BUDGET HIGHLIGHTS -2013-14 - DIRECT TAXES
By K P C Rao., LLB.,
FCMA., FCS.,
CMA (USA)., FIPA
(Australia)
Practicing
Company Secretary
kpcrao.india@gmail.com
INTRODUCTION
The
Union Budget of India, referred to as the Annual Financial Statement in Article
112 (Part V, Chapter II) of the Constitution of India, is the Annual Budget of
the Republic of India, presented each year on the last working day of February
by the Finance Minister of India in Parliament. The budget has to be passed by
both the Houses of Parliament before it can come into effect on April 1, the
start of the financial year.
Though
Union Budget 2013-14 may be missing the much needed ignition or spark to put
the markets on fire, it certainly attempt to address the issues that concerns
of fiscal discipline, consolidation, inflation,
other macroeconomic measures and also trying to keep the
basic tax structure unchanged. Without affecting one and all on tax
front, the Finance Minister has been able to enhance the plan allocation in
major areas and take up many socio economic schemes, besides pressing the
trigger for industrial growth and investment.
The
additional tax revenue would yield merely ` 18,000 crores which only indicates
that there is only a modest hike in tax revenue, that too from an affluent
class and people who can afford to pay additional tax, just for one year.
While higher taxes on about 43,000 rich people, surcharge on profit
earning corporates and commodity transaction tax on non-agriculture
transactions will not hit all and sundry but only a select few, the
benefit in form of reduced securities allowance of 15 percent,
additional benefit to housing loan borrowers and income tax
credit in initial slab of ` 2 to ` 5 lakh.
The
proposals are bound to increase investment – both domestic and foreign and
enhance manufacturing activity and productivity. In turn, economy will get a
boost, many sectors will grow and infra structure will get developed. For
example, with just one concession in interest on housing loans,
entire real estate sector, construction sector, Cement, Steel, Works
Contracts sector, Financial services etc. will get a boost. Investment
allowance will also push up investments in industrial sector.
On
Indirect taxes side, while there is no change in peak rates of customs, excise
and service tax, the hike in rates of few items like SUVs, imported
vehicles, cigarettes etc.
Not
much of tinkering has been close in Service Tax structure but given the level
of non-compliance in Service Tax, a scheme has
been announced as an amnesty scheme whereby defaulting assessees can
file Service Tax returns for five year period since October, 2007 and pay
taxes so as to save on interest and penalties.
On
Goods and Service Tax, though the FM has showed his serious concern, once again
he missed out on the clear road map. We can only hope for GST in near future.
How near, no one knows.
On
the fillip side, the budget could have been used as an opportunity to announce
some mega schemes for boosting infrastructure, investments, FDI in certain
sectors and major financial sector and capital market reforms. All in all,
budget is a reasonable step ahead, though it could have been worse. The reforms
and steps initiated are macro, deep and shall have long term positive impact.
For people who are looking at a quick buck making after budget from markets, it
may fail to enthuse.
AMENDMENTS PROPOSED IN DIRECT TAXES
Amendments proposed under the Income-tax Act, 1961
(hereafter referred to as “the Act”) and Wealth-tax Act, 1957 (specifically
referred wherever applicable) are discussed below:
I
Direct Tax Code (‘DTC’)
In his
Budget four years ago, the then Finance Minister announced the introduction of
the Direct Taxes Code (‘DTC’) and a draft of the same was also circulated for
comments and discussion. Thereafter, there have been revisions and variations
therein based on inputs from various lobbies.
Since last
two years, the then Finance Minister had been communicating its introduction
from the ensuing financial year, but the same did not happen. The result is
effectively the same even in this year. However, the only ray of hope is the
mention by the Finance Minster in his Budget Speech, to work with the Standing
Committee on the report submitted by it and to table the Bill before the end of
this Budget Session.
II
Rates of Taxes, Basic Exemption
Limit and Income Slabs unaltered, Surcharges increased, additional tax
credit upto `
2,000/- to individuals with income upto ` 5,00,000/-
a) Income thresholds, basic tax
rates and Education Cess
The rates
of Basic Tax, Education Cess and
Higher Secondary Education Cess (Education Cess and
Higher Secondary Education Cess collectively referred to as ‘Education Cess’),
as well as the Basic Exemption Limits and the income slabs, have been kept unaltered for all assessees.
The
applicable Basic Exemption and Income Slabs as well as basic tax rates, though unchanged, are given below :
|
Assessee
|
Basic exemption and
Income Slabs
|
|
Total
Income
|
Tax
Rate
|
|
All Individuals, HUF, AOP and
BOI (except those stated below)
|
upto ` 2,00,000/-
|
Nil
|
|
` 2,00,001/- to
` 5,00,000/-
|
10% of income above
` 2,00,000/-
|
|
` 5,00,001/- to
` 10,00,000/-
|
` 30,000/- plus 20% of income above
` 5,00,000/-
|
|
Above ` 10,00,000/-
|
` 1,30,000/- plus 30% of income above
` 10,00,000/-
|
|
Individuals, being resident,
and ‘Senior Citizen’ (i.e. above 60 years) upto the age of 80 years
|
upto ` 2,50,000/-
|
Nil
|
|
` 2,50,001/- to
` 5,00,000/-
|
10% of income above
` 2,50,000/-
|
|
` 5,00,001/- to
` 10,00,000/-
|
` 25,000/- plus 20% of income above
` 5,00,000/-
|
|
Above ` 10,00,000/-
|
` 1,25,000/- plus 30% of income above
` 10,00,000/-
|
|
Individuals, being resident,
and ‘ Very Senior Citizen’ i.e. of age 80 years and above
|
upto ` 5,00,000/-
|
Nil
|
|
` 5,00,001/- to
` 10,00,000/-
|
20% of income above
` 5,00,000/-
|
|
Above ` 10,00,000/-
|
` 1,00,000/- plus 30% of income above
` 10,00,000/-
|
|
|
b)
Tax
Credit upto ` 2,000/- to resident individuals with taxable income upto `
5 lacs
However,
through the proposed new section
87A, a tax credit of
upto `
2,000/- (subject to maximum of tax
payable) would be allowed to resident
individuals having taxable
income upto ` 5 lacs.
c)
Increase
in Surcharges (for one year only as stated in Speech)
A surcharge of 10% of tax (dubbed as super-rich tax) is
proposed to be levied on all non-company
assessees (viz. Individuals,
HUFs, AOPs, BOIs, firms etc.) with income exceeding `1 crore. However, marginal relief shall be allowed to ensure that
the additional tax and surcharge payable on excess of income over `
1 crore is limited to the amount by
which the income exceed ` 1 crore.
Further, currently, domestic
companies and foreign companies having taxable income above `
1 crore (including uner MAT
provisions), are liable to a surcharge of 5% and 2% of tax respectively. While
that continues for such companies having taxable income of upto `10 crores (including MAT
provisions), it is now proposed to levy a surcharge of 10% on domestic companies and 5% on foreign companies,
with taxable income exceeding ` 10 crores (with marginal relief as stated
in the preceding paragraph).
This
creates a situation where companies with taxable income of more than ` 1 crore (but less than ` 10 crores) would an tax at an effective
rate of 32.445% (considering 5% surcharge and 3% Education Cess), while
the non-company assessees with taxable income above ` 1 crore would pay tax at a higher effective rate of
33.99% (including Surcharge of 10% and Education Cess of 3%).
Similarly, surcharge @ 10% of the amount of tax is also
proposed to be levied on dividend/income distribution by companies
(section 115-O), mutual funds (section 115-R), securitization trust to its
investors (proposed new section 115TA, discussed herein below) as well as on amount paid by unlisted domestic company to
its shareholders by way of buy-back of shares (proposed new section
115QA discussed herein below).
However, the above increases shall only be for a year i.e.
Financial Year 2013-14.
III
Reduction in Securities Transaction
Tax (‘STT’) Rates
The STT rates are proposed to be
reduced as under effective from 1st June 2013:
a) On sale of equity futures – from
0.017% to 0.01% (payable by seller as hitherto);
b) On sale of unit of an equity
oriented fund to the mutual fund (redemption at fund counters) – from 0.25 to
0.01 % (payable by seller);
c) On sale of unit of equity oriented
fund through recognized stock exchange, settled by delivery or actual transfer
of units – from 0.1% to 0.001% (payable only by seller, as against current levy
on both seller and purchaser)
IV Commodities
Transaction Tax (‘CTT’)
The Finance Minister has proposed to
levy CTT in a limited way, on non-agricultural commodities’ future
contracts traded on recognized commodity exchanges, @ 0.01% of
transaction value (on same lines as for equity futures) payable by the seller
only.
Detailed provisions are also
proposed for collection of CTT by exchanges, its payment to government, filing
returns, interest/penalties on non/delayed compliances etc.
The Finance Minister has clarified
in his speech that trading in commodity derivatives will not be
considered as a speculative transaction (per the existing provisions of section
43(5)).
Also, clause (xiv) is proposed
to be included in section 36(1) so as to allow the entire CTT as deduction
where the corresponding commodity derivative transactions form part of the
business of the assessee.
V Rationalization
and Postponement of much hyped and despised General Anti-Avoidance Rules
(‘GAAR’)
Amendments are proposed in Chapter X-A
containing the main GAAR provisions, as well as various other sections having
related or consequential applicability; to postpone its application from 1st April 2015 i.e.
Financial Year 2015-16.
VI Section 2 (1A) defining
‘agricultural income’, also prescribes the location of land which shall be
considered as ‘agricultural land’.
Amendments
are proposed to aerially measure the distance of such land from nearest
municipality or cantonment board, as against the current provisions of
measurement by ground. Also, to determine the population of such place, it is
proposed to consider the last preceding census of which the relevant figures
have been published before the first day of the concerned previous year.
Similar
amendments are also proposed in the Wealth-tax Act, 1957.
VII Section 10 (10D) exempts from tax any sum received under a
life insurance policy, where the annual premium does not exceed 10 % of the actual capital sum
assured (for policies issued on or after 1st April 2012).
It is now proposed to amend these
provisions so as to provide such exemption on annual premium upto 15% on policies issued on or after 1st April
2013 on life of person with
disability/severe disability (per section 80U) or suffering from specified disease or ailment (per
section 80DDB).
Corresponding amendments are also
proposed in section 80C so as not to withdraw the deduction thereof to cases
covered by the preceding paragraph.
VIII Plugging
the loophole in taxing the proceeds received under the Keyman Insurance Policy
As stated above, section 10(10D)
exempts from tax sum received under a life insurance policy; however proceeds
received under a keyman insurance policy is not so exempt.
However, there has been rampant
tax-planning whereby policies taken as keyman insurance policy were assigned to
the keyman before maturity and the keyman would pay remaining premium and claim
the sum received as exempt on the ground that the policy is no longer keyman
insurance policy.
To plug the above loophole, it is
proposed to amend the said section so as to provide that a keyman insurance
policy assigned to any person during its term, with or without consideration
shall continue to be treated as keyman insurance policy and thus its proceeds
not exempt from tax.
IX Taxation
of Securitization Trusts
As Per section 161, if a trust’s income consists of profits and gains
from business, then the same is taxable at maximum marginal rate.
These posed genuine hardship to special purpose
securitization trusts formed under the relevant provisions of
SEBI/RBI, as there was no specific provision exempting their income.
It is now proposed to enact section
10(33DA) to exempt income of such trusts from activity of securitization.
Further, Chapter XII-EA containing sections
115TA to 115TC are proposed to be introduced so as to provide an additional tax on income distributed by the
securitization trust to its investors, @ 25% in cases if individuals and HUFs and 30% in other cases (plus
surcharge @ 10% and Education Cess @ 3%), which shall then be exempt in hands of such investor (per
newly proposed section 10(35A). It is also proposed that such tax on
distributed income shall not be payable if such income is received by a person
who is exempt from tax under the Act.
Other provisions related to delay in
payment of tax on distributed income are also provided for.
X Exemption
to income of Investor Protection Fund of Depository
Under the concerned SEBI
Regulations, depositories are mandatorily required to set up an Investor
Protection Fund.
A new section 10(23ED) is proposed
to be included so as to exempt from tax the contribution received by such fund
(formed in accordance with the concerned SEBI regulations) from a depository.
It is also proposed to tax the
amount shared by such fund with a depository in the year in which it is so shared.
XI Retrospective
amendment granting pass through status to certain Alternative Investment Funds
Currently, section 10(23FB) exempts
the income of a Venture Capital
Company (‘VCC’) or a Venture
Capital Fund (‘VCF’) earned from investment in Venture Capital Undertaking (‘VCU’). Also,
section 115U grants a pass through
status to VCC and VCF in respect of income earned from investment in VCU i.e.
such income shall be taxed in the hands of investor and not the VCC or VCF.
The SEBI (Alternative Investment
Funds) Regulations, 2012 have replaced the SEBI (Venture Capital Fund)
Regulations, 1996, effective May 2012.
It is accordingly, proposed to extend the benefit of exemption
to the VCC and VCF set up under Alternative Investment Fund (‘AIF’) regime, on
its income from investment in VCU, retrospectively from Assessment Year 2013-14 (i.e.
Financial Year 2012-13)
XII Tax-free/low
tax buy-back of shares
It is proposed to introduce Chapter XII-DA containing sections
115QA to 115QC, to levy an
additional tax on domestic unlisted company, of 20% (plus 10% surcharge and 3%
Education Cess) on ‘distributed income’ to its shareholder by way of buy back
of its shares.
‘Distributed income’ has been defined to mean the consideration
paid by the company on buy-back as reduced by the amount which was received by
the company for issue of such shares.
XIII
Exemption of income of NFHCL
It is proposed to insert section
10(49) to exempt income of National Financial Holdings Company Limited (which
is succeeded by the erstwhile The Specified Undertaking of Unit Trust of India
(SUUTI)), from Assessment Year 2014-15 onwards.
XIV
Investment Allowance of 15% for
acquisition and installation of new plant and machinery by manufacturing
company
A new
section 32AC is proposed to be introduced so as to allow to a company engaged
in the business of manufacture or production of any article or thing, an
allowance of 15% of the actual cost, if exceeds ` 100 crores, of new plant and
machinery acquired and installed between 1st April 2013 to 31st March
2015; subject to fulfillment of the other conditions therein.
XV Clarification
regarding extent of allowance of bad debts in case of banks
To do away
with certain interpretational issues relating to the amount allowable as
deduction to banks on account of bad debts u/s.36(1)(vii), after reducing the
provision for bad and doubtful debts allowed as deduction under a different
sub-clause (viia); it is proposed to provide for an amendment to the effect
that the allowance of bad debts would be the amount actually written off as
reduced by the amount lying in the credit of provision for bad and doubtful
debts without any distinction between urban and rural advances.
XVI Disallowance
of certain fee, charge etc. incurred by State Government Undertakings
It is proposed to insert section
40(iib) so as to disallow any royalty, license fee, service fee etc. levied on
any state government undertaking by the State Government.
XVII Taxability
of income from sale of immoveable property based on stamp duty valuation
extended to business transactions
Currently, section 50C provides that
where a capital asset (liable to tax as ‘Capital Gains’) being land or building or both, is
transferred, then the higher of stamp duty valuation or the agreement value shall
be considered as full value of consideration (subject to other provisions
therein) and tax shall be levied accordingly.
It is now proposed to introduce section 43CA so as to
extend similar provisions i.e. taxability based on higher of stamp duty or
agreement value, to transactions of transfer of land or building or both even
to business assets (as in case of real estate builders, developers etc.).
Other provisions in line with those in section 50C are also proposed.
It is also proposed that where the
date of agreement and date of registration are not the same, then the stamp
duty valuation may be taken on date of agreement and not transfer in such cases
where the amount of consideration or part thereof has been received by any mode
other than cash on or before the date of agreement.
XVIII
Taxing the recipient individual or
HUF of an immoveable property for inadequate consideration
Section 56(1)(vii) taxes receipts by
Individuals or HUFs, without consideration or at consideration less than the
fair value. However, the receipt of any immoveable property is taxable only if it’s
received without consideration (from non-relatives), and not if it is received
for a consideration lesser than the fair value. The logic behind this, as we
understand, is that the seller thereof would pay the tax based on stamp duty
valuation u/s.50C, if that’s higher than the agreement value (and now even
under the newly proposed section 43CA as discussed above)
It is now proposed to amend the
provisions so as to provide that where the immoveable property is received for an inadequate consideration (i.e.
he difference between stamp duty valuation and transactions value is more than `
50,000/-), then such difference
shall be taxable in the hands of the recipient individual or HUF as Income from
Other Sources.
It is also proposed that where the
date of agreement and date of registration are not the same, then the stamp
duty valuation may be taken on date of agreement and not transfer in such cases
where the amount of consideration or part thereof has been received by any mode
other than cash on or before the date of agreement.
XIX
Expanding the scope and eligibility
of u/s. 80CCG
Section 80CCG currently allows
deduction to a resident individual with gross total income upto `
10 lacs, being a new investor, who acquires
specified listed shares in accordance with notified scheme (Rajiv Gandhi Equity
Savings Scheme), of 50% of such investment or ` 25,000/-, whichever is lower.
It is now proposed to extend the benefit to investment in listed
units of an equity oriented fund, and allow the deduction for 3 consecutive years beginning with the
year of investment. Also, eligibility
limit of gross total income upto `10 lacs
has been upped to ` 12 lacs.
XX
Extension of deduction u/s.80D to
contributions to notified schemes
Section 80D allows deduction, inter
alia, in respect of mediclaim premium as well as contribution to Central
Government Health Schemes, subject to fulfillment of other conditions therein.
It is now proposed to extend the
benefit of the deduction thereunder to contributions to such other schemes of
Central and State governments as may be notified by Central Government.
XXI
Additional deduction of interest on
housing loan of upto ` 1 lac to first time home buyers
Section 80EE is proposed to be
enacted so as to allow to an
individual, a deduction of
upto `1 lac in
respect of loan taken from a financial institution (banking company or housing
finance company) of upto ` 25 lacs between 1st April 2013 and
31st March 2014 to acquire a residential property valued upto ` 40 lacs, provided she
does not own any residential house property as on the date of sanction of loan.
It is also proposed that if the deduction entire of ` 1 lac as above could not be claimed in Financial
Year 2013-14, then the balance can be claimed in Financial Year 2014-15.
It may be noted that the above
deduction is over and above the existing entitlement of housing loan interest
deduction of ` 1.5 lacs. However, while the existing deduction of upto ` 1.5 lacs can be of interest on housing loan taken
from anyone, the aforesaid deduction can be allowed only on housing loan taken
from financial institution.
XXII Changes
in Section 80G
Section
80G, which allows deduction in respect of donations, @ 100% in respect of
certain funds and @ 50% for rest, subject to other conditions therein; is
proposed to be amended so as to allow 100% deduction in respect of donations to
the National Children’s Fund (which was hitherto entitled for 50% deduction).
XXIII
Changes in Sections 80 GGB and 80
GGC
Sections
80 GGB and 80 GGC allow deduction respectively to company and non-company
assessees, of contributions given to a political party or electoral trust.
It is
proposed to amend these sections so as not to allow deductions of amounts
contributed in cash.
XXIV
Changes in Section 80IA
Section
80IA provides for deduction of 100% of the profits and gains from various
businesses specified therein, subject to fulfillment of other conditions
prescribed.
The said section allows such
deduction, inter alia, to the undertakings set up for generation/distribution/transmission
of power before 31st March 2013.
It is now proposed to extend the
benefit of this deduction to such undertakings set up before 31st March 2014.
XXV
Rationalization of section 80JJAA
allowing deduction for additional wages to new regular workmen
Section 80JJAA provides that domestic companies shall be entitled to
deduction for 3 years, of an amount of 30% of additional wages paid to new
regular workmen (as defined therein) engaged in its industrial
undertaking, , subject to other conditions therein.
While this incentive was intended for employment of blue
collared employees in manufacturing sector, it is being claimed for other
employees in other sectors also. To plug the same, amendments are proposed so as to provide that the deduction
shall be available to new regular workmen employed in factory manufacturing
goods (as against industrial undertaking), subject to fulfillment
of other conditions therein.
XXVI
Tax Residency Certificate (‘TRC’)
mandatory but not sufficient to claim DTAA relief
Last year, sections 90 and 90A were
amended to provide that the benefit of the DTAA shall not be allowed to any
non-resident unless he/it obtains a certificate from the government of the
country of its/his residence of he/it being resident of that country.
It is now proposed to further amend these sections
retrospectively from Assessment Year 2013-14, so as to provide that the TRC is
necessary but not sufficient condition for claiming relief under DTAA.
While this seem to have created
havoc in international investors’ fraternity, as it could have implications on
Mauritian companies taking shelter of TRC, based on Circular 789 of the CBDT
and the Supreme Court’s decision in the case of Azadi Bachao Andolan.
XXVII Increase
in tax rates on income from royalty and fees for technical services of
non-residents
Section
115A, inter alia, provides for a tax rate of 10% on royalty and fees for
technical services earned by a non-resident or a foreign company from Indian
government/entity, subject to fulfillment of other conditions therein.
It is
proposed to increase this tax rate from existing 10% to 25%.
XXVIII Extension
of concessional rate of tax on dividend from foreign subsidiary to one more
year, and removal of cascading effect thereon
Section 115BBD provides for concessional
rate of tax at 15% on dividend income of by Indian companies from foreign
companies in which they hold atleast 26% equity stake, upto Financial Year
2012-13.
It is proposed to extend this
benefit for Financial Year 2013-14 also.
Further, section 115-O relating to
Dividend Distribution Tax (DDT) provides for removal of cascading effect thereof in respect of dividends received from
Indian subsidiaries, by allowing the same as reduction from the amount
of dividend distributed by the shareholder company in a multi-tier structure.
It is now proposed to remove such cascading effect in
respect of dividend received from foreign subsidiaries too, where the
tax has been paid by the Indian company receiving dividend, under the aforesaid
section 115BBD.
XXIX
Increase in rate of tax on Mutual
Fund Income Distribution in case of Individuals and HUFs
Section 115R provides for a rate of
tax of 12.5% on income distributed by mutual funds, other than a money market
mutual fund or a liquid fund, to an individual or HUF.
It is now proposed to increase this
rate to 25% effective from 1st June 2013, to bring it in line
with the rates applicable to such assessees in case of money market mutual
funds and liquid funds.
XXX
Rationalization of rate of tax on
income distributed by Infrastructure Debt Fund (‘IDF’) operating as a
Mutual Fund
In case of an IDF set up as a
Non-Banking Finance Company (‘NBFC’) the interest payment made by the fund to a
non-resident investor is taxable at a concessional rate of 5%, per provisions
of section 115A(1)(iiaa). However in case of distribution of income by an IDF
set up as a Mutual Fund the distribution tax is levied at the higher rates
u/s.115R.
In order to bring parity in taxation
of income from investment made by a non-resident Investor in an IDF whether set
up as NBFC or MF, it is proposed to amend section 115R to provide for tax @ 5%
on income distributed by a Mutual Fund under an IDF scheme to a non-resident
Investor.
XXXI
Application of seized assets in
search cases
The existing provisions of section
132B, inter alia, provide that seized assets may be adjusted against any existing liability under the Act
or Wealth-tax Act, or other direct taxes statutes and the amount of liability
determined on completion of assessments pursuant to search, including penalty
levied or interest payable.
Various courts have taken a view
that the term ‘existing liability’
includes advance tax liability of the assessee. To do away with such
interpretation, it is proposed to amend the aforesaid section so as to clarify
that the existing liability does not include advance tax payable.
These provisions would apply from
1st June, 2013.
XXXII Return
of Income file without payment of Self Assessment Tax to be considered as
defective return
The existing provisions of section
139 (9) provide that where the Assessing Officer considers that the return of
income furnished by the assessee is defective, he may intimate the defect to
the assessee and give him an opportunity to rectify the defect within 15 days.
If the defect is not rectified within the time allowed by the Assessing
Officer, the return is treated as an invalid return.
Further, section 140A provides that
where any tax is payable on the basis of any return (Self Assessment Tax), the
assessee shall be liable to pay such tax together with interest payable.
It is stated by the finance ministry
that a large number of assessees have been filing their returns of income
without payment of Self Assessment Tax.
It is, therefore, proposed to amend
section 139(9) to provide that the return of income shall be regarded as
defective unless the tax together with interest, if any, payable in accordance
with the provisions of section 140A has been paid on or before the date of
furnishing of the return.
It must be noted here that the way
the amendment is worded, if the return is considered as defective for
non-payment of Self Assessment Tax before the due date of filing return, then
such defect cannot be cured and the return would eventually turn invalid.
Therefore, it must be ensured that
the Self Assessment Tax is paid before filing the Return.
This amendment will take effect from
1st June, 2013.
XXXIII Expansion
of the provisions of Special Audit u/s.142(2A) entailing lesser work for
Assessing Officers and more for professionals
The existing provisions of section
142(2A), inter alia, provide that if at any stage of the proceeding, the
Assessing Officer having regard to
the nature and complexity of the accounts and the interests of the
revenue, is of the opinion that it is necessary so to do, he may, with the
approval of the Chief Commissioner or Commissioner, direct the assessee to get
his accounts audited by an accountant and to furnish a report of such audit.
The expression ‘nature and
complexity of the accounts’ has been interpreted in a very restrictive
manner by various courts.
It is, therefore, proposed to amend
the aforesaid section so as to cover situation involving ‘volume of the
accounts, doubts about the correctness of the accounts, multiplicity of
transactions in the accounts or specialized nature of business activity’.
This amendment will take effect from
1st June, 2013.
XXXIV Sections
153 and 153B (for search assessments) provide for period of limitations
for assessments and reassessments.
It is
proposed to amend the said sections, effective from 1st June
2013, so as to exclude in counting such period of limitation, the time from
which the direction given by the Assessing Officer for special audit
u/s.142(2A) is challenged in the court by the assessee and the order of the
court setting aside such direction is received.
XXXV
Clarification of the phrase ‘tax
due’ for the purposes of recovery in certain cases
Section 179 provides that where tax due from a private company cannot be recovered from such
company, then the director (who
was the director of such company during the previous year to which non-recovery
relates) shall be jointly and severally liable for payment of such tax unless he proves that the non-recovery of
tax cannot be attributed to any gross neglect, misfeasance or breach of duty on
his part.
Some courts have interpreted the
phrase ‘tax due’ does not
include penalty, interest and other sum payable under the Act.
In view of the above, it is proposed
to clarify that for the purposes of this section, the expression ‘tax due’ includes
penalty, interest or any other sum payable under the Act.
Amendment
on the similar lines for
clarifying the expression ‘tax due’ is proposed to be made to the provisions of section 167C, which is applicable in case of
a Limited Liability Partnership (‘LLP’).
These amendments have also been
proposed from 1st June, 2013.
XXXVI Tax
Deduction at Source on transaction of immoveable property with resident
It is proposed to introduce a new
section 194IA so as to provide that a purchaser of any immoveable property
(other than agricultural land) from a resident, shall be obliged to deduct tax
at source @ 1% of the amount of consideration payable therefor, where the
consideration is ` 50 lacs or more.
It may be noted that the requirement
of tax deduction at source as above is applicable to all assessees including
individuals, HUFs etc. (whether or not they are subjected to tax audit), where
the above conditions are fulfilled.
XXXVII Concessional
rate of tax on interest in case of certain rupee denominated long-term infrastructure
bonds
The existing provisions of section
115(1) (iiaa) and 194LC provide that if an Indian company borrows money in
foreign currency from a source outside India either under a loan agreement or
by way of issue of long-term infrastructure bonds, as approved by the Central
Government, then the interest payment to a non-resident person would be subject
to a concessional rate of tax @ 5% and withholding of tax shall be done at that
rate.
In order to facilitate subscription
by a non-resident in the long term infrastructure bonds issued by an Indian
company in India (rupee denominated bond), it is proposed to amend section
194LC so as to provide that where a non-resident deposits foreign currency in a
designated bank account and such money as converted in rupees is utilised for
subscription to a long-term infrastructure bond issue of an Indian company,
then, the borrowing by the company shall be deemed to be in foreign currency
and the benefit of reduced rate of tax would be available to such non-resident
in respect of the interest income arising on such subscription subject to other
conditions provided in the section.
The designated bank account should
be solely for the purpose of deposit of money in foreign currency and such
money is to be used, after conversion, for subscription to a rupee denominated
long-term infrastructure bond issue of an Indian company.
This amendment will take effect from
1st June, 2013.
XXXVIII
Section
271FA
Section 271FA, providing for penalty for non-filing or delay
in filing of Annual Information Report (‘AIR’) of `
100/- per day.
It is now proposed to amend the said
section so as to provide for a penalty of ` 500/- per day in respect of
continuing failure beyond the time limit allowed in the notice requiring filing
of such AIR.
XXXIX
Wealth-tax Act, 1957
Under the Wealth-tax
Act, 1957 amendments are proposed to facilitate electronic filing
of annexure-less return of net wealth.
[Published in Corporate Secretary, a Monthly magazine of ICSI, Hyderabad]
