TaxTMI 
TaxTMI 
Finance Act, 2008 -Explanatory Notes on provisions relating to Direct Taxes
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.... (29A), sub-clause (h). Exemption of income of Coir Board. 8.1-8.2 10A (1) proviso, 10B (1) proviso. Extension of time limit for availing deduction under section 10A and 10B. 9.1-9.4 35(1)(iia). Weighted deduction for sum paid to a company to be used by such company for scientific research. 10.1-10.2 35D (1)(ii). Extending the provision of section 35D relating to amortization of preliminary expenses to all undertakings. 11.1-11.2 40(a)(ia). Amendment to the provisions of section 40(a)(ia) of the Income-tax Act. 12.1-12.3 40A(3), 40A (3A). Amendment to the provisions of section 40A(3) of the Income-tax Act. 13.1-13.4 43(6), Explanation 6. Clarification regarding definition of 'written down value' under section 43(6). 14.1-14.3 10(43), 47(xvi). Amendment to give effect to reverse mortgage scheme. 15.1-15.6 49(2A). Capital gains on transfer in the context of foreign currency exchangeable bonds. 16.1-16.3 80C (xxiii) & (xxiv). Enlargement of the scope of eligible saving instruments under section 80C. 17.1-17.6 80D. ....
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....to the provisions of Dematerialisation of TDS and TCS certificates. 35.1-35.4 201(1), 191. Consequences of non-deduction of tax at source. 36.1-36.6 153(4), 251, 273AA, 278AB. Rationalisation of revised settlement scheme. 37.1-37.10 254 (2A), 3rd proviso. Clarification regarding stay of demand by Income-tax Appellate Tribunal. 38.1-38.7 268A. Consequence of non-filing of appeal in respect of cases where the tax effect is less than the prescribed monetary limit. 39.1-39.4 271(1B). Clarification regarding requirement of satisfaction for initiation of penalty under section 271(1)(c). 40.1-40.8 282A. Authentication of documents/notices/letters. 41.1-41.4 292BB, 143(2), proviso, clause (ii). Service of notice and the time limit for issuance of notice under section 143 (2) of the Income-tax Act. 42.1-42.9 292C (2). Presumption as to books of accounts, other documents, etc. 43.1-43.5 36, 40, 88E, and 98, 99 of Finance Act, 2004. Rationalization of provision of Securities Transaction Tax. 44.1-44.10 36 and 102 to 121, Chapter VII of Fi....
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.... A of the fourth Schedule to the Income-tax Act, 1961; (v) amended section 17, 17A, 18, 23A and 42D of the Wealth-tax Act, 1957; (vi) inserted new section 18BA, 35GA and 42 in the Wealth-tax Act, 1957; (vii) inserted sections 102 to 121 in Chapter-VII of the Act; (viii) amended section 98 and 99 of Finance (No.2) Act, 2004; (ix) amended section 95(3) of the Finance Act, 2005. 3. Rate structure 3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2008-09 3.1-1 In respect of income of all categories of taxpayers liable to tax for the assessment year 2008-09, the rates of income-tax have been specified in Part I of the First Schedule to the Act. These rates are the same as those laid down in Part III of the First Schedule to the Finance Act, 2007 for the purposes of computation of advance tax, deduction of tax at source from Salaries and charging of tax payable in certain cases during the financial year 2007-08. 3.1-2 The major features of the rates specifie....
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....0/-. Therefore, marginal relief to the extent of Rs. 11,600/-will be available in this case as the additional tax liability cannot be more than the additional income. The total tax liability will, therefore, be Rs. 2,70,000/-instead of Rs. 2,81,600/-. 3.1-5 In the case of artificial juridical person, surcharge shall be levied at the rate of ten per cent of the income-tax payable on all levels of income. 3.1-6 In respect of fringe benefits chargeable to tax under section 115WA of the Income Tax Act, in the case of every association of persons and body of individuals, surcharge shall be levied at the rate of ten per cent, where the fringe benefits exceed ten lakh rupees. In the case of artificial juridical person, surcharge shall be levied at the rate of ten per cent. irrespective of the amount of fringe benefits. 3.1-7 Education Cess-An additional surcharge called the "Education Cess on income-tax" shall continue to be levied at the rate of two per cent. on the amount of tax computed, inclusive of surcharge, if any, in all cases. For instance, if the income-tax computed is Rs. 1,00,000/-and the surcharge is Rs. 10,000/-, then the education cess of two per cent. is to be com....
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....f the First Schedule to the Act. No surcharge shall be levied. However, "Education Cess on Income-tax" and "Secondary and Higher Education Cess on income-tax" shall be levied at the rate of two per cent. and one per cent. respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess. 3.1-11 Companies -In the case of a company, the rate of income-tax has been specified in Paragraph E of Part I of the First Schedule to the Act. In case of a domestic company, the rate of income-tax is thirty per cent. of the total income. The tax computed shall be enhanced by a surcharge of ten per cent. only where such domestic company has total income exceeding one crore rupees. In the case of a company other than a domestic company, royalties received from Government or Indian concern under an approved agreement made after 31-3-1961, but before 1-4-1976 shall be taxed at fifty per cent. Similarly, in the case of fees for technical services received by such company from Government or Indian concern under an approved agreement made after 29-2-1964, but before 1-4-1976, shall be taxed at fifty per cent. On the balance of the total income of suc....
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.... 3.2-3 Change in rate of short term capital gain from securities: The special tax rate of 10% under section 111A and section 115AD has been increased to 15% from existing 10%. These special tax rates are applicable on short-term capital gain arising from the transfer of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax. 3.2-4 Surcharge -The tax deducted at source in each case shall be increased by a surcharge for purposes of the Union as follows: (i) in the case of every individual, Hindu undivided family, association of persons and body of individuals, at the rate of ten per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds ten lakh rupees; (ii) in the case of every artificial juridical person, at the rate of ten per cent. of such tax; 3.2-5 In the case of every firm and company, the tax deducted at source in each case shall be increased by a surcharge only where the income or the aggregate of such incomes paid or likely to be paid and subject to deduction exceeds one ....
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....ph A of Part III of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a co-operative society, firm, local authority and company). In the case of individuals, the basic exemption limit has been enhanced from Rs. 1,10,000/-to Rs. 1,50,000/-. The exemption limit for every woman resident in India and below the age of 65 years of age has been enhanced from Rs. 1,45,000/-to Rs. 1,80,000/-. Further, the exemption limit for every individual resident in India and of the age of 65 years or more at any time during the previous year has been raised from Rs. 1,95,000/-to Rs. 2,25,000/-. The rates of tax during the financial year 2008-09 in the case of persons mentioned above are as follows: Income chargeable to tax Rate of income-tax Individual (other than individual woman resident in India and senior citizen resident in India), HUF, association of persons, body of individuals and artificial juridical person Individual woman, resident in India and below the age of sixty-five years Individual senior citizen, resident in India, who is....
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....y and Higher Education Cess on income-tax" shall be levied at the rate of two per cent. and one per cent. respectively of the amount of tax computed. No marginal relief shall be available in respect of Education Cess. 3.3-8 Firms -In the case of every firm, the rate of income-tax of thirty per cent. has been specified in Paragraph C of Part III of the First Schedule to the Act. Surcharge at the rate of ten per cent. shall be levied only in cases where the firm has total income exceeding one crore rupees. However, marginal relief shall be allowed to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over one crore rupees is limited to the amount by which the income is more than one crore rupees. In respect of fringe benefits chargeable to tax under section 115WA of the Income Tax Act, surcharge shall be levied at the rate of ten per cent .of the amount of tax irrespective of the amount of fringe benefits. Additional surcharge called the "Education Cess on Income-tax" shall continue to be levied at the rate of two per cent. on the amount of tax computed, inclusive of surcharge, in all cases. In addition, such amount of tax and sur....
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....ge shall be levied at the rate of ten per cent. of the amount of tax, irrespective of the amount of fringe benefits. In the case of a company other than a domestic company, in respect of fringe benefits, surcharge shall be levied at the rate of two and one-half per cent. of the amount of tax, irrespective of the amount of fringe benefits 3.3-12 "Education Cess on income-tax" shall continue to be levied at the rate of two per cent on the amount of tax computed, inclusive of surcharge in the case of every company. Also, such amount of tax and surcharge shall be further increased by an additional surcharge called "Secondary and Higher Education Cess on income-tax" at the rate of one per cent. of the amount of tax, computed, inclusive of surcharge. 4. Widening the scope of "agricultural income" 4.1 "Agricultural income" is defined in sub-section (1A) of section 2 of the Act to mean, inter-alia, income derived from land which is situated in India and is used for agricultural purposes. Such agricultural income is exempt from tax under sub-section (1) of section 10 of the Income-tax Act, 1961. It has been held by judicial authorities that whether income from nursery operations....
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....ity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Scope of this amendment has further been explained by the CBDT vide its circular no.11/2008 dated 19Dec 2008. 5.3 Applicability: This amendment has been made applicable with effect from 1^st April, 2009 and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. 6. Exemption to a "Sikkimese" individual 6.1 Section 10 of Income-tax Act relates to incomes which do not form part of total income. As a measure to promote socio-economic development, a new clause (26AAA) in section 10 has been inserted to provide exemption from income-tax to the following income, which accrues or arises to a Sikkemese individual - (a) income from any source in the State of Sikkim; or (b) income by way of dividend or interest on securities 6.2 However this exemption will not be available to a Sikkimese woman who, on or after 1st April, 2008, marries a non-Sikkimese individual. The term 'Sikkimese' has been defined under the Explanation to the ....
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.... undertaking engaged in the manufacture or production of articles or things or computer software. (section 10B) 9.2 The deduction is available for a period of ten consecutive assessment years beginning with the initial assessment year in which the undertaking begins to manufacture or produce the article or things or computer software. However, no deduction was allowable, under these sections, to any undertaking beyond the assessment year 2009-10. 9.3 Section 10A and section 10B have now been amended to extend the sun-set date under these sections to assessment year 2010-11. Hence, no deduction will, therefore, be available under these sections beyond assessment year 2010-11. 9.4 Applicability: These amendments have been made applicable with effect from 1April, 2008 and shall accordingly apply for assessment year 2008-09 and subsequent assessment years. 10. Weighted deduction for sum paid to a company to be used by such company for scientific research 10.1 In order to encourage the outsourcing of scientific research, a new clause (iia) in sub-section (1) of section 35 of the Income-tax Act has been inserted to allow a weighted deduction of 125 ....
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....cribed under sub-section (1) of section 200 shall not be allowed as deduction. However, the sum is allowed as a deduction in the year of actual payment of the TDS 12.2 To mitigate any hardship caused by the above provisions of section 40 while maintaining TDS discipline, the Act has amended provisions of sub-clause (ia) of clause (a) of section 40. The amendment allows additional time (till due date of filing of return of income) for deposit of TDS pertaining to deductions made for the month of March so that disallowance under sub-clause (ia) of clause (a) of section 40 is not attracted in such cases. Thus where the last date for filing the return of income in case of a taxpayer (deductor) is 30September, he will get additional time of six months (April to September) for depositing the tax deducted at source on an expenditure incurred or payment made in the month of March so as to escape disallowance under sub-clause (ia) of clause (a) of section 40. 12.3 Applicability: This amendment has been made applicable with retrospective effect from 1April, 2005 and shall accordingly apply for assessment year 2005-06 and subsequent assessment years. 13 Amendment to the provisi....
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....s that depreciation shall be allowed at the prescribed percentage on the written down value (WDV) of any block of assets. Sub-clause (b) of clause (6) of section 43 provides that written down value in the case of assets acquired before the previous year means the actual cost to the assessee less all depreciation actually allowed to him under the Income-tax Act. 14.2 Some persons were exempt from tax and, therefore, not required to compute their income under the head "profits and gains of business or profession". Upon withdrawal of exemption, such persons became liable to income-tax and hence were required to compute their income for income-tax purposes. In this context, dispute has arisen regarding the basis for allowing depreciation under the Income tax Act in respect of assets acquired during the years when such persons enjoyed tax exemption. The Income Tax Appellate Tribunal in the case of Kandla Port Trust v. Assistant Commissioner Of Income-Tax, 104 ITD 01 (Rajkot) has held that in the case of such a previously exempt entity, since there was no liability to tax, there was no occasion to compute the income of such person under the provisions of the Income-tax Act. Hence, the....
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....b-section (47) of section 2 of the Income-tax Act provides an inclusive definition of 'transfer'. Further, 'transfer' within the meaning of the Transfer of Properties Act includes some types of mortgage. Therefore, a mortgage of property, in certain cases, is a transfer within the meaning of sub-section (47) of section 2 of the Income-tax Act. Consequently, any gain arising upon mortgage of a property may give rise to capital gains under section 45 of the Income-tax Act. However, in the context of a reverse mortgage, the intention is to secure a stream of cash flow against the mortgage of a residential house and not to alienate the property. Therefore a new clause (xvi) in section 47 of the Income-tax Act has been inserted to provide that any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government shall not be regarded as a transfer and therefore shall not attract capital gains tax. Accordingly, in pursuance of above, Reverse Mortgage scheme has been notified vide notification No.93/2008 {S.O No. 2310(E)} dated 30September, 2008. 15.4 The second issue is whether the loan, either in lump sum or in instalment, rec....
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....deduction of upto rupees one lakh to an individual or a Hindu undivided family (HUF) for,- (i) making investments in certain saving instruments; or (ii) incurring expenditure on tuition fee and repayment of housing loan. 17.2 With a view to encourage small savings, the scope of eligible saving instruments has been enlarged by inserting two new clauses in sub-section (2) of section 80C. The following investments made by the assessee, during the previous year, shall also be eligible for deduction under section 80C within the overall ceiling of rupees one lakh:- (i) five year time deposit in an account under Post Office Time Deposit Rules, 1981; and (ii) deposit in an account under the Senior Citizens Savings Scheme Rules, 2004. 17.3 Further, it has also been provided that where any amount is withdrawn by the assessee from such account before the expiry of a period of 5 years from the date of its deposit, the amount so withdrawn shall be deemed to be income of the assessee of the previous year in which the amount is withdrawn (sub-section (6A) of section 80C). The amount so withdrawn, accordingly, shall be chargeable to tax in the assessment year relevant to such pre....
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.... been allowed to an assessee, being an individual, on any payment made to effect or keep in force an insurance on the health of his parent or parents. The existing condition of 'dependent' with respect to parents has been dispensed with. This deduction is in addition to the existing deduction available to the individual assessee on medical insurance for himself, his spouse and dependent children. Further, if either of the individual assessee's parents, who has been medically insured, is a senior citizen, the deduction would be allowed up to twenty thousand rupees. 18.4 For example, an individual assessee pays (through any mode other than cash) during the previous year medical insurance premia, out of his taxable income, as under: (i) Rs 12,000/-to keep in force an insurance policy on his health and on the health of his wife and dependent children; (ii) Rs 17,000/-to keep in force an insurance policy on the health of his parents. 18.5 Under the new provisions he will be allowed a deduction of Rs 27,000/-(Rs. 12,000/-+ Rs. 15,000/-) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs 29,00....
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.... notified by the Central Government in this behalf on or before the 31st day of May, 2008; and (iii) it begins refining not later than the 31st day of March, 2012. 19.4 Vide notification no S.O. 1273(E) dated 30May, 2008, the Central Government has notified 8 undertakings for the purpose of this sub-section. 19.5 Applicability -This amendment has been made applicable with effect from the 1st day of April, 2008 and will accordingly apply from assessment year 2008-09 and and subsequent assessment years. 20. Five year tax holiday to hospitals located in certain areas 20.1 Sub-section (11B) of section 80-IB provides for a tax holiday for five consecutive assessment years, beginning from the initial assessment year, to an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area. The undertaking is required to fulfil certain conditions specified in the said sub-section. One of the conditions is that the hospital is constructed at any time during the period beginning on the 1st day of October, 2004 and ending on the 31st day of March, 2008. 20.2 With a view to encouraging inve....
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....d the districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad. 21.2 With a view to promoting tourism and to attract tourists to certain World Heritage Sites in India, the scope of tax benefits available in this section has been extended also to new two-star, three-star or four-star category hotels located in specified districts having a World Heritage Site. Such hotels are required to be constructed and start functioning at any time during the period beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2013. Specified districts having a World Heritage Site are the districts of Agra, Jalgaon, Aurangabad, Kancheepuram, Puri, Bharatpur, Chhatarpur, Thanjavur, Bellary, South 24 Parganas (excluding areas falling within the Kolkata Urban Agglomeration on the basis of the 2001 census), Chamoli, Raisen, Gaya, Bhopal, Panchmahal, Kamrup, Goalpara, Nagaon, North Goa, South Goa, Darjeeling and Nilgiri. Other conditions, already specified in this section, shall also be applicable to the new hotels. 21.3 Applicability -This amendment has been made applicable with effect from 1st April, 2009 and will accordingly apply in relation to assessment year 2009-10 ....
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....sessment years. 23. Relief in respect of tax on distributed profits of domestic companies 23.1 Provisions of sub-section (1) of section 115-O provide for levy of tax on distributed profits of a domestic company at the rate of fifteen per cent in addition to the income tax payable on its taxable profits. Where a parent company receives dividend from its subsidiary company, there is a cascading effect of the dividend distribution tax when the parent company also distributes dividend. Relief from this cascading effect of dividend distribution tax between a parent and its subsidiary company upto one level has now been provided for the purpose of which a new sub­section (1A) has been inserted in section 115. Relief in respect of dividend received by a domestic company is available subject to following conditions - (a) Such dividend is received from its subsidiary. (b) The subsidiary has paid tax under this section on such dividend. (c) The domestic company is not a subsidiary of any other company. 23.2 Relief is provided by allowing the parent company to reduce the amount of dividend received during the financial year from its subsidiary while calculating its liabi....
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....fty per cent. 24.4 Applicability -These amendments have been made applicable with effect from 1st April, 2009 and shall accordingly apply in relation to assessment year 2009­10 and subsequent assessment years. 25 Deemed payment of tax by the employee where FBT on securities allotted to him is recovered by the employer 25.1 The Central Board of Direct Taxes (CBDT) had issued circular number 9, dated 20th December, 2007, clarifying therein certain issues relating to levy of FBT on ESOPs. One of the clarifications was that if FBT on account of share allotted or transferred under ESOPs has been paid by the employer, but recovered from an employee, it shall be deemed that the employee has paid the FBT. Therefore, such an employee can claim credit for this deemed payment of FBT in a foreign country. 25.2 Representations were received from taxpayers suggesting that this clarification should be incorporated in the Income-tax Act so as to provide a firm basis to enable the employees to claim credit for tax so paid. Since this demand is consistent with the clarification issued by the CBDT earlier, and does not have any adverse impact on revenues, a new section 115WKB has been....
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....under any other law for the time being in force; or (iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force. 26.3 The said clause (a) of this Explanation has been amended so as to provide that the due date for filing of return of income for the above categories of assessees shall be 30th day of September of the assessment year. 26.4 Similarly, the due date for filing of return of fringe benefits has been advanced from 31st day of October of the assessment year to 30th day of September of the assessment year by amending clause (a) of the explanation to sub-section (1) of section 115WD for the following categories of assessees:- (i) a company; or (ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force. 26.5 There is no change in the due date of filing of returns in the case of all other categories of taxpayers. 26.6 Applicability: These amendments have been made applicable with effect from 1st April, 2008 and will accordingly apply in relation to the returns for assessment year 2008-09 and f....
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.... administration is concerned with the verification of the income. 28.2 In India, the scheme of summary assessment being in force since the 1st day of June, 1999 does not contain any provision allowing for prima facie adjustment. The scope of the present scheme is limited only to checking as to whether taxes have been correctly paid on the income returned. Under the existing provisions of sub-section (1) of section 143, there is no provision for correcting arithmetical mistakes or internal inconsistencies. This leads to avoidable revenue loss. With an objective to reduce such revenue loss, sub-section (1) of section 143 of the Income-tax Act has been amended to provide that the total income of an assessee shall be computed under sub-section (1) of 143 after making the following adjustments to the total income in the return:- (a) any arithmetical error in the return; or (b) an incorrect claim, if such incorrect claim is apparent from any information in the return. 28.3 Further the meaning of the term "an incorrect claim apparent from any information in the return" has been defined by inserting an explanation in the said section. This term shall mean such cl....
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....the department and the taxpayers. Some of the judicial interpretations on the subject have been found to have a bearing on the legality of such reopening. Two of such judicial interpretations are given below:- (i) One of the judicial interpretation on this issue is that if the order of the Assessing Officer has been interfered by the CIT (A) and further proceedings are pending before the ITAT, any notice under section 148 for the said assessment year is invalid. In the light of such interpretation, it may not be possible to issue notice under section 148 in any case which is pending before the ITAT/courts. Further, by the time the Tribunal or the court judgment is received, reopening of the case may be barred by limitation. Such a situation is not in conformity with legislative intent and some other judicial pronouncement. Infact, in one of the other judgement, it has been held that in a case where an assessment is made the subject of an appeal, only that part of assessing officer's order merges with the appellate authority's order in respect of which the appellate authority has exercised the appellate jurisdiction [CIT Vs. Sakseria Cotton Mills Ltd. 124 ITR 570 Bombay]. Hence, ....
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....roceeding under section 153A/153C 30.1 Under the Income-tax Act, whenever a search is conducted under section 132 or books of account or other documents or any assets are requisitioned under section 132A, provision of section 153A comes into operation. This section, inter-alia, provides for assessment or reassessment of total income in respect of each assessment year falling within a period of six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or books of account, etc are requisitioned. Time limit for completion of such assessment or reassessment is provided in section 153B. 30.2 There were a number of questions relating to revival of proceedings and time limits which remain ambiguous. With the view to providing clarity and reducing disputes, amendments have been carried out to provide that - (i) if any proceeding initiated under section 153A or any order of assessment or reassessment made under sub-section (1) of this section has been annulled in any appeal or other legal proceeding, the abated assessment or reassessment relating to any assessment year shall stand revived and if such order of annulment....
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....(1) of section 153B. 30.5 Let us assume that the proceeding under section 153A is annulled in an appeal or legal proceeding by an order dated 3rd August, 2007 which is received by the Commissioner on 29th August, 2007. In such a situation,- • the assessment with respect to any of the six assessment years (from assessment year 2002-03 to assessment year 2007-08), if already completed under first proviso to renumbered sub-section (1) of section 153A, shall automatically become annulled due to this order; • no order of assessment or reassessment with respect to any of the six assessment year (from assessment year 2002-03 to assessment year 2007­08) can be made under first proviso to renumbered sub-section (1) of section 153A as the proceeding under section 153A has been annulled; • the proceeding for assessment year 2005-06 which has been abated under second proviso to renumbered sub-section (1) of section 153A, shall revive under new sub-section (2); and • the order in respect of this assessment can be made at any time before 31st December, 2007 (normal time limit under section 153) or 31st August, 2008 [new time limit under sub-section (4) of section 153],....
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....nfrastructure development, the TDS on any interest payable to a resident on any security issued by a company has now been withdrawn, where such security is in dematerialised form and is listed on a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956). 32.2 Applicability: This amendment has been made applicable with effect from 1^st June, 2008. 33. Enlargement of scope of TDS under section 194C to cover association of persons and body of individuals 33.1 Sub-section (1) of section 194C of the Income-tax Act provides for deduction of income-tax at source from any sum credited or paid to a resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government, local authorities, statutory corporations, companies, co-operative societies, statutory authorities engaged in providing housing accommodation, registered societies, trusts, universities, firms and those individuals/HUFs who are required to get their accounts audited under section 44AB. A number of Special Purpose Vehicles (SPVs) are being set-up to execute larg....
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....been amended providing that any person responsible for paying any interest or any other sum chargeable to tax to a non-resident shall furnish the information relating to payment of such sum in such form and manner as may be prescribed by the Board. 34.3 Applicability: This amendment has been made applicable with effect from 1^st April, 2008. 35. Amendments to the provisions of Dematerialisation of TDS and TCS certificates 35.1 A scheme for dematerialisation of Tax Deducted at Source (TDS)/ Tax Collected at Source (TCS) certificates was introduced through the Finance Act, 2004, with effect from 01.04.2005 for any deduction or collection of tax at source made on or after 01.04.2005. The commencement of this scheme was postponed to 01.04.2006 by the Finance Act, 2005 and later to 01.04.2008 by the Finance Act, 2006. Since the national level information technology infrastructure of the Income-tax Department is not yet fully operational, the commencement of the scheme has been extended to 01.04.2010. 35.2 The system of allowing credit to the assessee for TDS/TCS needs a certain degree of flexibility considering the ongoing technological and business process changes. Providin....
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....licability: The amendment to substitute Explanation to section 191 has been made applicable with retrospective effect from 1June, 2003. 37. Rationalisation of revised Settlement Scheme 37.1 The Finance Act, 2007 carried out a comprehensive amendment to the scheme of settlement of cases. This scheme provides for abatement of proceedings before the Settlement Commission under various circumstances. In order to deal with the various issues that may arise in the event of abatement of proceedings before the Settlement Commission, an amendment has been carried out to empower the Commissioner of Income tax to grant immunity from penalty and prosecution in cases which abate. 37.2 The salient features of the scheme for granting immunity from penalty are as under:- • The application for the immunity must be made by the assessee {person whose case has been abated under section 245(HA)} to the Commissioner of Income-tax. • If penalty was levied before or during the pendency of settlement proceedings, then the assessee can approach the commissioner for immunity at any time. • If no penalty was levied till the time of abatement of proceedings before Settlement Commission,....
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.... The immunity granted may be withdrawn by the Commissioner, if he is satisfied that the assessee had, in the course of proceedings, after abatement, concealed any particulars from the Income-tax authority or had given false evidence. 37.4 Applicability: These amendments relating to power of the Commissioner to grant immunity from penalty and prosecution have been made applicable from 1st April, 2008. 37.5 Further, section 153 of the Income tax Act has been amended so as to allow a minimum time period of one year to the Income tax authority before whom the case was pending when the application was filed with the Settlement Commission. 37.6 Applicability: This amendment has been made applicable retrospectively with effect from 1st of June 2007. It shall be deemed that this revised time limit will apply to all cases where settlement proceedings have abated from 1st of June 2007 and thereafter. 37.7 Similar amendments have also been carried out in the Wealth-tax Act. 37.8 Further the Finance Act, 2007 has provided for abatement of cases from Settlement Commission if the Commission fails to pass the order of settlement before a specified date. The abatement has started f....
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....nt order, beyond the period of 365 days in aggregate. 38.6 To make this intention clear, section 254 of the Income-tax Act has been amended to provide that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days, even if the delay in disposing of the appeal is not attributable to the assessee. 38.7 Applicability: This amendment has been made applicable with effect from 1st October, 2008. 39. Consequence of non-filing of appeal in respect of cases where the tax effect is less than the prescribed monetary limit 39.1 There is a prescribed dispute resolution mechanism under the Income-tax Act. In this regard, the Central Board of Direct Taxes have issued instructions from time to time directing Departmental Officers to not file an appeal if the tax effect is less than the monetary limit prescribed by it. 39.2 The Hon'ble Supreme Court in M/s. Berger Paints India Ltd. Vs. CIT, Kolkata, (Civil appeal Nos. 1081 to 1083 of 2004) has held that if the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one ass....
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.... 1st April, 1999. 40. Clarification regarding satisfaction for initiation of penalty under subsection (1) of section 271 40.1 Sub-section (1) of section 271 of the Income-tax Act empowers the Assessing Officer to levy penalty for certain offences listed in that sub-section. It is a requirement that the Assessing Officer is required to be satisfied before such a penalty is levied. 40.2 In the context of levy of penalty under section 271 of the Income-tax Act, there has been an ongoing dispute between the Income-tax department and taxpayers on whether an assessing officer is required to record his satisfaction before initiating penalty proceedings. The Income-tax department has held the view that no separate satisfaction is required to be recorded before initiating penalty proceedings. In the case of Commissioner of Income-tax Vs. S.V. Angidi Chettiar (44 ITR 739; 1962), the Supreme Court has, while dealing with penalty under section 28 of the Indian Income-tax Act, 1922, held that "satisfaction before conclusion of proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction". The sam....
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.... revenue's contention on this issue in pending cases. However, this retrospective effect will not prejudice taxpayers' right to agitate the levy of penalty on merits. Further, while no separate satisfaction is required to be recorded before initiating penalty proceedings, it is still incumbent upon the assessing officer to record his satisfaction before levying the penalty. Accordingly, there is neither violation of the principle of natural justice nor any prejudice caused to the taxpayer as a result of the retrospective amendment. 40.7 Similar amendment has also been carried out in the Wealth-tax Act. 40.8 Applicability: These amendments have been made applicable with retrospective effect from 1st April, 1989. 41. Authentication of documents/notices/letters 41.1 The demand on the tax administration has been growing on account of increase in the volume of work. The widening and deepening of the tax base has resulted in substantial increase in the number of taxpayers. To cope with the sheer volume of work and render timely service to the taxpayer, the Department has been increasingly using information technology in its major processes and procedures. A case in point is t....
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.... notwithstanding the fact that the assessee has attended the assessment proceedings in response to the notice served on him. Instances have also come to notice where the orders of the assessing officer is being quashed on the consideration that there is no evidence of issue or service of notice, even though the assessee and his authorized representative have attended the hearing before the Assessing Officer during the assessment proceedings. Further, the design of the limitation period with reference to the end of the month leads to administrative inconvenience in as much as the last day of every month becomes a time barring date. 42.3 In order to address these issues and to reduce litigation, a new section 292BB in the Income-tax Act has been inserted and the provision of sub-section (2) of section 143 has been amended. 42.4 New Section 292BB provides that where an assessee has appeared in any proceeding or cooperated in any inquiry related to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act has been duly served upon him in time in accordance with the relevant provision of the Act. Further, such assessee shall be preclud....
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....sumption to - (i) books of account, other documents, etc., found in the possession or control of any person in the course of a survey operation; (This amendment has been made applicable with retrospective effect from 1st June, 2002.) (ii) Books of account, other documents or assets which have been delivered to the requisitioning officer in accordance with the provisions of section 132A. (This amendment has been made applicable with retrospective effect from 1st October, 1975.) 43.3 Applicability: As indicated against each amendment. 43.4 Similar amendment has also been carried out under section 42D of the Wealth-tax Act to extend this presumption to books of account, other documents or assets which have been delivered to the requisitioning officer in accordance with the provisions of section 37B of the Wealth-tax Act. 43.5 Applicability: This amendment has been made applicable with retrospective effect from 1st October, 1975. 44. Rationalization of provision of Securities Transaction Tax 44.1 Section 98 of Chapter VII of Finance (No.2) Act, 2004, provides for charge of securities transaction tax (STT). It was provided that in the case of sale of a derivative, w....
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....en made applicable with effect from 1st April, 2009 and accordingly applies in relation to assessment year 2009-10 and subsequent assessment years. 45. Commodities Transaction Tax 45.1 Chapter VII of the Finance Act, 2008 has introduced a new tax called Commodities Transaction Tax (CTT) to be levied on taxable commodities transactions entered in a recognized association. 45.2 'Taxable commodities transaction' has been defined to mean a transaction of purchase or sale in a recognized association of - (i) option in goods; or (ii) option in commodity derivative; or (iii) any other commodity derivative. 45.3 The tax is levied at the rate, given in the Table below, on taxable commodities transactions undertaken by the seller or the purchaser, as the case may be, as indicated hereunder:- S.No. Taxable commodities transaction Rate Payable by 1. Sale of an option in goods or an option in commodity derivative. 0.017 per cent on option premium. Seller 2. 3. Sale of an option in goods or an option in commodity derivative, where option is exercised. Sale of any other commodity derivative 0.125 per cent on the settlement price of the option.....
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....t from 1st April, 2009. 47. Extension of time limit set out in Rule 3 for complying with the condition laid down in Clause (ea) of rule 4 of Part A of the Fourth Schedule to the Income-tax Act 47.1 Rule 4 of Part A of the Fourth Schedule to the Income-tax Act provides for the conditions which are required to be satisfied by a provident fund for receiving or retaining recognition under the Income-tax Act. 47.2 Rule 3 of Part A of the Fourth Schedule provides that the Chief Commissioner or the Commissioner of Income-tax may accord recognition to any provident fund which satisfies the conditions prescribed in rule 4 and the rules made by the Board in this behalf. 47.3 The proviso to sub-rule (1) of the said rule 3, inter-alia, specifies that in a case where recognition has been accorded to any provident fund on or before 31st day of March, 2006, and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4 on or before 31st day of March, 2008, the recognition to such fund shall be withdrawn. One of the requirements of this clause (ea) of Rule 4 is that the establishment shall obtain exemption under section 17 of the Employees' Provident Funds and....