TaxTMI 
TaxTMI 
FINANCE (NO. 2) ACT, 1998
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....bsp; Finance (No. 2) Act, 1998 Rates for deduction of income-tax at source during the financial year 1998-99 from income other than "Salaries" 4.2 The rates for deduction of income-tax at source during the financial year 1998-99 from income other than "Salaries", have been specified in Part II of the First Schedule to the Act. These rates apply to income by way of interest on securities, interest other than "interest on securities" , insurance commission, winnings from lotteries or crossword puzzles, winnings from horse races and income of non-residents (including non-resident Indi­ans). Finance (No. 2) Act, 1998 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 1998-99 4.3 The rates of deduction of income-tax at source from "Sal­ari....
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.... 66.7 60,000 2,000 1,000 1,000 50 75,000 5,000 4,000 1,000 20 1,00,000 10,000 9,000 1,000 10 1,20,000 14,000 13,000 1,000 7.1 1,50,000 20,000 19,000 1,000 5 1,75,000 27,500 26,500 1,000 3.6 2,00,000 35,000 34,000 1,000 2.9 2,50,000 50,000 49,000 1,000 2 3,00,000 65,000 64,000 1,000 1.5 4.3-3 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. 4.3-4 Firms - In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Act. This rate is 35% which is the same as that specified in the corresponding paragraph of Part I of the First Schedule to the Act. 4.3-5 Local authorities - In the case of local authorities, the rate of income-tax has been specified in Paragraph D of Part III of the First Schedule to the Act. This rate is 30% which is the same as....
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.... Deputy Director Joint Director 5.3 Clause (7A) of section 2 of the Income-tax Act containing the definition of Assessing Officer has been amended to include the redesignated authorities as above. 5.4 Clause (9A) of section 2 of the Income-tax Act has been amended to include Deputy Commissioner in the definition of Assistant Commissioner. 5.5 Clauses (19A) and (19C) of section 2 of the Income-tax Act have been amended to exclude the authorities of Additional Com­missioner of Income-tax and Additional Director of Income-tax from the definitions of Deputy Commissioner and Deputy Director. 5.6 Two new clauses, namely (28C) and (28D) have been inserted in section 2 of the Income-tax Act to define Joint Commissioner and Joint Director. 5.7 Section 116 of the Income-tax Act has been amended by insert­ing clause (cca) to add a new class of income-tax authorities, namely, Joint Director of Income-tax or Joint Commissioner of Income-tax. 5.8 Identical amendments have also been made in the Wealth-tax Act, Interest-tax Act, Gif....
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....sp; Finance (No. 2) Act, 1998 Extension of exemption under section 10(15)(iv) to industrial undertakings manufacturing computer software, etc. 7.1 Existing sub-clause (iv) of clause (15) of section 10 of the Income-tax Act provides for exemption from income-tax in respect of interest payable by, inter alia, an "industrial undertaking" in India on any moneys borrowed or debt incurred by it in a foreign country subject to certain conditions. An "industrial undertaking" for this purpose has been defined to mean any under­taking which is engaged in specified activities. 7.2 The Act amends the definition of industrial undertaking to so as to include within its ambit the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device. 7.3 The amendment will take effect from 1st April, 1990 and will, accordingly, apply in relation to the assessment year 1999-200....
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.... have since been notified vide Notification No. S.O. 897(E) dated 12th October, 1998. By this notification the Central Board of Direct Taxes have been designated as the prescribed authority for the purpose of approval under sub-clauses (vi) and (via) of section 10(23C). 8.5 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. [Section 5] Finance (No. 2) Act, 1998 Liberalisation of exemption of income of a venture capital fund or a venture capital company. 9.1 Section 10(23F) exempted income by way of dividends or long term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a ven­ture capital undertaking. This clause provided for a minimum lock-in period of three....
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....isions of section 10(23G) have been amend­ed by Finance (No. 2) Act, 1998 to provide, inter alia, that the exemption under this clause shall be available only in respect of the investments in an enterprise,— (i) which is wholly engaged in the business of developing, main­taining and operating an infrastructure facility; and (ii) which has been approved by the Central Government on an application made by it accordance with the rules made in this behalf and which satisfies the specific conditions. 10.3 The amended provisions would apply only in respect of in­vestment made on or after 1-6-1998. Doubts had been expressed in different quarters about the continuance of exemption available under section 10(23G) in respect of investments made prior to 1-6-1998 for assessment year 1999-2000 and onwards. The Central Board of Direct Taxes have clarified by way of a press release that the exemption available under the provisions of section 10(23G), prior to its amendment by the Act, will continue to govern the investments made prior to 1-6-1998. The Rules and Forms in this regard have since been notified vide Notification No. S.O. 897(E) dated 12th Octobe....
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....Rs. 25,000. 12.3 The terms of employment of highly paid salaried employees are so arranged that these provide them benefit and facilities, whereby incidental expenses are not born by them. The amendment, therefore seeks to withdraw the benefit of standard deduction for the assessee having salary income of more than Rs. 5,00,000. The existing provisions of standard deduction shall continue to apply in respect of salary income between Rs. 1 lac to Rs. 5 lacs. 12.4 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 6] Finance (No. 2) Act, 1998 Amendment of the provisions relating to perquisite value of medical benefits. 13.1 Under the existing provisions, any sum paid by the employer in respect of any expenditure act....
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....Finance (No. 2) Act, 1998 Depreciation to be allowed on intangible assets 15.1 Under the existing provisions of section 32 of the Income-tax Act, depreciation is allowable only on tangible assets, being building, machinery, plant or furniture. The Act amends this section to widen its scope by providing that depreciation will also be allowable in respect of intangible assets, being know-how, patents, copyrights, trade mark, licences or franchises or any other business or commercial rights of similar nature, ac­quired on or after the 1st day of April, 1998. The Act also amends the definition of the term 'block of assets' so as to include these intangible assets within the meaning of block of assets. The rate of depreciation in respect of these intangible assets has since been prescribed at 25% vide Notification S.O. No. 781(E), dated 4-9-1998. 15.2 As a consequence of this amendment, the deductions allowable under section 35A of the Income-tax Act in respect of any expend­iture of a capital nature incurred on the acquisition of patent rights or copyrights and under section 35AB in respect of expend­iture on know-how have been withdrawn with effect from the as­....
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.... 16.3 The Act has also inserted section 50A in the Income-tax Act to provide for the working of the cost of acquisition for the purposes of computation of capital gains in respect of such assets. It has been provided that where the capital asset is an asset in respect of which a deduction on account of depreciation under clause (i) of sub-section (1) of section 32 has been ob­tained by the assessee in any previous year, the provisions of sections 48 and 49 shall apply subject to the modification that the written down value, as defined in clause (6) of section 43, of the asset, as adjusted, shall be taken as the cost of acqui­sition of the asset. 16.4 These amendments will take effect retrospectively from 1st day of April, 1998 and will, accordingly, apply in relation to the assessment year 1998-99 and subsequent years. [Section 9, 16 & 23]  ....
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....in respect of the same amount in any other previous year. 17.4 The amount standing to the credit of such special account or Site Restoration Account can be withdrawn only for the purposes specified in the respective schemes. If the amount released by the State Bank of India or the amount withdrawn from the Site Restoration Account during a previous year is not utilised in the same previous year for the purpose for which it is released, the amount not so utilised shall be deemed to be profits and gains of the business and , accordingly, chargeable to income-tax as the income of that previous year. 17.5 In case any amount standing to the credit of the assessee in the special account to in the Site Restoration Account is uti­lised by the assessee for the purposes of any expenditure in connection with such business in advance with the relevant schemes, such expenditure will not be allowed as deduction in computing the income chargeable under the head 'profits and gains of busi­ness or profession'. 17.6 The section also provides that where any amount standing to the credit of the assessee in the above accounts is withdrawn on closure of the account during any previous y....
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....ccordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 10] Finance (No. 2) Act, 1998 Omission of provision for weighted deduction 18.1 Sub-section (2AB) to section 35 was introduced by the Fi­nance Act, 1997. This sub-section allows weighted deduction of a sum equal to one and one-fourth times of the expenditure incurred on scientific research on in-house research and development facility as approved by the prescribed authority on fulfilment of certain conditions. Due to difficulties experienced by the pre­scribed authority in monitoring and auditing such expenses, the Act omits the said sub-section and, accordingly, it has been provided that no deduction shall be allowed in respect of the expenditure which is incurred after the 31st day of March, 2000. ....
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....in respect of such ex­penditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on ac­count of protection money, extortion, hafta, bribes etc. as business expenditure. It is well decided that unlawful expendi­ture is not an allowable deduction in computation of income. 20.2 This amendment will take effect retrospectively from 1st April, 1962 and will, accordingly, apply in relation to the as­sessment year 1962-63 and subsequent years. [Section 15] Finance (No. 2) Act, 1998 Tax treatment of assignment expenses 21.1 A situation unique to the petroleum and natural gas industry is the assignment or farm-out of participating interest held by an assessee in a production sharing contract to the third party. Section 42 of the Income-tax Act is amended so as ....
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....transfer over expenditure remaining unallowed (c-b) NIL 1,000 9,000 NIL (g) Difference between the expenditure incurred and the expenditure remaining unallowed (a-b) 4,000 4,000 4,000 4,000 (h) Amount chargeable to income-tax as profits and gains in the assessment year 1999-2000 [lower of (f) & (g)] NIL 1,000 4,000 NIL 21.4 In a scheme of amalgamation whereby the amalgamating company sells or otherwise transfers the business to the amalgamated company (being an Indian company), the amended provisions shall not apply in the case of the amalgamating company and shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not transferred the business or interest in the business. 21.5 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 17]  ....
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....bsp; Finance (No. 2) Act, 1998 Certain expenses to be allowed only on payment 23.1 Under the existing provisions, the sums referred to in clauses (a) to (e) of section 43B are allowable as deduction in the previous year in which the sum is actually paid. The first proviso to section 43B provides that the provisions of this section shall not apply to any sum referred to in clauses (a), (c) or (d) if the sum is actually paid on or before the date on which the return of income is due to be furnished under sub-section (1) of section 139 for the previous year in which the liability to pay such sum was incurred. Thus, while the deduction in respect of any sum payable as interest on any loan or borrow­ing from any public financial institution or a State Financial Corporation or a State Industrial Corporation, referred to in clause (d), is allowable during the previous year even though the sum is actually paid in the subsequent year within the specified due date, the deduction in respect of any sum payable as interest on any term loan from a scheduled bank, referred t....
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....es and of five hundred thousand rupees to ten lakhs rupees. Accordingly, under the amended provi­sions, the assessees carrying on business or profession are re­quired to keep and maintain the books of account and other docu­ments if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in the business or profession exceed or exceeds ten lakhs rupees during the relevant previous year. 24.3 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 20] Finance (No. 2) Act, 1998 Extension of period for corporatisation of stock broker's card 25.1 Under the existing provisions of the Income-tax Act, corpo­ratisation of membership card of recognised stock exchanges is exempt from capital g....
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....2) Act, 1998 Exemption from levy of capital gains tax and allowance of carry forward of losses and unabsorbed depreciation in certain cases of business re-organisation 27.1 Business reorganisations have definite tax implications under the existing provision of the Income-tax Act. Transfer of assets attracts levy of capital gains tax. Similarly, carry forward of losses and that of unabsorbed depreciation are not available to successor business entities. However, in cases of amalgamation, capital gains tax is not levied and losses and unabsorbed depreciation are allowed to be carried forward under certain conditions. The Expert Group, in the draft Income-tax Bill, has recognised the need to encour­age business reorganisation when they are in consonance with the whole objective of economic development and not merely devices to secure tax advantage. 27.2 The Act, following the recommendation of the Expert Group, has amended the relevant sections of the Income-tax Act to allow tax benefits in cases of business reorganisation where a firm or a proprietary concern is succeeded by a company in the business carried on by it. 27.3 Section 47 of the Income-tax Act has been ame....
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....nbsp; Finance (No. 2) Act, 1998 Extension of time for investing amount of capital gains under section 54EA & 54EB of Income-tax Act in cases of compulsory acquisition under any law. 28.1 Section 54H of Income-tax Act caters to the situation where the transfer of the long-term asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of transfer. In such cases the period available to the assessee for investing the long-term capital gains for the purpose of exemp­tion is reckoned from the date of receipt of compensation and not from the date of transfer. The Act has inserted references to sections 54EA and 54EB in section 54H of Income-tax Act whereby extension of time shall be available for investing amount of capital gains under sections 54EA and 54EB in cases of compulsory acquisition. 28.2 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relat....
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....ny other head, the whole loss shall be allowed to be carried forward and set off in the subsequent assessment years against the income from house property upto a maximum of 8 assessment years. 30.2 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 26] Finance (No. 2) Act, 1998 Rationalisation of benefits available to parents and guard­ians of handicapped dependent 31.1 Under the existing provisions of section 80DD of the Income-tax Act, an assessee who is resident in India being an individual or a Hindu undivided family was allowed a deduction of Rs. 15,000 for expenditure incurred in respect of handicapped dependants subject to certain conditions. 31.2 Section 80DDA allows a separate deduction, from the gross ....
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.... for donations made to National Sports Fund to be set up by the Central Government. 32.3 The Central Government has also set up a National Culture Fund for the promotion of art and culture in the country with a view to mobilising funds for protecting, preserving and promoting the cultural heritage in the country. A similar deduction of 100% for donations made to the National Culture Fund shall now be allowed under the amended provisions of section 80G. 32.4 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. [Section 29] Finance (No. 2) Act, 1998 Reintroduction of the provisions of section 80GG 33.1 Section 80GG of the Income-tax Act provided for a deduction to all assessees [except the salaried persons who received house rent ....
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.... Finance (No. 2) Act, 1998 New provisions for deduction for World Bank aided housing projects in India 34.1 A new section 80 HHBA has been inserted in the Income-tax Act with a view to providing that an Indian company or a non-corporate assessee resident in India shall be entitled to a deduction of 50% of the profits and gains derived from the busi­ness of execution of housing projects aided by the World Bank and undertaken by the assessee in pursuance of a contract floated on the basis of a global tender. To claim this deduction the asses­see shall have to transfer 50% of profits and gains from the business of housing project, to a Housing Project Reserve Ac­count. This amount shall have to be utilised during a period of five years for the purposes of business other than for distribu­tion by way of dividends or profits. If the money is utilised for any non-business purpose then the income of the year in which the deductions allowed would be re-computed after withdrawing the deduction so allowed. 34.2 The amendment will take effect from 1st April, 1999 and will, accordingly, apply....
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....of computer soft­ware provided the sale consideration is received in or brought into India inconvertible foreign exchange. Software exports have grown exponentially in recent years. With a view to increasing India's market share in the international arena, the Explanation (b) below this section has been extended to include 'any custo­mised electronic data' within the meaning of "computer software". The benefits of deduction have also been extended to supporting software developers. With this in view, proviso to sub-section (1); and sub-sections (1A), (3A) and (4A) have been inserted by the Act so that the benefit of export can also be passed on to software developers by software exporting companies. 36.2 The said proviso provides that where an exporting company issues and certificate in the prescribed form that in respect of an amount of export turnover, deduction under sub-section (1) of section 80HHE is to be allowed to a supporting software develop­er, the amount of deduction available to the assessee shall be reduced by such amount which bears to the total profits of the assessee issuing the certificate, the same proportion as the amount of export turnover specif....
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....p; Finance (No. 2) Act, 1998 Tax holiday in respect of undertaking set up in industrially backward States and industrially backward districts extended up to 31-3-2000 37.1 Under the existing provisions of section 80-IA of the Income-tax Act, deduction is allowed in computing the taxable income in respect of profits derived from a new industrial undertaking, or a ship or the business of a hotel. 37.2 For encouraging industrialisation in industrially backward States, the Finance Act, 1993 had provided for a five-year tax holiday for industrial undertakings set up in industrially back­ward States specified in the Eighth Schedule, which start manufac­ture or production during the period beginning of the 1st day of April, 1993 and ending on 31st day of March, 1998. After the first five years, deduction of 30% of the profits of such under­taking in the case of companies (25% in the case of other asses&s....
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....sp; Finance (No. 2) Act, 1998 Tax holiday in respect of companies engaged in scientific and industrial research and development activities. 39.1 In order to promote research and development activities, a five-year holiday was provided under section 80-IA with effect from the assessment year 1997-98 to approved companies engaged in scientific and industrial research and development activities. The incentive was made available to any company that had as its main objective, activities in the areas of scientific and indus­trial research and development and which had been accorded ap­proval by the prescribed authority. The prescribed authority for this purpose is the Secretary, Department of Scientific and Industrial Research. The tax holiday available to any company, which is accorded approval by the prescribed authority at any time before 31st March, 1998 has been extended by one year, i.e., up to 31st March, 1999. 39.2 This amendment will take effect from 1st A....
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....fining of mineral oil. This benefit would be available to such undertakings which commence production on or after 1-10-1998. 41.2 This amendment will take effect from 1-4-1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 34] Finance (No. 2) Act, 1998 Tax holiday to undertakings engaged in developing and building housing projects 42.1 With a view to promoting investments in housing, a new sub-section (4F) has been inserted in section 80-IA of the Income-tax Act. Under this provision, an undertaking engaged in developing and building housing projects is eligible to claim deduction under section 80-IA, subject to the following:— (a) The project should be approved by a local authority; (b) The size of the plot of land is a minimum of 1 acre and the re....
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....sp; Finance (No. 2) Act, 1998 80JJA Deduction in respect of profits and gains from busi­ness of collecting and processing of bio-degradable waste 44.1 Increasing population and urbanization pose challenges for planners. Waste management has been one area of serious concern, which so far has been primarily the responsibility of local bodies. Waste is now being thought not as a useless resource but a re-cyclable and reusable one given the proper framework. The waste can be utilized for generating energy and useful resources by way of composting, vermi-compost and anaerobic digestion. The potential for power generation is also tremendous. 44.2 Accordingly, a new section 80JJA has been inserted with a view to providing that where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power, producing bio-gas, making pellets or bri­quettes for fuel or organic manure, a deduction of an amount equal to the ....
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....w as well as exist­ing undertakings. (v) The assessee should furnish along with the return of income the report of the accountant, as defined in the Explana­tion below sub-section (2) of section 288, giving such particu­lars as may be prescribed. 45.3 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 36] Finance (No. 2) Act, 1998 Increase in the limits of deductions allowed in respect of income of cooperative societies. 46.1 Under the Income-tax Act, co-operative societies enjoy certain tax concessions in respect of their income. The whole of the amounts of profits and gains of co-operative societies engaged in the business of banking or providing credit facilities to its members, marketing o....
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....ccordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 38] Finance (No. 2) Act, 1998 Addition of two more economic indicators for obligatory filing of returns 48.1 Under the existing provisions, it is obligatory for a person not furnishing return under sub-section (1) of section 139 but residing in a specified area and fulfilling any two of the four following conditions to file return of income : (i) occupation of an immovable property exceeding a speci­fied floor area by way of ownership, tenancy or otherwise, (ii) ownership/lease of a motor vehicle, (iii) subscription of a telephone, (iv) foreign travel. 48.2 The Act has amended sub-section (1) of section 139 to add two more economic criteria, namely :— (v) Holding of a credit card ....
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....According to the existing provisions, every person who is carrying on any business or profession and whose total sales, turnover, or gross receipts are likely to exceed Rs. 50,000 in any previous year is required to apply for the allotment of Permanent Account Number. This provision was inserted by the Taxation Law (Amendment) Act, 1975 w.e.f. 1-4-1976 and has ceased to be a realistic eligibility criteria for applying for PAN. 49.2 The Act has amended clause (ii) of sub-section (1) of sec­tion 139A to enhance the limit of Rs. 50,000 to Rs. 5,00,000. 49.3 This amendment will take effect from 1st August, 1998 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 41] Finance (No. 2) Act, 1998 Compulsory quoting of PAN 50.1 The existing provisions of section 139A of the ....
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.... (including a cellular telephone connection); (h) payment to hotels and restaurants against their bills for an amount exceeding twenty-five thousand rupees at any one time. 50.4 The rules further provide that if a person has not been allotted PAN, he may quote his GIR No. till such time PAN is allotted to him. If he does not have either PAN or GIR No. and is making transactions in cash or otherwise than by way of crossed bank cheque or crossed bank draft, he is required to fill decla­ration in Form No. 60 giving his name and address and particulars of the transaction along with proof of his residential address. Persons having income from agriculture and not having any other income chargeable to tax are required to file similar declara­tions in Form No. 61. Non-residents visiting the country can produce copies of their passports. [Section 41] &n....
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....sp; Finance (No. 2) Act, 1998 Clarificatory amendments in procedure for block assessment 53.1 To set at rest the controversy as to whether block assess­ment subsumes the regular assessments or is independent of the latter, the Act has inserted an Explanation after sub-section (2) of section 158BA of the Income-tax Act clarifying that assess­ments completed under Chapter XIVB shall be in addition to regu­lar assessments in respect of each previous year included in the block period. Further, undisclosed income relating to the block period shall not include the income assessed in regular assess­ment. Similarly income in regular assessment shall not include the income of the block period assessed in block assessment. 53.2 To settle the controversy regarding meaning of the word 'execution' while calculating the period of limitation in section 158BE of the Income-tax Act, the Act has inserted a new clarifi­catory Explanation. An author....
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....ible from salary. The person responsible for deducting tax at source can now make necessary adjustment and deduct appropriate amount of tax. It is hoped that this measure would go a long way to remove the hardship to a large number of salaried taxpayers. 54.3 This amendment will take effect from 1st August, 1998 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 47] Finance (No. 2) Act, 1998 Extending the scope of Authority for advance ruling to resi­dent applicants 55.1 Under the existing provisions, the scope of Authority for Advance Ruling is restricted to a determination of a question of law or fact in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant. 55.2 The act has amended clause (a) in section ....
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.... Act. 56.4 This amendment takes effect from the 1st day of October, 1998. [Sections 49, 69 & 76] Finance (No. 2) Act, 1998 Providing for appeal fee for filing appeals before Commis­sioner (Appeals) 57.1 Under the existing provisions of the Income-tax Act, no fees is required to file appeals before Commissioner (Appeals). Consequently, a large number of unnecessary appeals are filed on decided issues and also on issues having petty tax effect. These avoidable appeals take substantial time of the appellate authori­ties and slow down the disposal of appeals. In view of the above, the Act has amended section 249 of the Income-tax Act to provide for a scale of fee as under for filing appeals before Commission­er (Appeals) based on total income. Assessed total income Fee for filing the appeal before CIT (Ap....
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....nvolving assessed total income upto Rs. 1,00,000 and Rs. 1,500 when the assessed total income exceeded Rs. 1,00,000. The above small scale of fee did not prohibit filing of a large number of unnecessary appeals on decided issues and on issues having petty tax effect, thus slow­ing down the disposal of appeals. In view of the above, the Act has enhanced the scale of fee payable to Appellate Tribunal as under by amending sections 253 and 254 of the Income-tax Act :— Particulars Fee for filing the appeal before ITAT Assessed total income - Rs. 1 lakh or less Rs. 500 Assessed total income is more than Rs. 1 lakh but not more than Rs. 2 lakhs Rs. 1,500 Assessed total income is more than Rs. 2 lakhs 1% of the assessed income subject to a maximum of Rs. 10,000. Miscellaneous applications under section 254(2) Rs. 50 Stay petitions Rs. 500 59.2 The fee for filing an appeal before the Appellate Tribunal under other direct tax enactments, namely Wealth-tax Act, Gift-tax Act, Interest-tax Act and Expenditure-tax Act, has been enhanced from Rs. 200 to Rs. 1000. 59.3 These amendments have taken effect from the 1st day of Octo­ber, 1998. [Sec....
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....60 and 261 to provide that an appeal shall lie against the orders of the Tribunal directly to the High Court if the High Court is satisfied that the case involves a substantial question of law. The memorandum of appeal shall precisely state the substantial question of law involving the appeal and where the appeal is made by the assessee, such appeal shall be accompanied by a fee of Rs. 10,000 (Rs. 5,000 in the case of Wealth-tax). Where the High Court is satisfied that a substantial question of law is involved in any case, it may itself formulate that question. The appeals shall be heard on the question so formulated. However, nothing would take away or abridge the power of the Court to hear for reasons to be recorded the appeal on any other substantial questions of law if it is satisfied that the case involves such questions. The High Court may also determine any issue necessary for disposal of appeal which has not been determined by the Appellate Tribunal. 61.3 Similar amendments for direct appeal to High Court have also been made in Wealth-tax Act and Gift-tax Act. 61.4 These amendments have taken effect from the 1st day of October, 1998. &....
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....to sub-section (1) of section 139]. The interest chargeable under section 234A of the Income-tax Act for not furnishing the return or furnishing the same after the due date is calculated on the basis of tax pay­able. If no taxes are payable, no interest can be charged. It is seen that a large number of persons having salary income which are subject to deduction of tax at source do not file their returns. Since the Act has amended section 192(2B) of the Income-tax Act to provide that loss from house property shall be allowed to be adjusted against salary income at the source itself, filing of returns has become absolutely necessary to find out that the claim of set off of loss is being correctly made. The penal provisions are also necessary to ensure that all such persons having taxable income file their returns of income. 63.2 Therefore, section 271F has been amended to provide for a penalty of Rs. 1,000 for not filing of return under sub-section (1) of section 139 before the end of the relevant assessment year. 63.3 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years.  ....
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...., apply in relation to the assessment year 1999-2000 and subsequent years. [Section 63] Finance (No. 2) Act, 1998 Provisions relating to insurance business 66.1 The profits and gains of any insurance business other than life insurance are computed in accordance with the provisions of section 44 of the Income-tax Act and the rules contained in the First Schedule. As per rule 5 of the First Schedule, the profits and gains of such insurance business are taken to be the balance of profits disclosed by the annual accounts under the Insurance Act, 1938 and are subject to the adjustments of expenditure or allowance which are not admissible under sections 30 to 43B. 66.2 The Act amends rule 5 of the First Schedule so as to explic­itly provide for the disallowance of provision for any tax, dividend, reserve or any other provisio....
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....me-tax Act : Table From To Assistant Commissioner Assistant Commissioner or Deputy Commis­sioner Assistant Director Assistant Director or Deputy Director Deputy Commissioner Joint Commissioner Deputy Director Joint Director 5.3 Clause (7A) of section 2 of the Income-tax Act containing the definition of Assessing Officer has been amended to include the redesignated authorities as above. 5.4 Clause (9A) of section 2 of the Income-tax Act has been amended to include Deputy Commissioner in the definition of Assistant Commissioner. 5.5 Clauses (19A) and (19C) of section 2 of the Income-tax Act have been amended to exclude the authorities of Additional Com­missioner of Income-tax and Additional Director of Income-tax from the definitions of Deputy Commissioner and Deputy Director. 5.6 Two new clauses, namely (28C) and (28D) have been inserted in section 2 of the Income-tax Act to define Joint Commissioner and Joint Director. 5.7 Section 116 of the Income-tax Act has been amended by insert­ing clause (cca) to add a new class of income-tax authorities, namely, Joint Director of Income-tax or Joint Commissioner of Income-tax. 5.....
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....p; [Section 5] Finance (No. 2) Act, 1998 Extension of exemption under section 10(15)(iv) to industrial undertakings manufacturing computer software, etc. 7.1 Existing sub-clause (iv) of clause (15) of section 10 of the Income-tax Act provides for exemption from income-tax in respect of interest payable by, inter alia, an "industrial undertaking" in India on any moneys borrowed or debt incurred by it in a foreign country subject to certain conditions. An "industrial undertaking" for this purpose has been defined to mean any under­taking which is engaged in specified activities. 7.2 The Act amends the definition of industrial undertaking to so as to include within its ambit the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device. 7.3 The amendment will take effect from 1....
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.... transfer their investments to specified securities. The Rules and Forms in this regard have since been notified vide Notification No. S.O. 897(E) dated 12th October, 1998. By this notification the Central Board of Direct Taxes have been designated as the prescribed authority for the purpose of approval under sub-clauses (vi) and (via) of section 10(23C). 8.5 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. [Section 5] Finance (No. 2) Act, 1998 Liberalisation of exemption of income of a venture capital fund or a venture capital company. 9.1 Section 10(23F) exempted income by way of dividends or long term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a ven&s....
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.... of infrastructure facility, was being achieved or not. To serve this purpose, the provisions of section 10(23G) have been amend­ed by Finance (No. 2) Act, 1998 to provide, inter alia, that the exemption under this clause shall be available only in respect of the investments in an enterprise,— (i) which is wholly engaged in the business of developing, main­taining and operating an infrastructure facility; and (ii) which has been approved by the Central Government on an application made by it accordance with the rules made in this behalf and which satisfies the specific conditions. 10.3 The amended provisions would apply only in respect of in­vestment made on or after 1-6-1998. Doubts had been expressed in different quarters about the continuance of exemption available under section 10(23G) in respect of investments made prior to 1-6-1998 for assessment year 1999-2000 and onwards. The Central Board of Direct Taxes have clarified by way of a....
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....iew to minimising the hardship that would have been caused to employees and also pensioners who are receiving salary or pension in the lower income slab, section 16 has been amended to raise the limit of standard deduction for assessees having salary income up to Rs.1,00,000 from Rs. 20,000 to Rs. 25,000. 12.3 The terms of employment of highly paid salaried employees are so arranged that these provide them benefit and facilities, whereby incidental expenses are not born by them. The amendment, therefore seeks to withdraw the benefit of standard deduction for the assessee having salary income of more than Rs. 5,00,000. The existing provisions of standard deduction shall continue to apply in respect of salary income between Rs. 1 lac to Rs. 5 lacs. 12.4 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 6] &nbs....
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....ction 8] Finance (No. 2) Act, 1998 Depreciation to be allowed on intangible assets 15.1 Under the existing provisions of section 32 of the Income-tax Act, depreciation is allowable only on tangible assets, being building, machinery, plant or furniture. The Act amends this section to widen its scope by providing that depreciation will also be allowable in respect of intangible assets, being know-how, patents, copyrights, trade mark, licences or franchises or any other business or commercial rights of similar nature, ac­quired on or after the 1st day of April, 1998. The Act also amends the definition of the term 'block of assets' so as to include these intangible assets within the meaning of block of assets. The rate of depreciation in respect of these intangible assets has since been prescribed at 25% vide Notification S.O. No. 781(E), dated 4-9-1998. 15.2 As a consequence of this amendmen....
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....he amount of sharp value, if any, exceeds the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business of the previous year in which the moneys payable became due. 16.3 The Act has also inserted section 50A in the Income-tax Act to provide for the working of the cost of acquisition for the purposes of computation of capital gains in respect of such assets. It has been provided that where the capital asset is an asset in respect of which a deduction on account of depreciation under clause (i) of sub-section (1) of section 32 has been ob­tained by the assessee in any previous year, the provisions of sections 48 and 49 shall apply subject to the modification that the written down value, as defined in clause (6) of section 43, of the asset, as adjusted, shall be taken as the cost of acqui­sition of the asset. 16.4 These amendments will take effect retrospectively from 1st day of April, 1998 and will, accordingly, apply in relation to the assessment year 1998-99 and subsequent years.  ....
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....ny partner of the firm or the member of the association or body in respect of the same deposit. It is also provided that where a deduction is allowed in respect of any amount deposited in the special account or in the Site Restoration Account in one previous year, no deduction shall be allowed in respect of the same amount in any other previous year. 17.4 The amount standing to the credit of such special account or Site Restoration Account can be withdrawn only for the purposes specified in the respective schemes. If the amount released by the State Bank of India or the amount withdrawn from the Site Restoration Account during a previous year is not utilised in the same previous year for the purpose for which it is released, the amount not so utilised shall be deemed to be profits and gains of the business and , accordingly, chargeable to income-tax as the income of that previous year. 17.5 In case any amount standing to the credit of the assessee in the special account to in the Site Restoration Account is uti­lised by the assessee for the purposes of any expenditure in connection with such business in advance with the relevant schemes, such expenditure will not be allow....
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....s made in con­nection with the succession of the firm by a company fulfilling certain conditions. 17.9 These provisions are aimed to cater to the need of proper abandonment of oil wells after their economic life. 17.10 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 10] Finance (No. 2) Act, 1998 Omission of provision for weighted deduction 18.1 Sub-section (2AB) to section 35 was introduced by the Fi­nance Act, 1997. This sub-section allows weighted deduction of a sum equal to one and one-fourth times of the expenditure incurred on scientific research on in-house research and development facility as approved by the prescribed authority on fulfilment of certain conditions. Due to difficulties experienced....
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....Section 37 of the Income-tax Act is amended to provide that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and no deduction or allowance shall be made in respect of such ex­penditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on ac­count of protection money, extortion, hafta, bribes etc. as business expenditure. It is well decided that unlawful expendi­ture is not an allowable deduction in computation of income. 20.2 This amendment will take effect retrospectively from 1st April, 1962 and will, accordingly, apply in relation to the as­sessment year 1962-63 and subsequent years. [Section 15] Finance (No. 2) Act....
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.... 6,000 6,000 6,000 (c) Proceeds of transfer 5,000 7,000 15,000 6,000 (d) Amount allowable as deduction in A.Y. 1999-2000 (b-c) 1,000 NIL NIL NIL (e) Amount allowable as deduction in subsequent years NIL NIL NIL NIL (f) Excess of proceeds of transfer over expenditure remaining unallowed (c-b) NIL 1,000 9,000 NIL (g) Difference between the expenditure incurred and the expenditure remaining unallowed (a-b) 4,000 4,000 4,000 4,000 (h) Amount chargeable to income-tax as profits and gains in the assessment year 1999-2000 [lower of (f) & (g)] NIL 1,000 4,000 NIL 21.4 In a scheme of amalgamation whereby the amalgamating company sells or otherwise transfers the business to the amalgamated company (being an Indian company), the amended provisions shall not apply in the case of the amalgamating company and shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not transferred the business or interest in the business. 21.5 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation t....
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....1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 18] Finance (No. 2) Act, 1998 Certain expenses to be allowed only on payment 23.1 Under the existing provisions, the sums referred to in clauses (a) to (e) of section 43B are allowable as deduction in the previous year in which the sum is actually paid. The first proviso to section 43B provides that the provisions of this section shall not apply to any sum referred to in clauses (a), (c) or (d) if the sum is actually paid on or before the date on which the return of income is due to be furnished under sub-section (1) of section 139 for the previous year in which the liability to pay such sum was incurred. Thus, while the deduction in respect of any sum payable as interest on any loan or borrow­ing from any public financial institution or a State Financial Corporation or....
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.... thousand rupees or his total sales, turnover or gross receipts, as the case may be, in a business or profession are or is likely to exceed five hundred thousand rupees during such previous year. 24.2 The Act enhances the above limits of forty thousand rupees to one lakh twenty thousand rupees and of five hundred thousand rupees to ten lakhs rupees. Accordingly, under the amended provi­sions, the assessees carrying on business or profession are re­quired to keep and maintain the books of account and other docu­ments if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in the business or profession exceed or exceeds ten lakhs rupees during the relevant previous year. 24.3 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 20] &....
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....nbsp; Finance (No. 2) Act, 1998 Exemption from levy of capital gains tax and allowance of carry forward of losses and unabsorbed depreciation in certain cases of business re-organisation 27.1 Business reorganisations have definite tax implications under the existing provision of the Income-tax Act. Transfer of assets attracts levy of capital gains tax. Similarly, carry forward of losses and that of unabsorbed depreciation are not available to successor business entities. However, in cases of amalgamation, capital gains tax is not levied and losses and unabsorbed depreciation are allowed to be carried forward under certain conditions. The Expert Group, in the draft Income-tax Bill, has recognised the need to encour­age business reorganisation when they are in consonance with the whole objective of economic development and not merely devices to secure tax advantage. 27.2 The Act, following the recomm....
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....st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Sections 21, 22, 27 & 9] Finance (No. 2) Act, 1998 Extension of time for investing amount of capital gains under section 54EA & 54EB of Income-tax Act in cases of compulsory acquisition under any law. 28.1 Section 54H of Income-tax Act caters to the situation where the transfer of the long-term asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of transfer. In such cases the period available to the assessee for investing the long-term capital gains for the purpose of exemp­tion is reckoned from the date of receipt of compensation and not from the date of transfer. The Act has inserted references to section....
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....n under the head "Income from house property" is a loss to the assessee and such loss cannot be or is not wholly set off against income from any other head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or where he has no income under any other head, the whole loss shall be allowed to be carried forward and set off in the subsequent assessment years against the income from house property upto a maximum of 8 assessment years. 30.2 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 26] Finance (No. 2) Act, 1998 Rationalisation of benefits available to parents and guard­ians of handicapped dependent 31.1 Under the existing provisions of section 80DD of the Inc....
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.... access to world class facilities, sports equip­ment and scientific backup to sports persons is required. To facilitate availability of adequate funds for such objects for the promotion of sports and games in the country, an amendment to section 80G has been made to provide a 100% deduction for donations made to National Sports Fund to be set up by the Central Government. 32.3 The Central Government has also set up a National Culture Fund for the promotion of art and culture in the country with a view to mobilising funds for protecting, preserving and promoting the cultural heritage in the country. A similar deduction of 100% for donations made to the National Culture Fund shall now be allowed under the amended provisions of section 80G. 32.4 These amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. [Section 29] ....
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....ld Bank aided housing projects in India 34.1 A new section 80 HHBA has been inserted in the Income-tax Act with a view to providing that an Indian company or a non-corporate assessee resident in India shall be entitled to a deduction of 50% of the profits and gains derived from the busi­ness of execution of housing projects aided by the World Bank and undertaken by the assessee in pursuance of a contract floated on the basis of a global tender. To claim this deduction the asses­see shall have to transfer 50% of profits and gains from the business of housing project, to a Housing Project Reserve Ac­count. This amount shall have to be utilised during a period of five years for the purposes of business other than for distribu­tion by way of dividends or profits. If the money is utilised for any non-business purpose then the income of the year in which the deductions allowed would be re-computed after withdrawing the deduction so allowed. 34.2 The amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Secti....
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....grown exponentially in recent years. With a view to increasing India's market share in the international arena, the Explanation (b) below this section has been extended to include 'any custo­mised electronic data' within the meaning of "computer software". The benefits of deduction have also been extended to supporting software developers. With this in view, proviso to sub-section (1); and sub-sections (1A), (3A) and (4A) have been inserted by the Act so that the benefit of export can also be passed on to software developers by software exporting companies. 36.2 The said proviso provides that where an exporting company issues and certificate in the prescribed form that in respect of an amount of export turnover, deduction under sub-section (1) of section 80HHE is to be allowed to a supporting software develop­er, the amount of deduction available to the assessee shall be reduced by such amount which bears to the total profits of the assessee issuing the certificate, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the exporting company. 36.3 The new sub-section (3A) provides that where the bus....
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....; Finance (No. 2) Act, 1998 Tax holiday in respect of undertaking set up in industrially backward States and industrially backward districts extended up to 31-3-2000 37.1 Under the existing provisions of section 80-IA of the Income-tax Act, deduction is allowed in computing the taxable income in respect of profits derived from a new industrial undertaking, or a ship or the business of a hotel. 37.2 For encouraging industrialisation in industrially backward States, the Finance Act, 1993 had provided for a five-year tax holiday for industrial undertakings set up in industrially back­ward States specified in the Eighth Schedule, which start manufac­ture or production during the period beginning of the 1st day of April, 1993 and ending on 31st day of March, 1998. After the first five years, deduction of 30% of the profits of such under­taking in the case of companies (25% in the case of other asses­sees) was allowed for the subsequent five years. The undertakings which started manufacture or production after 31st March, 1998 in backward States ceased to be entitled to the two-tier benefit. Similarly, a five-y....
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....ance (No. 2) Act, 1998 Tax holiday in respect of companies engaged in scientific and industrial research and development activities. 39.1 In order to promote research and development activities, a five-year holiday was provided under section 80-IA with effect from the assessment year 1997-98 to approved companies engaged in scientific and industrial research and development activities. The incentive was made available to any company that had as its main objective, activities in the areas of scientific and indus­trial research and development and which had been accorded ap­proval by the prescribed authority. The prescribed authority for this purpose is the Secretary, Department of Scientific and Industrial Research. The tax holiday available to any company, which is accorded approval by the prescribed authority at any time before 31st March, 1998 has been extended by one year, i.e., up to 31st March, 1999. 39.2 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 34] ....
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....elation to the assessment year 1999-2000 and subsequent years. [Section 34] Finance (No. 2) Act, 1998 Tax holiday to undertakings engaged in developing and building housing projects 42.1 With a view to promoting investments in housing, a new sub-section (4F) has been inserted in section 80-IA of the Income-tax Act. Under this provision, an undertaking engaged in developing and building housing projects is eligible to claim deduction under section 80-IA, subject to the following:— (a) The project should be approved by a local authority; (b) The size of the plot of land is a minimum of 1 acre and the residential unit has a built-up area not exceeding 1000 sq. ft. &....
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....bsp; Finance (No. 2) Act, 1998 80JJA Deduction in respect of profits and gains from busi­ness of collecting and processing of bio-degradable waste 44.1 Increasing population and urbanization pose challenges for planners. Waste management has been one area of serious concern, which so far has been primarily the responsibility of local bodies. Waste is now being thought not as a useless resource but a re-cyclable and reusable one given the proper framework. The waste can be utilized for generating energy and useful resources by way of composting, vermi-compost and anaerobic digestion. The potential for power generation is also tremendous. 44.2 Accordingly, a new section 80JJA has been inserted with a view to providing that where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power, producing bio-gas, making pellets or bri­quettes for fuel or organic manure, a deduction of an amount equal to the whole of su....
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....p; (iv) In case of a new undertaking, the number of such workmen must be at least one hundred. The benefit of the aforesaid deduc­tion shall be available only in respect of wages paid to workmen over and above that number both in case of new as well as exist­ing undertakings. (v) The assessee should furnish along with the return of income the report of the accountant, as defined in the Explana­tion below sub-section (2) of section 288, giving such particu­lars as may be prescribed. 45.3 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 36] Finance (No. 2) Act, 1998 Increase in the limits of deductions allowed in r....
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....f such securities is given in section 115AD. The Act amends clause (a) of sub-section (1) so as to extend the tax concessions available on income of Foreign Institutional Investors on their investment in listed securities to unlisted securities also. 47.2 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 38] Finance (No. 2) Act, 1998 Addition of two more economic indicators for obligatory filing of returns 48.1 Under the existing provisions, it is obligatory for a person not furnishing return under sub-section (1) of section 139 but residing in a specified area and fulfilling any two of the four following conditions to file return of income : (i)&nb....
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....Vide Notification No. SO 712(E) dated 20-8-1998, it has been specified that travel to any foreign country shall not include travel to SAARC countries, namely, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka. [Section 40] Finance (No. 2) Act, 1998 Rationalisation of provision relating to application for allotment of Permanent Account Number 49.1 According to the existing provisions, every person who is carrying on any business or profession and whose total sales, turnover, or gross receipts are likely to exceed Rs. 50,000 in any previous year is required to apply for the allotment of Permanent Account Number. This provision was inserted by the Taxation Law (Amendment) Act, 1975 w.e.f. 1-4-1976 and has ceased to be a realistic eligibility criteria for applying for PAN. 49.2 The Act has amended clause (ii) of sub-s....
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....vide Notification S.O. 939(E) dated 29-10-1998. (c) a time deposit, exceeding fifty thousand rupees, with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (d) a deposit, exceeding fifty thousand rupees, in any account with Post Office Saving Bank; (e) a contract of a value exceeding ten lakh rupees for sale or purchase of securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (f) opening an account with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (g) making an application for installation of a telephone connection (including ....
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.... of accounting in certain cases 52.1 The issue relating to whether the value of the closing stock of the inputs, work-in-progress and finished goods must neces­sarily include the element for which MODVAT credit is available, has been the matter of considerable litigation over the years. 52.2 Consistent with the other provisions of the Act, with a view to put an end to this point of litigation and in order to ensure that the value of opening and closing stock reflect the correct value, a new section 145A is inserted. This section provides that the valuation of purchase, sale and inventory shall be made in accordance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. 52.3 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 43] &n....
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....; Finance (No. 2) Act, 1998 Adjustment of loss from house property for the purpose of determining the tax deductible from salary 54.1 Under the existing provisions of sub-section (2B) of section 192, the person responsible for making payment of salary can take into account income from other heads (not being a loss) and taxes deducted thereon for the purpose of calculating and deducting tax at source from salary income. This results in small refunds in a large number of salary cases mostly because the drawing and disbursing officer cannot allow adjustment of loss from house property against salary income. It is such refunds that become subject matter of a large number of grievances of tax payers. 54.2 Since it is not desirable to collect taxes which are certain to be refunded, the Act amends sub-section (2B) of section 192 so as to allow adjustments of loss from house property against the income from salary f....
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....nbsp; Finance (No. 2) Act, 1998 Abolition of the appellate level at Deputy Commissioner (Appeals) 56.1 Under the existing provisions of Income-tax Act, Deputy Commissioner (Appeals) are hearing appeals in very small cases. The Commissioner (Appeals) are also doing the identical functions. In the same case, appeal in one year may be pending before Deputy Commissioner (Appeals) and in the other year before the Commissioner (Appeals) depending upon the quantum of addi­tion. Presently, only a few posts of Deputy Commissioner (Ap­peals) are functioning in the country. 56.2 A new section i.e., section 246A has been inserted to pro­vide for filing of appeals before the Commissioner (Appeals) against all order where appeals earlier lay either with Deputy Commissioner (Appeals) or Commissioner (Appeals). It also pro­vides that every appeal which is pending before the Deputy Com­missioner (Appeals) would stand transferred to the Commissioner (Appeals) on the appointed date. Vide Notification SO 811(E) dated 14-9-1998, 1st day of October, 1998 has been notified as the appointed date for the purpose of the above section. 56.3 Similar amendments have ....
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.... eligible to become an Accountant Member. 58.2 In view of the above provisions, the members of these two services join Appellate Tribunal at a very late age. On the other hands a Chartered Accountant, an advocate or a person holding judicial office can become a member of Appellate Tribunal at a younger age as they are required to put in only 10 years of serv­ice. 58.3 To redress this imbalance, the Act has amended section 252 of the Income-tax Act so as to make a Grade-II Officer of Indian Legal Service and an Additional Commissioner of Income-tax with 3 years' experience in either case eligible to appointed as Judicial Member and Accountant Member respectively. [Section 51] Finance (No. 2) Act, 1998 Enhancement of fee payable for filing appeal before appellate Tribunal 59.1 Under the existing provisions, the appeal ....
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....urt where a substantial question of law is involved therein. The assessee or the Commissioner can request the Appellate Tribunal for reference of question of law to the High Court. If the Appellate Tribunal decides against such reference, High Court can be moved to direct the Appellate Tribunal to make such reference and state the case. This process consumes a lot of time before the decision on merits of the case is finalised. The limited scope of section 256(2) does not allow rendering of a final decision on the issue even where the relevant facts are available to give such a decision. Hon'ble Kerala High Court in the case of CIT v. Wandoor Jupitar Chits (P.) Ltd. 213 ITR 75 has pointed out such provisions as being archaic and have opined that authorities should take a fresh look on this matter. Similarly, after the High Court or Supreme Court have decided on the question of law, a copy of the judgment is sent to the Registrar of the Appellate Tribunal for passing such order as in necessary to dispose of the case. The above provision again contributes to the delay. 61.2 The Act has, therefore, inserted a new sub-heading, "CC-Appeals to High Court" and sections 260A, 260B in Cha....
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....stayed by an order or injunction of any court shall be exclud­ed. Further, the above time shall also not apply in cases of revisionary orders to be passed in consequence of or to give effect to any finding or direction in an order of the Appellate Tribunal, High Court or the Supreme Court. 62.3 Corresponding amendments have also been made in other direct tax enactments namely, Wealth-tax Act, Gift-tax Act, Interest-tax Act and the Expenditure-tax Act. 62.4 These amendments have taken effect from the 1st day of October, 1998. [Sections 60, 71, 76, 80 & 83] Finance (No. 2) Act, 1998 Provision of penalty for non-filing of returns of income 63.1 Under the existing provisions, no penalty is provided for failure to file return of income under sub-section (1) of section 139 [section 271F provides for penalty of Rs. 500 only....
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....the amount of tax deductible or collectible, as the case may be. 64.3 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 62] Finance (No. 2) Act, 1998 Increase in the limit for submission of statements by produc­ers of cinematograph films 65.1 Under the existing provisions of section 285B, producers of cinema-tographic films are obliged to furnish within 30 days from the date of completion of the film or within 30 days from the end of the financial year, whichever is earlier, statement containing particulars of all payments of over Rs. 5,000 in aggregate made by him or due from him to each person engaged by him. The Act en­hances the monetary limit from Rs. 5,000 to Rs. 25,000. 65.2 This amendment will take ....
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....inance (No. 2) Act, 1998 Wealth-tax Incentives allowed under the Wealth-tax Act 68.1 The existing provisions of section 2(ea) of the Wealth-tax Act, exempt from wealth-tax a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or director who is in whole time employ­ment, having a gross annual salary of less than Rs. 2 lakhs. In view of inflation and general rises in the salaries, section 2(ea) is amended so as to enhance the limit of gross annual salary to Rs. 5 lakhs. 68.2 The Act also amends the said section so as to provide for exemptions from wealth-tax in respect of any residential property that has been let out for a minimum period of 300 days in the previous year and also any property in the nature of commercial establishment or complexes. 68.3 Explanation (b) of section 2(ea) excludes from the meaning of urban land, any land held by the assessee as stock-in-trade for a period of five years from the date of its acquisition by him. The Act amends the Explanation so as to make land held by the assessee as a stock-in-trade for a period of ten years from the date of its acquisition by him, not ....
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.... effect from 1st October, 1998 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent years. [Section 81] Finance (No. 2) Act, 1998 Kar Vivad Samadhan Scheme, 1998 71.1 Kar Vivad Samadhan Scheme, 1998 (in short the "Scheme") seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31-3-1998, both in various direct tax enactments as well as indirect tax enactments by offering waiver of a part of the arrear taxes and interest and providing immunity against institution of prosecution and imposition of penalty. The asses­see on his part shall seek to withdraw appeals pending before various appellate authorities and Courts. The Scheme has come into force on the first day of September, 1998 and ends on 31st day of December, 1998. The salient features of the Scheme insofar ....
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....ct of tax arrears payable under the Ex­penditure-tax Act, the amount payable shall be 10% of the disput­ed chargeable expenditure where the tax arrear comprises expend­iture-tax or includes interest payable and penalty in addition to expenditure-tax. Where the arrear is only in respect of interest or penalty, only 50% of the arrear shall be payable. (viii) In respect of tax arrears payable under the Inter­est-tax Act, the amount payable shall be @ 2% of the disputed chargeable interest where tax arrear includes interest tax or interest payable and penalty levied in addition to interest tax. If the tax arrears includes only interest or penalty, the amount payable will be 50% of the tax arrear. 71.3 A person desiring to avail the Scheme is required to file a declaration in the prescribed form before the designated authori­ty notified for this purpose. The designated authority shall pass an order within sixty days of the declaration determining the amount payable in accordance with the provisions of the Scheme and grant a certificate indicating the particulars of tax arrears and the sum payabl....