory provisions legislation, law, enact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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