TaxTMI 
TaxTMI 
Finance (No. 2) Act, 2004 - Explanatory Notes on provisions relating to Direct Taxes
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....2B, 272BBB, 273B, 278B, 279 and Thirteenth Schedule of the Income-tax Act, 1961; (ii) inserted new sections 80CCD, 88D, 88E, 111A, 142A, 194LA, 203AA, 271FA, 277A and new Chapter XII-G in the Income-tax Act, 1961; (iii) substituted new sections 203A, 285BA of the Income-tax Act, 1961; (iv) amended section 35HA of the Wealth-tax Act, 1957; (v) introduced a new Chapter VII to levy Securities Transaction Tax. 3. Provisions in brief 3.1 The provisions of the Act in the sphere of direct taxes relate to the following matters: (i) Prescribing the rates of income-tax on income liable to tax for the assessment year 2004-05; the rates at which the tax will be deductible at source in the financial year 2004-05 from interest (including interest on securities), winnings from lotteries or cross-word puzzles, winnings from horse races, insurance commission and other categories of income liable for tax deduction at source under the Income-tax Act, rates for computing advance tax, deduction of income-tax from Salaries and charging of income-tax on current income in certain cases for the financial year 2004-05. (ii) Amendmen....
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....ent being a person with disability or severe disability suffering from autism, cerebral palsy or multiple disabilities. - extending tax benefits under section 80-IA in the case of substantial renovation and modernization of transmission and distribution lines in the power sector. - extending the time limit for providing telecommunication services, etc. for the purpose of tax holiday under section 80-IA. - extending the time-limit for setting up of industries in the State of Jammu and Kashmir for the purpose of tax holiday under section 80-IB. - extending the time-limit for the purpose of tax holiday under section 80-IB to any company carrying on scientific research and development. - extending the time-limit for obtaining approval of housing projects for the purpose of tax holiday under section 80-IB, and allowing deduction for redevelopment or reconstruction of existing buildings in slum areas. - providing tax holiday for agro-processing industry. -&nbs....
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....rtificates. - providing for prosecution in case of falsification of books of account or documents etc. - Rationalising provisions relating to offences by a company. - modifying the provisions for filing of annual information return. (iii) Introduction of provisions for levy of Securities Transaction Tax and to provide : - exemption from income-tax on long-term capital gain arising from transactions chargeable to securities transaction tax; - concessional rate of income-tax on short-term capital gain arising from transaction chargeable to securities transaction tax; - rebate of securities transaction tax paid on transactions forming part of business against income-tax liability on business income arising from such transactions. Rate Structure 4. Rates of income-tax in respect of incomes liable to tax for the assessment year 2004-05. In respect of incomes of all categories of taxpayers (corporate as well as non-corporate) liable to tax for the assessment year 2....
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....be levied at the rate of two per cent on the amount of tax deducted, inclusive of surcharge if any. Rates for deduction of income-tax at source from Salaries, computation of advance tax and charging of Income-tax in special cases during the financial year 2004-05 The rates for deduction of income-tax at source from Salaries during the financial year 2004-05 and also for computation of advance tax payable during that year in the case of all categories of taxpayers have been specified in Part III of the First Schedule to the Act. These rates are also applicable for charging income-tax during the financial year 2004-05 on current incomes in cases where accelerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during that financial year, assessment of persons who are likely to transfer property to avoid tax, or assessment of bodies formed for short duration, etc. An additional surcharge, to be called the Education Cess, is to be levied at the rate of two per cent on the amount of tax deducted or advance tax paid, inclusive of surcharge if any. However, so far as the ....
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....ule to the Act; and column (b) specifies the rates given in Paragraph A of Part III of the First Schedule to the Act. Table (a) (b) Income slab Rates as specified in Part I of First Schedule to the Act (i.e., existing rates) Income slab Rates as specified in Part III of First Schedule to the Act (i.e., new rates) Up to Rs. 50,000 Nil Up to Rs. 50,000 Nil Rs. 50,001 to Rs. 60,000 10% Rs. 50,001 to Rs. 60,000 10% + 2% Education Cess Rs. 60,001 to Rs. 1,50,000 20% Rs. 60,001 to Rs. 1,50,000 20% + 2% Education Cess Above Rs. 1,50,000 30% + Surcharge @ 10% in cases where total income exceeds Rs. 8.5 lakhs Above Rs. 1,50,000 [30% + Surcharge @ 10% in cases where total income exceeds Rs. 8.5 lakhs] + 2% Education Cess B. Co-operative societies In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Act. These rates are the same as those specified in the corresponding Paragraph of Part I of the First Schedule to the Act. The tax payable would be enhanced by a surcharge for the purposes of the Union at the rate of two and one-half per ....
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.... occasion of marriage of the individual, or (iii) under a will or by way of inheritance, or (iv) in contemplation of death of the payer. The expression relative has also been defined for the purposes of this clause. Section 2 has also been amended to provide that income defined in clause (24) shall also include the income referred to in the new sub-clause (v) of clause (2) of section 56. This amendment has taken effect from 1st April, 2005, and applies in relation to the assessment year 2005-06 and subsequent assessment years. [Section 3] Discontinuation of the exemption under sub-clause (ii) of clause (4) of section 10 in respect of interest on deposits in a Non-Resident (External) Account Under the existing provisions contained in section 10(4)(ii), in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India is not to be included in computing his total income. The Finance (No. 2) Act, 2004 has amended clause (4)(ii) of section 10 to provide that this exemption will not be available in respect of such income paid to him or credited to his Non-Resident (External) account in ....
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.... (No. 2) Act, 2004 has amended clause (6BB) of section 10 to provide that the said exemption shall also be allowed in respect of such agreements entered into on or after the 1st day of April, 2005. Under the existing provisions of section 10(15A), any payment made by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine on lease from Government of a foreign State or a foreign enterprise under an agreement, not being an agreement entered into between the 1st day of April, 1997 and 31st day of March, 1999, and approved by the Central Government is not included in computing the total income. This exemption is being withdrawn in respect of the agreements entered into on or after the 1st day of April, 2005. These amendments apply in relation to the assessment year 2006-07 and subsequent assessment years. [Sections 5(b) and 5(d)] Exemption of family pension received by the family members of armed forces personnel killed in action in certain circumstances Under the existing provisions contained in clause (18) of section 10, the pension income received by the recipients of Param Vir Chakra, Mahavir Chakra, Vir Cha....
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....re capital company liable to tax under section 115JB Under the existing provisions contained in clause (23G) of section 10, any income by way of dividends, other than dividends referred to in section 115-O, interest, or long term capital gains of an infrastructure capital fund or an infrastructure capital company or a co-operative bank from investments made in any undertaking engaged in an infrastructure project or a housing project or a hotel or hospital project is excluded from the total income. With a view to rationalise the provision, a proviso has been inserted in the said clause so as to provide that in the case of an infrastructure capital company the abovementioned incomes shall be taken into account in computing the book profit for the purpose of section 115JB and for payment of tax under that section. Consequential amendments have been made in section 115JB. These amendments take effect from 1st April, 2005 and apply in relation to the assessment year 2005-06 and subsequent years. [Sections 5(g), 28] Providing for exemption on capital gains arising from compulsory acquisition of agricultural land situated within specified urban limits Section 10 of ....
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....e ten per cent of salary every month towards a non-withdrawable pension tier-I account. A matching contribution is required to be made by the Government to the said account. To give effect to the New Pension Scheme of the Central Government, a new section 80-CCD has been inserted to provide for a deduction from the total income of an individual employed by the Central Government on or after 1st January, 2004, of the amounts paid or deposited by him in the non-withdrawable pension tier-I account, which do not exceed ten per cent of his salary in the previous year. The employee has been provided a further deduction, equal to the matching contribution made by the Central Government to the said account. For the purposes of section 80CCD, salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. The amounts standing to the credit of the assessee in the tier-I account, for which a deduction has already been allowed to him, and accretions to such account, shall be taxed as income in the year in which such amounts are received by the assessee or his nominee on closure of the account or his opting out of the tier-I ac....
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....section (4) of the said section provides that where National Committee is satisfied that the project or scheme is not being carried on in accordance with all or any of the conditions, it may withdraw the approval earlier granted to the association or institution. Sub-section (5) similarly provides for withdrawal of the notification of the eligible project or scheme if it is not being carried out in accordance with all or any of the conditions on the basis of which such project or scheme was notified. Certain cases have come to notice where the projects or schemes are not implemented or have been abandoned midway. In some cases donations raised have not been used on the eligible projects are the projects and schemes were not implemented in proper manner. With a view to ensure effective monitoring in cases where associations/institutions are approved or eligible projects or schemes have been notified, the Act has substituted sub-sections (4) and (5) to provide for an additional mechanism for withdrawal of approval granted to associations/institutions or withdrawal of notification of eligible project or scheme by the National Committee. It has been provided that where an associa....
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....lause to provide that in any case in which tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of time prescribed under sub-section (1) of section 200, the sum from which tax has been so deducted or paid shall be allowed as deduction in computing the income of the previous year in which the tax has been paid to the account of the Central Government. Further, with a view to augment compliance of TDS provisions in the case of residents and curb bogus payments to them it has been provided that no deduction will be allowed in the computation of income where tax is not deducted from payments of interest, commission or brokerage, fees for professional services or fees for technical services and payments to a contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200. It has, however, been p....
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.... The Explanation to the said section defines, inter alia, the expressions, disability, medical authority, person with disability and person with severe disability with reference to the relevant provisions of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. With a view to extend the benefits under section 80DD to persons suffering from autism, cerebral palsy and multiple disability, the said Explanation has been amended so as to expand these definitions to include the abovementioned expressions as provided for under the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. The amendments take effect from 1-4-2005 and apply in relation to the assessment year 2005-06 and subsequent years. [Section 16] Extension of tax benefit under section 80-IA in the case of substantial renovation and modernization of transmission and distribution lines in the power sector Under the existing provisions contained in clause (iv) of sub-section (4) of section 80-IA, an undertaking engaged in the generation, generation and distribution, or the transmission or dis....
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....the year in which the undertaking starts providing telecommunication services. The amount of deduction is one hundred per cent of profits for the first five years, and thereafter thirty per cent of profits for the next five years. Further, this deduction is, inter alia, available to an undertaking providing telecommunication services if such undertaking is formed by splitting up or the reconstruction of a business already in existence or by the transfer to a new business of old plant and machinery. With a view to give incentive to the telecom sector, the terminal date for the eligible undertaking to start providing telecommunication services, etc. has been extended from 31-3-2004 to 31-3-2005. Further, in order to rationalize the provisions of the section and prevent misuse, the deduction shall be available to an undertaking which begins to provide telecommunication services on or after 1-4-2004 subject to, inter alia, the conditions that it is not formed by the transfer of old plant and machinery or splitting up or reconstruction of a business already in existence. However, the condition introduced by the Finance (No. 2) Act, 2004 will not apply to undertakings, which have star....
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....ssessment years, if such company is for the time being approved by the prescribed authority after 31-3-2000, but before 1-4-2004. For this purpose, the prescribed authority is the Secretary, Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. With a view to encourage scientific research and development in the country, the deduction is being extended to companies carrying on scientific research and development, which are approved by the prescribed authority before 1-4-2005. This amendment takes effect from 1-4-2005 and applies in relation to assessment year 2005-06 and subsequent years. [Section 18(c)] Extension of the time limit for obtaining approval of housing projects for the purpose of tax holiday under section 80-IB, and allowing deduction for redevelopment or reconstruction of existing buildings in slum areas Under the existing provisions contained in sub-section (10) of section 80-IB, a deduction equal to one hundred per cent of the profits of an undertaking developing and building housing projects is allowed if the housing project is approved by a local authority before 31-3-2005. The deduction ....
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....d also the time limit for completion of the construction has been relaxed in the case of a housing project, carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law in force, and notified by the Board in this behalf. These amendments take effect from 1-4-2005 and apply in relation to the assessment year 2005-06 and subsequent years. [Section 18(d) and 18(g)] Tax holiday for agro-processing industry Under the existing provisions of section 80-IB(11A), an undertaking deriving profit from the integrated business of handling, storage and transportation of foodgrains, is allowed a deduction of hundred per cent of such profits for a period of five assessment years and thereafter twenty five per cent (thirty per cent in the case of companies) for the next five years. Since the agro-processing industry is an important source of employment, especially in the rural areas, the deduction has been extended to undertakings engaged in the business of processing, preservation and packaging of fruits or vegetables. This amendment takes effec....
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....hty per cent or more of one or more disabilities. An individual claiming deduction under this section is required to furnish a copy of the certificate issued by the medical authority along with the return of income. The Explanation to the said section defines, inter alia, the expressions, disability, medical authority, person with disability and person with severe disability with reference to the relevant provisions of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. With a view to extend the benefits under section 80U to persons suffering from autism, cerebral palsy and multiple disability, the said Explanation has been substituted so as to expand these definitions to include the abovementioned expressions as provided for under the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999. The amendment takes effect from 1-4-2005 and applies in relation to the assessment year 2005-06 and subsequent years. [Section 19] Rebate for repayment of housing loans taken from an authority established by a Central or State Act Section 88 of the Income-t....
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....6 and subsequent years. [Section 22] Amendment of section 90 Under the existing provisions contained in the Explanation to section 90 it is declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company, where such foreign company has not made the prescribed arrangement for declaration and payment within India, of the dividends (including dividends on preference shares) payable out of its income in India. The words where such foreign company has not made the prescribed arrangement for declaration and payment within India, of the dividends (including dividends on preference shares) payable out of its income in India in the Explanation have been omitted, as these words are redundant in the case of a foreign company. This amendment takes effect from 1-4-1962, and applies in relation to the assessment year 1962-63 and subsequent assessment years. [Section 24] Measures to curb tax avoidance via dividend and bonus stripping The existing provisions contained in sub-section (7) of secti....
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....s been amended so that while the specified company or a mutual fund shall continue to pay income-tax on such distributed income at the rate of twelve and one-half per cent. If distribution is made to any individual or Hindu undivided family, the rate shall be twenty per cent. If income is distributed to any person, other than individual or HUF. This amendment takes effect from 9th July, 2004. [Section 29(a)] Exemption to open-ended equity oriented funds Under the existing provisions of sub-section (2) of section 115R, no additional tax was to be levied in respect of any income distributed to the unit holders of open-ended equity oriented funds in respect of any distribution made from such funds for a period of one year commencing from 1st April, 2003. With a view to encourage investment in such funds, the limit of one year has been done away with. The exemption shall continue without any time limit. This amendment takes effect retrospectively from 1-4-2004 and is relevant for assessment year 2005-06 and subsequent assessment years. [Section 29(b)] Amendment of section 119 relating to instructions to subordinate authorities The existing provisions containe....
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.... where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B is required to be made for the purposes of making any assessment or re-assessment, the Assessing Officer may require the Valuation Officer to make an estimate of the same and report to the Assessing Officer. Sub-section (2) of the new section provides that the Valuation Officer to whom such a reference is made under sub-section (1) shall, for the purpose of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957. Sub-section (3) of the new section provides that on receipt of the report from the Valuation Officer, the Assessing Officer may after giving the assessee an opportunity of being heard, take into account such report in making such assessment or re-assessment. It has been provided in the proviso to the new section that the provisions of the same shall not apply in respect of an assessment made on or before the 30th day of September, 2004 and where such assessment has become final and conclusive on or before that date, exc....
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....o contractors and sub-contractors The existing provisions contained in sub-section (3) of section 194C of the Income-tax Act, inter alia, provide that no deduction of tax is to be made at source from any sum credited or paid in pursuance of any contract, the consideration for which does not exceed twenty thousand rupees. It had been reported that composite contracts were being split up into contracts valued at less than Rs. 20,000 each to escape the provisions of TDS. To prevent this practice, the Act has amended section 194C to provide that tax will be required to be deducted at source where the amount credited or paid or likely to be credited or paid to a contractor or sub-contractor exceeds Rs. 20,000 in a single payment or Rs. 50,000 in aggregate during a financial year. This amendment takes effect from 1st October, 2004. [Section 37] Tax to be deducted at source from compensation or enhanced compensation paid on acquisition of certain immovable property other than agricultural land With the growing development and rapid urbanization in the country, large areas of land and many residential buildings are being acquired by various agencies including Governmen....
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....nt number and tax collection account number. The Act has, therefore, amended section 206CA to do away with the requirement of obtaining tax collection account number separately on or after 1-10-2004. Section 203A has been substituted to provide that persons required to deduct tax at source and collect tax at source shall be required to obtain a common tax deduction and collection account number. The amended section also provides where such number shall be required to be quoted. Consequently, section 272BBB has also been amended to restrict it to cases of default prior to 1-10-2004. These amendments take effect from 1-10-2004. [Sections 45, 51 and 58] Filing of returns of tax deducted at source Under the existing provisions of sub-section (1) of section 206, the pres-cribed person in the case of every Government office, principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer or every other person responsible for deducting tax is required to prepare and deliver or cause to be delivered to the prescribed income-tax authority, such returns in such form and ve....
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.... the purposes of business. The tax shall be collected from the licensee or lessee of any such license, contract of lease of the specified nature, at the time of debiting of the amount payable by the licencee or lessee to the account of the licencee or lessee or at the time of such receipt of such amount from the said licencee or lessee in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. Consequential amendments have also been made in sub-sections (2), (3), (5) and (9) of section 206C. Sub-sections (5C) and (5D) of section 139A relating to permanent account number have also been amended so as to require the licensee or lessee, referred to in sub-section (1C) of section 206C to intimate his permanent account number and require every person collecting tax to quote such permanent account number in all the certificates furnished under sub-section (5) of section 206C and all returns under sub-section (5A) or (5B) of section 206C. This amendment takes effect from 1-10-2004. [Sections 33(b) and 50] Filing of returns of tax collected at source Under the existing provisions of sub-section (5A) of section 206C of the Income-tax Act, every....
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....ime after the end of each financial year, on a floppy, diskette, magnetic cartridge etc, CD-ROM or any other computer media and in the manner as may be specified in that scheme. The filing of TCS return on computer media under the said scheme has been made mandatory in cases where a company, the Central Government or a State Government, collects the tax. A scheme for Electronic filing of returns of Tax Collected at Source was notified vide Notification No. 121/2005, dated 30-3-2005. Sub-section (5C) has also been substituted to provide that a return filed on computer media shall be deemed to be a return for the purposes of sub-section (5A) of section 206C and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof of production of the original, as evidence of any contents of the original or of any fact stated therein. A new sub-section (5D) has also been inserted which provides that where the Assessing Officer considers that the return delivered or cause to be delivered under sub-section (5B) is defective, he may intimate the defect to the person responsible for collecting tax and give him an opportunity of rectifying the defect ....
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....ns; or in a case where the board of directors routinely approve the commercial and strategic decisions made by the executive directors or officers of the company, the place where such executive directors or officers of the company perform their functions. Section 115VD deals with what is a qualifying ship. A ship is a qualifying ship if it is a sea going ship or vessel of 15 net tons or more; is registered under the Merchant Shipping Act, 1958, or is a ship registered outside India in respect of which a licence has been issued by the Director-General of Shipping under section 406 or section 407 of the Merchant Shipping Act, 1958; and a valid certificate indicating the net tonnage of the ship has been issued by the Director General (Shipping). [Section 115VX provides that the tonnage of a ship shall be determined in accordance with a valid certificate indicating its tonnage and also gives the meaning of valid certificate in case of ships registered in India and ships registered outside India.] Section 115VD also provides for exclusion of certain ships/vessels from the category of qualifying ships. The exclusions are (i) a sea going ship or vessel if the....
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....computed in accordance with this section. For the purpose of computing the tonnage income, first the daily income is to be calculated for each qualifying ship on the basis of the following rates: Qualifying ship having net tonnage Amount of daily tonnage income (1) (2) up to 1,000 Rs. 46 for each 100 tons exceeding 1,000 but not more than 10,000 Rs. 460 plus Rs. 35 for each 100 tons exceeding 1,000 tons exceeding 10,000 but not more than 25,000 Rs. 3,610 plus Rs. 28 for each 100 tons exceeding 10,000 tons exceeding 25,000 Rs. 7,810 plus Rs. 19 for each 100 tons exceeding 25,000 tons. The tonnage income for each ship is to be derived by multiplying the daily tonnage income by the number of days in the previous year or the number of days the ship is operated by the company as a qualifying ship. The tonnage income so arrived at in case of all ships will then be aggregated. The tonnage income shall be further increased by the deemed tonnage which is to be computed in the manner prescribed in rule 11Q. Deemed tonnage means, the tonnage in respect of an arrangement of purchase of slots, slot charter and an arrangement of sharing of break bulk ves....
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....his chapter and shall be taxable under the other provisions of the Act. Core activities of a tonnage tax company have been specified in sub-section (2) of the said section. These include its activities from operating qualifying ships and other ship related activities being (i) shipping contracts in respect of earning from pooling arrangements and contracts of affreightment; (ii) specific shipping trades being on-board or on shore activities of passenger ships comprising of fares and food and beverages consumed on board; and slot charters, space charters, joint charters, feeder services, container box leasing of container shipping. It has also been provided that the Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, exclude any of the other ship related activities which have been referred to in clause (ii) of sub-section (2) of the said section or prescribe the limit up to which such activities shall be included in the core activities for the purposes of the section. It is also provided that every notification issued under sub-section (3) shall be laid before Parliament. The incidental activit....
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....VJ relates to treatment of common cost. Common costs and losses will be apportioned on a just and reasonable basis to determine what is attributable to a companys shipping and non-shipping activities. It has also been provided that where any asset, other than qualifying ship, is not exclusively used for the tonnage tax business by the tonnage tax company, depreciation on such asset shall be allocated between its tonnage tax business and other business on a fair proportion to be determined by the Assessing Officer, having regard to the use of such asset for the purpose of the tonnage tax business and for the other business. Section 115VK provides that the depreciation for the first previous year of the tonnage tax scheme shall be computed on the written down value of the qualifying ships which will be computed in accordance with the provisions of sub-section (2). The written down value of the block of assets, being ships, as on the first day of the previous year, shall be divided in the ratio of the book written down value of the qualifying ships and the book written down value of the non-qualifying ships. The block of qualifying assets shall constitute a separate block of assets....
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....ck of other assets so created shall be allowed as if such written down value has been brought forward from the preceding previous year. The expression book written down value has been defined. Section 115VL relates to general exclusion of deduction and set off, etc. It has been provided that sections 30 to 43B and section 57 shall apply as if every loss allowance or deduction referred to therein and relating to or allowable for any of the relevant previous years, had been given full effect to for that previous year itself: no loss referred to in sub-sections (1) and (3) of section 70 or sub-sections (1) and (2) of section 71 or sub-section (1) of section 72 or sub-section (1) of section 72A, in so far as such loss relates to the business of operating qualifying ships of the company, shall be carried forward or set off where such loss relates to any of the previous years when the company is under the tonnage tax scheme; no deduction shall be allowed under Chapter VI-A in relation to the profits and gains from the business of operating qualifying ships; and in computing the depreciation allowance under section 32 of this Act, the written down value of any asset used for the purpos....
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.... or, as the case may be, the date on which the company became a qualifying company. The Joint Commissioner may call for such information or documents as may be necessary for the purpose of satisfying himself regarding the eligibility of the company to exercise the option and after satisfying himself, he shall pass an order in writing either approving the option for the scheme or refusing the approval for such option. The order granting or refusing the option shall be passed within one month of filing the application. Where an order granting approval has been passed, the provisions of the Chapter shall apply from the assessment year relevant to the previous year in which the option for tonnage tax scheme is exercised. The company in whose case the tonnage tax option is denied, may file an appeal before the CIT (Appeals). Section 115VQ provides that an option for tonnage tax scheme, after it has been approved under section 115VP shall remain in force for a period of ten years. It has also been provided that an option for the tonnage tax scheme shall cease to have effect in cases where the qualifying company ceases to be a qualifying company or gives a declaration in writing ....
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....e account are to be utilized in the manner laid down in the section. It has been provided that a tonnage tax company may transfer a sum in excess of twenty per cent of the book profits and such excess sum transferred shall also be utilized in the manner laid down in the section. The explanation below sub-section (1) defines the expression book profit. It has further been provided under sub-section (2) that where the company has book profits from the business of operating qualifying ships and book loss from any other sources, and consequently, the company is not in a position to create the full or any part of the reserves under sub-section (1), the company shall create the reserves to the extent permissible in that previous year and the shortfall, if any, shall be added to the amount of the reserves required to be created for the following previous year and such shortfall shall be deemed to be part of the reserve requirement of that following previous year. Sub-section (3) of the said section provides for the manner in which the amount credited to the reserve account under sub-section (1) shall be utilized by the company. Sub-section (4) of the said section provides for taxing of an....
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....se to have effect from the start of the previous year following the fifth consecutive year in which the failure to comply with the minimum training requirement under sub-section (1) occurred and the company will be prohibited from exercising the option for tonnage tax scheme for a period of ten years in accordance with the provisions of section 115VS. Section 115VV relates to limit for charter-in of tonnage. Sub-section (1) of the section provides that in the case of every company which has opted for tonnage tax scheme, not more than forty nine per cent of the net tonnage of the qualifying ships operated by it during any previous year shall be chartered-in. Sub-section (2) of the said section provides that the proportion of net tonnage referred in sub-section (1) in respect of a previous year shall be calculated based on the average of net tonnage during that previous year . Sub-section (3) provides that the average of net tonnage shall be computed in the manner prescribed in Rule 11S. Sub-section (4) of the said section provides that where the net tonnage of ships chartered-in exceeds the limit under sub-section (1) during any previous year, the total income of such company in ....
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....n for tonnage tax scheme within the initial period, the provisions of this Chapter shall not apply to the amalgamated company and the income of the amalgamated company from the business of operating qualifying ships shall be computed in accordance with the other provisions of the Income-tax Act. Section 115VZ relates to demerger. The section provides that in a scheme of demerger, the tonnage tax scheme shall, as far as may be, apply to the resulting company for the unexpired period if it is a qualifying company. It has also been provided that the option for tonnage tax scheme in respect of the demerged company shall remain in force for the unexpired period of the tonnage tax scheme if it continues to be a qualifying company. Section 115VZA provides that a temporary cessation of operating any qualifying ship by a company shall not be considered as a cessation of operating of such qualifying ship and the company shall be deemed to be operating such qualifying ship for the purposes of this Chapter. It has also been provided that where a company continues to operate a ship which temporarily ceases to be a qualifying ship, such ship shall not be considered as qualifying ship for t....
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....so been amended to provide that no deduction shall be allowed under the said section from assessment year 2005-06 onwards. These amendments take effect from 1-4-2005 and apply in relation to assessment year 2005-06 and subsequent years. [Sections 9, 30, 53 and 54] Dematerialisation of TDS and TCS certificates Under the existing provisions of the Income-tax Act, for the purpose of claiming credit for tax deducted at source or tax collected at source, TDS or TCS certificates, as the case may be, are required to be filed along with the return of income. Returns are deemed to be defective in case they are not accompanied with proof of tax claimed to have been deducted/collected at source. With a view to computerising the TDS and TCS functions as also enable the process of dematerialisation of TDS and TCS certificates, the Act has incorporated certain amendments in the provisions relating to tax deduction at source and tax collection at source. Section 199 of the Income-tax Act which provides for credit for tax deducted on production of TDS certificate has been amended to provide that in cases where tax is deducted on or after 1st April, 2005 and is paid to the credit ....
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.... tax deducted has been inserted in the Income-tax Act to provide that the prescribed income-tax authority or the person authorized by such authority to whom the quarterly statements shall be delivered, shall, within the prescribed time after the end of each financial year beginning on or after 1st April, 2005 prepare and deliver to every person from whose income-tax has been deducted or in respect of whose income-tax has been paid, a statement in the prescribed form specifying the amount of tax deducted or paid and such other particulars as may be prescribed (Rule 31AB). Similar amendments have also been made in sub-section (5) of section 206C by way of insertion of the second proviso. All assessees, including non-residents, will be required to intimate the permanent account number to the person deducting or collecting tax in the absence of which credit for TDS or TCS cannot be given. Hence, the first proviso to sub-section (5A) of section 139A not requiring quoting of PAN by non-residents, has been omitted. Section 272B relating to penalty for failure to comply with the provisions of section 139A has been amended so as to provide for a penalty of a sum of ten thousand rupees....
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....an offence has been committed by a company, the company as well as the person who was in charge of, and was responsible for the conduct of the business of the company at the time when the offence was committed will be deemed to be guilty of the offence. The said section also provides that where the offence has been committed with the consent or connivance of any director, manager, secretary or other officer of the company, such director or other officer shall also be deemed to be guilty of the offence. In respect of some of the offences [wilful attempt to evade tax (section 276C), false statement in verification (section 277), failure to deposit tax deducted at source with the Government (section 276B), etc.] it has been provided that the person found guilty shall be punishable with rigorous imprisonment and with fine. There has been a judicial controversy as to whether a company, being a juristic person, can be punished with imprisonment where the statute refers to punishment of imprisonment and fine. In the case of M/s. M.V. Javali v. Mahajan Borewell & Co. [1998] 230 ITR 1, the Honble Supreme Court held that on a harmonious interpretation of section 276B read with section 278....
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....nment agencies and other authorities who are valuable sources of information, the Finance (No. 2) Act, 2004, has substituted the said section by a new section. The substituted section 285BA provides that an assessee or certain agencies responsible for registering or maintaining books of account or other documents containing a record of any specified financial transaction, under any law for the time being in force, shall furnish an annual information return in respect of such specified financial transaction as may be prescribed by the Board. The return shall be furnished in respect of transactions registered or recorded on or after the 1st day of April, 2004. Sub-section (2) of the said section provides that the annual information return shall be furnished within the prescribed time after the end of such financial year and in such form and manner as may be prescribed. Sub-section (3) of the said section defines the specified financial transaction to mean any transaction of purchase, sale or exchange of goods or property or right or interest in a property or transaction for rendering any service or transaction under a works contract or transaction by way of an investment made o....
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....g bonds or debentures. Receipt from any person of an amount of five lakh rupees or more for acquiring bonds or debentures issued by the company or institution. 5. A company issuing shares through a public or rights issue. Receipt from any person of an amount of one lakh rupees or more for acquiring shares issued by the company. 6. Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908. Purchase or sale by any person of immovable property valued at thirty lakh rupees or more. 7. A person being an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934, who is duly authorized by the Reserve Bank of India in this behalf. Receipt from any person of an amount or amounts aggregating to five lakh rupees or more in a year for bonds issued by the Reserve Bank of India. It has also been provided in the said rule that Annual Information Return shall be furnished on or before 31st August immediately following the financial year in which transaction is registered or recorded. Finance (No. 2) Act, 2004 has inserted a new section 271FA providing for penalty for failure to furnish the a....
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....mutual fund. It has been provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures. It has been provided in the said Chapter that the Board may specify by rules the method of determining the value of taxable securities transaction. Securities Transaction Tax Rules, 2004, notified by the Central Government vide notification S.O. No. 1059(E) dated 28th September, 2004, lay down the method for determining the price in respect of transactions of purchase and sale of equity shares and units in three modes of settlement, i.e., netted settlement mode, trade to trade settlement mode and auction settlement mode in a recognized stock exchange. Section 100 of Chapter VII of Finance (No. 2) Act, 2004, provides that every recognised stock exchange and the prescribed person in case of every mutual fund shall collect the securities transaction tax. These persons are required to pay the same to the credit of the Central Government by the seventh day of the month immediately following the calendar month in which tax is collected. Section 101 of the said Chapter provide....
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....at in case any amount is refunded on assessment to the assessee, then the assessee shall within the time prescribed refund the same to the concerned person from whom the amount was collected. It has been provided in the rules that such amount shall be refunded by the assessee to the persons from whom it was collected within thirty days of receipt of same from the Government. Section 103 relates to rectification of mistakes apparent from the record, by the Assessing Officer in any order passed by him. Section 104 provides for charging of simple interest @ one per cent per month of delay in paying the securities transaction tax to the account of the Government within specified time. Sections 105 to 108 relates to levy of penalty for certain failures. Section 110 provides for filing of appeal to the Commissioner of Income-tax (Appeals), in such form and verified in such manner as may be prescribed by the Board, in cases where the assessee is aggrieved by any assessment order/rectification order passed by the Assessing Officer. Section 111 provides for filing of appeal to the Appellate Tribunal in such form and verified in such manner as may be prescribed by the Board....