TMI BlogExplanatory Notes to the Provisions of the Finance Act, 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... to business or employment, 13.1-13.3; New regime for taxation of long-term capital gains on sale of equity shares etc., 29.1-29.13 9 Aligning the scope of business connection with modified PE Rule as per Multilateral Instrument (MLI), 5.1-5.5; Business connection to include Significant Economic presence , 6.1-6.9 10 Royalty and FTS payment by NTRO to a non-resident to be tax-exempt, 7.1-7.4; Extending the benefit of tax-free withdrawal from NPS to non-employee subscribers, 8.1-8.3; Tax deduction at source and manner of payment in respect of certain exempt entities, 11.1-11.5; New regime for taxation of long-term capital gains on sale of equity shares etc., 29.1-29.13; Exemption to specified income of class of body, authority, Board, Trust or Commission in certain cases, 9.1-9.4; Exemption of income of Foreign Company from sale of leftover stock of crude oil on termination of agreement or arrangement, 10.1-10.4 11 Tax deduction at source and manner of payment in respect of certain exempt entities, 11.1-11.5 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79 Benefit of carry forward and set off of losses for facilitating insolvency resolution, 21.1-21.6 80AC Deductions in respect of certain incomes not to be allowed unless return is filed by the due date, 22.1-22.3 80D Deductions available to senior citizens in respect of health insurance premium and medical treatment, 23.1-23.4 80DDB Enhanced deduction to senior citizens for medical treatment of specified diseases, 24.1-24.3 80IAC Measures to promote start-ups, 25.1-25.3 80JJAA Incentive for employment generation, 26.1-26.4 80 PA Deduction in respect of income of Producer Companies, 27.1-27.3 80TTA Deduction in respect of interest income to senior citizens, 28.1-28.5 80 TTB Deduction in respect of interest income to senior citizens, 28.1-28.5 112 A New regime for taxation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndments to the structure of Authority for Advance Rulings, 41.1-41.5 245Q Amendments to the struct,ure of Authority for Advance Rulings, 41.1-41.5 253 Appeal against penalty imposed by Commissioner (Appeals] under section 271), 42.1-42.3 271 FA Penalty for failure to furnish statement of financial transaction or reportable account, 43.1-43.4 276 CC Rationalisation of section 276 CC relating to prosecution for failure to furnish return, 44.1-44.4 286 Rationalisation of provisions relating to Country-by-Country Report, 45.1-45.4 CHAPTER VIII Miscellaneous PART XVI THE FINANCE (NO.2) ACT, 2004 97 New regime for taxation of long-term capital gains on sale of equity shares etc., 29.1-29.13 PART XVII THE FINANCE ACT, 2013 116 Rationalisation of the provisions relating to Commodity Transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to tax for the assessment year 2018-19. 3.1.1 In respect of income of all categories of assessees liable to tax for the assessment year 2018-19, the rates of income-tax have been specified in Part I of the First Schedule to the Act. These are the same as those laid down in Part Ill of the First Schedule to the Finance Act, 2017 for the purposes of computation of advance tax , deduction of tax at source from Salaries and charging of tax payable in certain cases during the financial year 2017-18. The main features of the rates specified in the said Part I are as follows: 3.1.2 Individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person. Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company) as under:- Income chargeable to tax Rate of income- tax Individual (other than senior and very senior citizen), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income chargeable to tax Rate Up to ₹ 10,000 10% ₹ 10,001 - ₹ 20,000 20% Exceeding ₹ 20,000 30% The amount of income-tax so computed shall be increased by a surcharge at the rate of twelve per cent of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. However, marginal relief shall be available so that 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. Education Cess on income-tax shall continue to be levied at the rate of two per cent on the amount of tax computed inclusive of surcharge. In addition, the amount of tax computed shall be further increased by an additional surcharge called Secondary and Higher Education Cess on income-tax at the rate of one per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies. In the case of a company, the rate of income-tax has been specified in Paragraph E of Part I of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is a) twenty five per cent of the total income, if the total turnover or gross receipts of the company in the previous year 2015-16 does not exceed fifty crore rupees; b) twenty-five per cent of the total income at the option of the company, if it satisfies the conditions contained under section 115BA of the Income-tax Act; c) thirty per cent of the total income, in all other cases. The tax computed shall be enhanced by a surcharge of seven per cent where such domestic company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of twelve per cent shall be levied if the total income of the company exceeds ten crore rupees. In the case of a company other than a domestic company, royalties received from Government or an Indian concern under an approved agreement made after 31.03.1961 but before 01.04.1976, shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign company, tax shall be deducted at source at the rate of ten per cent on income by way of long-term capital gain referred to in section 112A of the Income-tax Act. 3.2.2 Surcharge. The tax deducted at source in the following cases shall be increased by a surcharge, as specified below, for purposes of the Union: (i) In case of an individual, Hindu undivided family, association of person, body of individual or artificial juridical person, where the income or aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds- (a) fifty lakh rupees but does not exceed one crore rupees, the rate of surcharge is ten per cent of such income-tax; (b) one crore rupees, the rate of surcharge is fifteen per cent of such income-tax. (ii) In case of a firm or cooperative society, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees, the rate of surcharge is twelve per cent of such income-tax. (iii) In case of payments made to foreign companies, the rate of surcharge is two per cent of such income-tax where the income or the aggregate of such incomes paid or likel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, Paragraph A of Part Ill of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company). The basic exemption limits, rates of tax and slabs of income for various categories remain the same as in financial year 2017-18. The rates of tax during the financial year 2018-19 are as follows:- Income chargeable to tax Rate of income- tax Individual (other than senior and very senior citizen), HUF, association of persons, body of individuals and artificial juridical person Individual, resident in India who is of the age of sixty years or more but less than eighty years (senior citizen) Individual. resident in India who is of the age of eighty years or more (very senior citizen) Up to ₹ 2,50,000 Nil Nil Nil ₹ 2,50,001- ₹ 3,00,000 5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The amount of income-tax as increased by the applicable surcharge, shall be further increased by an additional surcharge called 'Health and Education Cess' at the rate of four per cent of such income-tax inclusive of surcharge. No marginal relief shall be available in respect of the Health and Education Cess. 3.3.4 Firms. In the case of every firm, the rate of income-tax of thirty per cent has been specified in Paragraph C of Part III of the First Schedule to the Act. The amount of income-tax so computed shall continue to be increased by a surcharge at the rate of twelve per cent of such income-tax in case of a firm having a total income exceeding one crore rupees. However, marginal relief shall be available so that 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. The amount of income-tax as increased by the applicable surcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der an approved agreement made after 31.03.1961 but before 01.04.1976, shall be taxed at fifty per cent. Similarly, fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29.02.1964 but before 01.04.1976 shall be taxed at fifty per cent. On the balance of the total income of such company, the tax rate shall be forty per cent. The tax computed shall continue to be enhanced by a surcharge of two per cent where such company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of five per cent shall continue to be levied if the total income of such company exceeds ten crore rupees. However, marginal relief shall be allowed in the case of every company to ensure that,- (i) 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; (ii) the total amount payable as income-tax and surcharge on total income exceeding ten crore rupees shall not exceed the total amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orting to abusive arrangements in order to escape liability of paying tax on distributed profits. Under such arrangements, companies with large accumulated profits adopt the amalgamation route to reduce capital and circumvent the provisions of sub-clause (d) of clause (22) of section 2 of the Income-tax Act. 4.4 With a view to prevent such abusive arrangements and similar other abusive arrangements, a new Explanation 2A has been inserted in clause (22) of section 2 of the Income-tax Act to widen the scope of the term 'accumulated profits' so as to provide that in the case of an amalgamated company, accumulated profits, whether capitalised or not, or losses as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation. 4.5 Applicability : This amendment takes effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent assessment years. 5. Aligning the scope of business connection with modified PE Rule as per Multilateral Instrument (MLI) 5.1 Before amendment by the Act, the provisions of Explanation 2 to clause (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic law being narrower in scope were more beneficial than the provisions in the DTAAs, as modified by MLL such wider provisions in the DTAAs were ineffective. 5.4 In view of the above, the provisions of section 9 of the Income-tax Act have been amended so as to align them with the provisions in the DTAA, as modified by MLI, so as to make the provisions in the treaty effective. Accordingly, clause (i) of sub-section (1) of section 9 of the Income-tax Act has been amended to provide that business connection shall also include any business activities carried through a person who, acting on behalf of the non-resident, habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by the non-resident. It is further amended that the contracts should be - (i) in the name of the non-resident; or (ii) for the transfer of the ownership of, or for the granting of the right to use, property owned by that non-resident or that the non-resident has the right to use; or (iii) for the provision of services by that non-resident. 5.5 Applicability: This amendment takes effect from 1st April, 2019 and will, accordingly, apply in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce country to tax business profits that are derived from its economy are unfairly and unreasonably eroded. 6.4 OECD under its BEPS Action Plan 1 addressed the tax challenges in a digital economy wherein it has discussed several options to tackle the direct tax challenges arising in digital businesses. One such option is a new nexus rule based on Significant Economic Presence . As per the Action Plan 1 Report, a non-resident enterprise would create a taxable presence in a country if it has a significant economic presence in that country on the basis of factors that have a purposeful and sustained interaction with the economy by the aid of technology and other automated tools. It further recommended that revenue factor may be used in combination with the aforesaid factors to determine 'significant economic presence'. 6.5 Before amendment by the Act, the scope of existing provisions of clause (i) of subsection (1) of section 9 of the Income-tax Act was restrictive in nature as it essentially provided for physical presence-based nexus rule for taxation of business income of a non-resident in India. Explanation 2 to the said section, which defines 'business conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident to be tax-exempt 7.1 Section 195 of the Income-tax Act requires a person to deduct tax at the time of payment or credit to a non-resident. 7.2 Given the strategic nature and business exigencies of the National Technical Research Organisation (NTRO), a new clause (6D) has been inserted in section 10 of the Income-tax Act so as to provide that the income arising to non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the NTRO, will be exempt from income tax. 7.3 Consequently, NTRO will not be required to deduct tax at source on such payments. 7.4 Applicability: This amendment takes effect from 1st April, 2018 and accordingly applies in relation to assessment year 2018-19 and subsequent assessment years, 8. Extending the benefit of tax-free withdrawal from NPS to non-employee subscribers 8.1 Before amendment by the Act, clause (12A) of section 10 of the Income-tax Act provided that an employee contributing to the pension scheme referred to in section 80CCD of the Income-tax Act (NPS) shall be allowed exemption in respect of 40% of the total amount pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (48B) of the said section provided that any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil after the expiry of the agreement or arrangement shall be exempt subject to such conditions as may be notified by the Central Government. However, the benefit of exemption was not available on sale out of the leftover stock of crude in case of termination of the said agreement or arrangement. 10.3 Given the strategic nature of the project benefitting India in augmenting its strategic petroleum reserves, clause (48B) of section 10 of the Income-tax Act has been amended to provide that the benefit of tax exemption in respect of income from leftover stock will be available in cases where the agreement or arrangement is terminated in accordance with the terms mentioned therein. 10.4 Applicability : This amendment takes effect from 1st of April, 2019 and will, accordingly, apply in relation to assessment year 2019-20 and subsequent years. 11. Tax deduction at source and manner of payment in respect of certain exempt entities. 11.1 Section 11 of the Income-tax Act provides for exemption in respect of income from property hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reimbursement of certain medical expenses. Further, the exemption in respect of Transport Allowance (except in case of differently abled persons) under the Income-tax Rules, 1962 has also been withdrawn vide notification no. 17/2018 dated 06.04.2018. 12.4 Applicability: These amendments take effect from '1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 13. Taxability of compensation in connection to business or employment 13.1 Before amendment by the Act, the provisions of section 28 of the Income-tax Act provided that certain types of compensation receipts shall be taxable under the head Profits and gains of business or profession . However, the scope of this section was restrictive since it did not cover a large segment of compensation receipts in connection with business and employment, leading to base erosion and revenue loss. 13.2 Accordingly, section 28 of the Income-tax Act has been amended to provide that any compensation received or receivable, by any person, whether revenue or capital, in connection with the termination or the modification of the terms and conditions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or profession of the assessee, the said fair market value shall deemed as its actual cost; (iv) section 49 has been amended to provide that for the purposes of computation of capital gains arising on transfer of such capital assets, the said fair market value shall be deemed as its cost of acquisition. 14.4 Applicability: These amendments take effect from 1 st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 15. Tax treatment of transactions in respect of trading in agricultural commodity derivatives 15.1 Clause (5) of section 43 of the Income-tax Act defines speculative transaction . Clause (e) of the proviso to clause (5) of section 43 of the Income-tax Act, however, stipulates that an eligible transaction in commodity derivatives carried out in a recognised association, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013), is a non-speculative transaction. 15.2 Commodity transaction tax (CTT) was introduced vide Finance Act, 2013 to bring transactions relating to non-agricultural commodity derivatives under the tax net while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of plying, hiring or leasing such goods carriages, the income of such business chargeable to tax under the head Profits and gains of business or profession shall be deemed to be the aggregate of the profits and gains from all the goods carriages owned by him in the previous year, computed in accordance with the provisions of the said section. 17,2 Before amendment by the Act, sub-section (2) of the said section provided that the profits and gains shall be deemed to be an amount equal to seven thousand five hundred rupees per month or part of a month for each goods carriage or the amount claimed to be actually earned by the assessee, whichever is higher, 17.3 The presumptive income scheme under section 44AE of the Income-tax Act is applicable uniformly to all classes of goods carriages irrespective of their tonnage capacity. The only condition which needs to be fulfilled is that the assessee should not have owned more than 10 goods carriages at any time during the previous year. Accordingly, a transporter who owns large capacity/size goods carriages can also avail the benefit of section 44AE so long as he owns less than 10 goods carriages. It is necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial infrastructure in India, section 115JC of the Income-tax Act has also been amended to provide that in case of a unit located in an International Financial Service Centre, the alternate minimum tax under section 115JC shall be charged at the rate of 9%. 18.5 Consequential amendment has also been made to section 115JF of the Income-tax Act. 18.6 Applicability: These amendments take effect from 1 st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 19. Rationalization of the provisions of section 54EC 19.1 Section 54EC of the Income-tax Act provides that capital gain, arising from the transfer of a long-term capital asset, shall not be charged to tax subject to the said gain being invested in the long-term specified asset at any time within a period of six months after the date of such transfer and to such other conditions as specified in the said section. 19.2 The said section also provides that long-term specified asset for making any investment under the section on or after the 1st day of April, 2007 means any bond, redeemable after three years and issued on or after the I sl day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of losses for facilitating insolvency resolution 21.1 Section 79 of the Income-tax Act provides inter alia that carry forward and set off of losses in a closely held company shall be allowed only if there is a continuity in the beneficial owner of the shares carrying not less than fifty one per cent of the voting power, on the last day of the year or years in which the loss was incurred. 21.2 In general, the case of a company seeking insolvency resolution under the Insolvency and Bankruptcy Code, 2016, involves change in the beneficial owners of shares beyond the permissible limit under section 79. This acts as a hurdle for restructuring and rehabilitation of such companies. 21.3 In order to address this problem, section 79 of the Income-tax Act has been amended and the rigors of the said section have been relaxed in case of such companies, whose resolution plan has been approved under the Insolvency and Bankruptcy Code, 2016 after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner. 21.4 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly, apply in relation to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itizen. 23.2 In order to provide relief to cover the higher cost of medical expenses, section 80D of the Income-tax act has been amended and the monetary limit of the said deduction has been raised to ₹ 50,000 from ₹ 30,000. 23.3 The said section has been further amended to provide that in case of single premium health insurance policies having cover of more than one year, the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit. 23.4 Applicability: These amendments take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 24. Enhanced deduction to senior citizens for medical treatment of specified diseases 24.1 Before amendment by the Act, section 80DDB of the Income-tax Act provided for a deduction of up to ₹ 80,000 (in respect of a very senior citizen) and ₹ 60,000 (in respect of a senior citizen) to an individual and Hindu undivided family with regard to amount paid for medical treatment of specified diseases in respect of a very senior citiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years. 26. Incentive for employment generation 26.1 Section 80JJAA of the Income-tax Act provides for deduction of 30 per cent in addition to normal deduction of 100 per cent in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year, However, the minimum period of employment is relaxed to 150 days in the case of apparel industry. 26.2 In order to encourage creation of new employment by assessees engaged in the manufacturing of footwear or leather products, section 80JJAA of the Income-tax Act has been amended to extend the relaxation of 150 days to the footwear and leather products industry. 26.3 Further, the deduction available under section 80JJAA has also been rationalised by allowing the benefit of deduction for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year. 26.4 Applicability: These amendments take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 27. Deduction in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business trust, was exempt from income-tax under clause (38) of section 10 of the Income-tax Act However, transactions in such long term capital assets carried out on a recognised stock exchange were liable to securities transaction tax (STT). 29.2 Over the years, it was felt that this regime is inherently biased against manufacturing and has encouraged diversion of investment in financial assets. It has also led to significant erosion in the tax base resulting in revenue loss. The problem has been further compounded by abusive use of tax arbitrage opportunities created by these exemptions. 29.3 In order to minimize economic distortions and curb erosion of tax base, the provisions of clause (38) of section 10 of the Income-tax Act have been amended to withdraw the exemption available under the said section and a new section 112A has been inserted in the Income-tax Act to provide that long term capital gains arising from transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, shall be taxed at 10 per cent of such capital gains exceeding one lakh rupees. The tax on balance total income s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of a non-resident and inflation indexation of cost of acquisition and cost of improvement, shall not be allowed for computation of capital gains referred to in section 112A. 29.8 Consequential amendment has also been made in section 55 of the Income-tax Act to provide that the cost of acquisitions in respect of the long term capital asset, being an equity share in a company, or a unit of an equity oriented mutual fund, or a unit of business trust referred to in section 112A, which has been acquired by the assessee before the 1st day of February, 2018, shall be deemed to be the higher of- (a) the cost of acquisition of such asset; and (b) the lower of- (i) the fair market value of such asset; and (ii) the full value of consideration received or accruing as a result of the transfer of the capital asset. 29.9 It has been further provided that,- (a) in a case where the capital asset is listed on any recognised stock exchange as on the 31st day of January, 2018, the fair market value shall be the highest price of the capital asset quoted on such exchange on the said date. However, where there is no trading in such asset on such exchange on the 31st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l asset being equity shares of a company or a unit of an equity oriented fund or a unit of business trusts was exempt from income-tax under clause (38) of section 10 of the Income-tax Act. 30.2 Consequent to the withdrawal of exemption under clause (38) of section 10 of the Act, such long term capital gain shall become taxable in the hands of Flls also. As in the case of domestic investors, the F IIS shall also be liable to tax on such long term capital gains only in respect of amount of such gains exceeding one lakh rupees. Accordingly, the provisions of section 115AD of the Income-tax Act have been amended. 30.3 Applicability: This amendment takes effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. 31. Rationalisation of provision of section 115BA relating to certain domestic companies 31.1 Section 115BA of the Income-tax Act provides that the total income of a newly set-up domestic company engaged in business of manufacture or production of any article or thing and research in relation thereto, or distribution of such article or thing manufactured or produced by it, shall, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. Consequently, where the loss brought forward or unabsorbed depreciation is Nil, no deduction is allowed. 33.2 In order to provide relief to companies seeking insolvency resolution, section 115JB of the Income-tax Act has been amended to provide that the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit, if a company's application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority. 33.3 Consequently, a company whose application has been admitted shall be entitled to reduce the loss brought forward (excluding unabsorbed depreciation) and unabsorbed depreciation for the purposes of computing book profit under section 115JB. 33.4 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. 33.5 Further, section 115JB of the Income-tax Act has also been amended to clarify that the provisions of the said section shall not be applicable and shall be deemed neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, before amendment by the Act, any income distributed to a unit holder of an equity oriented fund was not chargeable to tax under the said section. 35.2 With a view to providing a level playing field between growth oriented funds and dividend paying funds in the wake of new capital gains tax regime for unit holders of equity oriented funds, the provisions of section 115R of the Income-tax Act have been amended so as to provide that where any income is distributed by a Mutual Fund, being an equity oriented fund, the mutual fund shall be liable to pay additional income tax at the rate of ten per cent on income so distributed. 35.3 Further, section 115T of the Income-tax Act has also been amended to provide that an equity oriented fund shall have the same meaning as assigned to it in the new section 112A of the Income-tax Act. 35.4 Applicability: This amendment takes effect from 1st April, 2018 and shall apply to the income distributed by an equity oriented fund to its unit holders on or after 1st April, 2018. 36. Entities to apply for Permanent Account Number in certain cases 36.1 Section 139A of the Income-tax Act provides inter alia that every person spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure for assessment. Sub-section (3) of the said section empowers the Assessing Officer to make, by an order in writing, an assessment of total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment. 38.2 With a view to prescribe a new scheme for the purpose of making assessments so as to impart greater transparency and accountability by eliminating the interface between the Assessing Officer and the assessee, for optimal utilization of the resources, and to introduce the concept of team-based assessment, the provisions of section 143 of the Income-tax Act have been amended and new sub-sections (3A), (3B) and (3C) have been inserted in the said section. 38.3 The newly-inserted sub-section (3A) empowers the Central Government to prescribe the aforementioned new scheme for scrutiny assessments, by way of notification in the Official Gazette. Sub-section (3B) empowers the Central Government to direct, by notification in the Official Gazette that any of the provisions of Income-tax Act relating to assessment shall not apply, or shall apply with such exceptions, modifications and adaptations a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract revenue shall include retention money, and contract cost shall not be reduced by incidental interest, dividend and capital gains. (v) Section 145A of the Income-tax Act has been amended to provide that, for the purpose of determining the income chargeable under the head Profits and gains of business or profession,- (a) the valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided in the ICDS notified under (2) of section 145; (b) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (c) inventory, being securities not listed, or listed but not quoted, on a recognised stock exchange, shall be valued at actual cost initially recognised in the manner provided in the ICDS notified under (2) of section 145; (d) inventory, being listed securities, shall be valued at lower of actual cost or net realisable value in the manner provided in the ICDS notified under (2) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow for deduction of tax at source at the time of making payment of interest on such bonds to residents. However, no TDS will be deducted if the amount of interest is less than or equal to ten thousand rupees during the financial year. 40.3 Applicability: This amendment takes effect from 1st April, 2018. 41. Amendments to the structure of Authority for Advance Rulings 41.1 Before amendment by the Act, section 245-0 of the Income-tax Act provided inter alia for the constitution of an Authority for Advance Rulings, and constitution of its benches, for giving advance rulings under Chapter V of the Customs Act, 1962. 41.2 In view of the constitution of new Customs Authority for Advance Ruling under section 28EA of the Customs Act, 1962, the provisions of section 245-O have been amended so as to provide that such Authority shall cease to act as an Authority for Advance Rulings, and shall act as an Appellate Authority for the purpose of Chapter V of the Customs Act, 1962 from the date of appointment of Customs Authority for Advance Rulings under section 28EA of the Customs Act, 1962. Consequential amendment has also been made in section 245Q of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 1st April, 2018. 44. Rationalisation of section 276CC relating to prosecution for failure to furnish return 44.1 Section 276CC of the Income-tax Act provides that if a person wilfully fails to furnish in due time the return of income which he is required to furnish, he shall be punishable with imprisonment for a term, as specified therein, with fine. 44.2 Before amendment by the Act, sub-clause (b) of clause (ii) of the proviso to section 276CC provided that a person shall not be proceeded against under the said section for failure to furnish return for any assessment year commencing on or after the 1st day of April, 1975, if the tax payable by him on the total income determined on regular assessment as reduced by the advance tax, if any, paid and any tax deducted at source, does not exceed three thousand rupees. 44.3 In order to prevent abuse of the said proviso by shell companies or by companies holding Benami properties, the provisions of sub-clause (b) of clause (ii) have been amended so as to provide that the said sub-clause shall not apply in respect of a company. 44.4 Applicability: This amendment takes effect from 1st April, 2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Commodity Transaction Tax 46.1 Before amendment by the Act, clause (7) of section 116 of the Finance Act, 2013 provided that taxable commodities transaction shall mean a transaction of sale of commodity derivatives in respect of commodities, other than agricultural commodities, traded in recognised association. 46.2 In order to align the definition of taxable commodities transaction with instruments allowed for transaction in commodity derivatives, the provisions of clause (7) of section 116 of the Finance Act, 2013 have been amended so as to include options in commodity futures in the definition of taxable commodities transactions . 46.3 Before amendment by the Act, section 117 of the Finance Act, 2013 provided the rate at which a commodities transaction tax in respect of every commodities transaction, being sale of commodity derivative, shall be chargeable and payable by the seller. 46.4 In order to provide rates for options in commodity derivative, the provisions of section 117 of the Finance Act, 2013 have been amended so as to prescribe the rate at which sale of an option on commodity derivative shall be chargeable and payable by the seller. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings for an offence under the said Act. 47.6 Sub-section (1) of the said section provides that a person shall not be proceeded against for an offence under section 49 to section 53 except with the sanction of the Principal Commissioner or Commissioner or the Commissioner (Appeals). 47.7 Before amendment by the Act, sub-section (2) of the said section provided that the Principal Chief Commissioner or the Chief Commissioner may issue such instructions, or directions, to the tax authorities referred to in sub-section (1), as he may think fit for the institution of proceedings. 47.8 The provisions of sub-section (2) have been amended so as to also empower the Principal Director General or the Director General to issue instructions or directions to the tax authorities under the said sub-section. 47.9 Further, marginal heading of the said section has also been amended so as to include the reference of Principal Director General or Director General. 47.10 Applicability: These amendments take effect from 1 st April, 2018. [Dr. T.S. Mapwal] Under Secretary to the Government of India Dated 26.12.2018 [F. No. F. No. 370142/7 /2018-TPL] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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