TaxTMI 
TaxTMI 
Finance Act, 2008 -Explanatory Notes on provisions relating to Direct Taxes
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....eighted 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. Additional deduction for health insurance premium paid for parents. 18.1-18.7 80IB(9), proviso. Sunset provision for deduction for refining of mineral oil under section 80-IB(9). 19.1-19.5 80IB(11C). Five year tax holiday to hospitals located in certain areas. 20.1-20.4 80ID (2)(iii). Five year tax holiday for hotels located in specified distric....
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....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 Finance Act, 2008. Commodities Transaction Tax. 45.1-45.7 95 (3) of Finance Act, 2005. Discontinuation of Banking Cash Transaction Tax. 46.1-46.4 4th Schedule, Part A, rule 3 (1), proviso. 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. 47.1-47.5 Wealth tax Act. 17(1), 3rd Proviso and Explanation to 17(1B). Amendments in respect of reassessment proceedings to clarify correct legislative intention. 29.1-29.5 17A(4), 2nd Proviso, 18BA, 23A(9A), 35GA. Rationalisation of revised settlement scheme. 37.1-37.10 18(1A). Clarification for requirement of satisfaction for initiation of penalty. 40.1-40.8....
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....ows: 3.1-3 Individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person. Paragraph A of Part I of the First Schedule specifies the rates of income-tax in the case of every individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person (other than a cooperative society, firm, local authority and company) as under: 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 of the age of sixty-five years or more Up to Rs. 1,10,000 Nil Nil Nil Rs. 1,10,001 -Rs. 1,45,000 10% 10% Nil Rs. 1,45,001 -Rs. 1,50,000 10% 10% Nil Rs. 1,50,001 -Rs. 1,95,000 20% 20% Nil Rs. 1,95,001 -Rs. 2,50,000 20% 20% 20% Exceeding Rs. 2,50,000 30% 30% 30% 3.1-4 Surcharge -In the case of every individual, Hindu undivided family, association of persons or body o....
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....ll also be increased by an additional surcharge called "Secondary and Higher Education Cess on income-tax" at the rate of one per cent. of such income-tax and surcharge. No marginal relief shall be available in respect of Education Cess. 3.1-8 Co-operative societies -In the case of every co-operative society, the rates of income-tax have been specified in Paragraph B of Part I of the First Schedule to the Act. The rates are as follows- Income chargeable to tax Rate Up to Rs. 10,000 10% Rs. 10,001 -Rs. 20,000 20% Exceeding Rs. 20,000 30% No surcharge shall be levied. "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. 3.1-9 Firms -In the case of every firm, the rate of income-tax of thirty per cent. has been specified in Paragraph C of Part I 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 tha....
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....only where such company has total income exceeding one crore rupees. However, marginal relief shall be allowed in the case of every company 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. Also, in the case of every company having total income chargeable to tax under section 115JB of the Income Tax Act and where such income exceeds one crore rupees, marginal relief shall be provided. In respect of fringe benefits, in the case of a domestic company, surcharge 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 "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 ....
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....of such income-tax. (ii) in the case of every company other than a domestic company, at the rate of two and one-half per cent. of such income-tax. 3.2-6 No surcharge shall be levied on the amount of income-tax deducted in the case of a co-operative society and local authority. 3.2-7 Education Cess -The additional surcharge, called the "Education Cess on income-tax" shall continue to be levied for the purposes of the Union at the rate of two per cent. of income-tax and surcharge, if any, in all cases. For instance, if such tax is Rs. 1,00,000/-and the surcharge is Rs. 10,000/-, then the education cess of two per cent. is to be computed on Rs. 1,10,000/-which works out to be Rs. 2,200/-. In addition, the amount of tax deducted 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. in all cases. Thus in the earlier illustration, where the amount of tax deducted is Rs. 1,00,000/-, the surcharge is Rs. 10,000/-, the Education Cess of two per cent. is Rs. 2,200/-, the said Secondary and Higher Education Cess will be computed on Rs. 1,10,000/-which works out to be Rs. 1,100/-. The ....
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....0% 10% Nil Rs. 2,25,001 -Rs. 3,00,000 10% 10% 10% Rs. 3,00,001 -Rs. 5,00,000 20% 20% 20% Exceeding Rs 5,00,000 30% 30% 30% 3.3-3 Surcharge-In the case of every individual, Hindu undivided family, association of persons or body of individuals, surcharge shall be levied at the rate of 10% of income-tax only where the total income exceeds ten lakh rupees. Marginal relief shall be provided to ensure that the additional amount of income-tax payable, including surcharge, on the excess of income over Rs. 10,00,000/-is limited to the amount by which the income is more than Rs. 10,00,000/-as illustrated in para 3.1-4. 3.3-4 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. 3.3-5 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 amou....
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....ge, in all cases. No marginal relief shall be available in respect of Education Cess. 3.3-9 Local authorities -In the case of every local authority, the rate of income-tax has been specified at thirty per cent. in Paragraph D of Part III of 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. 3.3-10 Companies -In the case of a company, the rate of income-tax has been specified in Paragraph E of Part III 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 c....
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.... the basic operations, then income from such nursery would be agricultural income not liable to tax under section 10. However, if the nursery is maintained independently without resorting to basic operations on land, then income from such nursery would not be agricultural income and would be liable to be included in the total income. 4.2 With a view to giving finality to the issue, an Explanation in section 2 of the Income-tax Act, has been inserted providing that any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income. Accordingly, irrespective of whether the basic operations have been carried out on land, such income will be treated as agricultural income, thus qualifying for exemption under sub-section (1) of section 10 of the Act. 4.3 Applicability: This amendment has been made applicable with effect from 1st April, 2009 and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. 5. Streamlining the definition of "charitable purpose" 5.1 Sub-section (15) of section 2 of the Act defines "charitable purpose" to include relief of the poor, education, medical relief, and the advancement of any o....
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....f income of Agricultural Produce Marketing Committee or Board 7.1 Clause (26AAB) has been inserted in section 10 to provide for tax exemption with respect to the income of an Agricultural Produce Marketing Committee or Board which has been constituted under any law for the purpose of regulating the marketing of agricultural produce. 7.2 Applicability: This amendment has been made applicable with effect from 1st April, 2009 and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. 8. Exemption of income of Coir Board 8.1 Sub-section (29A) of Section 10 provides that any income of certain specified commodity boards and export development authorities shall be exempt from income tax. As a measure to promote socio-economic development, a similar exemption has been provided in respect of any income accruing or arising to the Coir Board established under the Coir Industry Act, 1953 by inserting sub-clause (h) in clause (29A) of section 10. 8.2 Applicability: This amendment has been made applicable with retrospective effect from 1st April, 2002 and shall accordingly apply for assessment year 2002-03 and subsequent assessment years. 9. Extension of....
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....ontinue to be allowed to such companies. 10.2 Applicability: These amendments have been made applicable with effect from 1April, 2009 and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. 11. Extending the provision of section 35D relating to amortization of preliminary expenses to all undertakings 11.1 Section 35D provides for deduction of certain specified preliminary expenses. After the commencement of business, the deduction was being allowed to only an industrial undertaking or unit. In order to provide a level playing field to the services sector, the section has been amended to provide the benefit of amortization to all assessees after commencement of his business, in connection with the extension of his undertaking or in connection with his setting up a new unit. 11.2 Applicability: This amendment has been made applicable with effect from 1st April, 2009 and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. 12 Amendment to the provisions of sub-clause (ia) of clause (a) of section 40 of the Income-tax Act. 12.1 As per the provisions of sub-clause (ia) of clause (a) of section 40, any interest,....
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....ule 6DD of the Income-tax Rules, 1962. 13.2 Sub-section (3) of section 40A is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction. Thereby the risk of evasion is substantially mitigated. Field formations have reported that assessees tend to circumvent the provisions of sub-section (3) of section 40A by splitting a particular high value payment to one person into several cash payments, each below Rs. 20,000/-. This splitting is also resorted to for payments made in the course of a single day. The courts have approved such splitting by interpreting the words 'in a sum' used in the section to mean a single sum thereby applying the limit to each transaction. This interpretation is against the legislative intent and has, consequently, adversely affected the efficacy of this anti-abuse provision. 13.3 Therefore, the provisions of sub-section (3) of section 40A have been amended providing that the provisions of sub-section (3) of section 40A shall also be attracted where the aggregate of payments made to a single party otherwise than by an account payee cheque drawn on a bank or accou....
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....section 43 to clarify that in such a case - (a) the actual cost of the asset shall be adjusted by the amount attributable to the revaluation of such asset, if any, in the books of accounts of the assessee; (b) the total amount of depreciation on such asset provided in the books of account of the assessee in respect of such previous year or years preceding the previous year relevant to the assessment year under consideration shall be deemed to be the depreciation actually allowed under the Income-tax Act for the purposes of sub­section (6) of section 43; (c) the depreciation actually allowed as above shall be adjusted by the amount of depreciation attributable to such revaluation. 14.3 Applicability: This amendment has been made applicable with retrospective effect from 1April, 2003 and shall accordingly apply for assessment years 2003-04 and subsequent assessment years. 15 Amendment to give effect to reverse mortgage scheme 15.1 The Finance Minister, in paragraph 89 of his speech, while presenting the Union Budget, 2007-08, had announced that the National Housing Bank (NHB) will introduce a reverse mortgage scheme for senior citizens. In pursuance of this announcemen....
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....ns on transfer in the context of foreign currency exchangeable bonds 16.1 In 1992, the Government allowed established Indian companies to issue foreign currency convertible bonds (FCCB), with special tax regime for non-resident investors, so as to encourage the flow of foreign exchange to India. 16.2 The Government has now allowed established Indian companies to issue foreign currency exchangeable bond (FCEB). These are bonds expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency. The FCEBs differ from FCCBs in as much as the latter can only be converted into shares of the issuing company, whereas FCEBs can also be converted into or exchanged for the shares of a group company. With a view to providing a level playing field to FCEBs, amendment in the Income-tax Act has been carried out to provide that the conversion of FCEBs into shares or debentures of any company shall not be treated as a 'transfer' within the meaning of Income-tax Act. Further sub­section (2A) of section 49 of the Income-tax Act has been amended to provide that the cost of acquisition of the shares received upon conversion of the bond shall be the pric....
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....nt in the above mentioned two schemes by an assessee, the withdrawl of such amount ( principal only) will not attract the provision of sub­section (6) of section 80C and such amount ( principal only) will not be taxable. 17.6 Applicability -The amendment shall apply to investments, as above, made during the financial year 2007-08 and subsequent years and the deduction under this section would be available from assessment year 2008-09 and subsequent years. 18 Additional deduction for health insurance premium paid for parents 18.1 Pre-amended section 80D of the Income-tax Act provides for a deduction of up to fifteen thousand rupees to an assessee, being an individual or a Hindu undivided family. The deduction is allowed for making a payment to effect or keep in force an insurance on,- (a) the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the assessee where the assessee is an individual; (b) the health of any member of the family where the assessee is a Hindu undivided family. 18.2 In case the assessee or any other member of the family, on whose health the insurance has been effected or kept in force, is a se....
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....on for refining of mineral oil under subsection (9) of section 80-IB 19.1 Sub-section (9) of section 80-IB provides for a hundred percent deduction of profits and gains derived from commercial production or refining of mineral oil. For the purpose of this section, the term 'mineral oil' does not include petroleum and natural gas, unlike in other sections of the Income-tax Act. The deduction under this sub-section is available to an undertaking for a period of seven consecutive assessment years including the initial assessment year - (i) in which the commercial production under a production sharing contract has first started; or (ii) in which the refining of mineral oil has begun. 19.2 A new proviso in sub-section (9) of section 80-IB has been inserted so as to provide that no deduction under this sub-section shall be allowed to an undertaking engaged in refining of mineral oil if it begins refining on or after the 1st day of April, 2009. 19.3 However, it has also been provided that the deduction under this section will still be available to an undertaking which begins refining on or after the 1day of April, 2009, if the undertaking fulfils all of the following conditions,....
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....l be the area included in such urban agglomeration on the basis of the 2001 census. 20.3 Other existing conditions of sub-section (11B) of section 80-IB have also been incorporated in the new sub-section. 20.4 Applicability -This amendment has been made applicable with effect from 1st April, 2009 and will accordingly apply in relation to assessment year 2009-10 and subsequent assessment years. 21. Five year tax holiday for hotels located in specified districts having a World Heritage Site. 21.1 Section 80-ID of the Income-tax Act provides for a five year tax holiday to new hotels of two, three and four star categories and convention centres. It is a requirement that such hotel must be constructed and has started or starts functioning at any time during the period beginning on the 1st day of April,2007 and ending on the 31st day of March, 2010. Further, such convention centre must be constructed at any time during the above specified period. The tax holiday is available to profits derived from the business of hotels or convention centres for five consecutive assessment years beginning from the initial assessment year. For availing the above benefit, the hotel or convention c....
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.... specifically provided for add back of some such "below the line" items like deferred tax, dividend distribution tax, etc. as they were thought to be included in the term "income-tax". However, there has been some ambiguity regarding add back of these items, if debited to profit and loss account. 22.2 With a view to clarifying the intention, a new clause has been inserted after clause (g) of the Explanation 1, as so numbered, so as to provide that the book profit shall be increased by the amount of deferred tax and the provision thereof, if debited to profit and loss account. 22.3 Further, it has also been clarified that the amount of income tax shall include,- (i) tax on distributed profits under section 115-O or distributed income under section 115R; (ii) any interest charged under this Act; (iii) surcharge, if any, as levied by the provisions of the Central Acts from time to time; (iv) Education Cess on income-tax, if any, as levied by the Central Acts from time to time; and (v) Secondary and Higher Education Cess on income-tax, if any, as levied by the Central Acts from time to time. 22.4 Applicability -These amendments have been made applicable retrospectively w....
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....diture on or payment through pre-paid electronic meal card shall also be excluded from the hospitality expenditure for calculation of the value of fringe benefit. Such electronic meal card should not be transferable, should be usable only at eating joints or outlets and should fulfil such other conditions, as may be prescribed. These conditions have subsequently been provided vide insertion of new Rule 40E in the Income-tax Rules, 1962. (ii) Explanation to clause (E) has been amended to provide that any expenditure incurred or payment made, to - • provide crèche facility for the children of the employee; or • sponsor a sportsman, being an employee; or • organize sports events for employees, shall not be considered as expenditure for employees' welfare for the purpose of calculation of the value of fringe benefits. (iii) Clause (K) has been omitted. Hence, any expenditure on or payment made for maintenance of any accommodation in the nature of guest house shall not be included for valuation of fringe benefits. 24.3 Further, clause (c) and clause (d) of sub-section (1) of section 115WC have been amended so as to provide that the value of fringe benefits on account of....
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....of Rs 1000/-will be taken as the payment against tax liability on perquisite value of ESOPs allotted to him, if it were to be taxed in his hand. However, if the tax on the perquisite value of ESOPs, if it were to be taxed in his hand, is less than Rs 1000 (say 900); then the employee will neither be entitled for a refund of Rs 100; nor this amount will be allowed to be credited against tax liability on other income or against any other tax liability. 25.4 Applicability -This amendment has been made applicable with effect from 1st April, 2008 and shall accordingly apply in relation to assessment year 2008-09 and subsequent assessment years. 26 Advancement of due date from 31st October to 30th September in respect of certain categories of assessees. 26.1 Section 139 provides for filing of return of income by certain categories of assessees. Due dates, for filing such return of income in respect of different categories of assesses, have been provided in Explanation 2 to sub-section (1) of this section. 26.2 Under clause (a), the due date has been prescribed as 31st day of October of the assessment year for the following categories of assessees:- (i) a company; (ii) a person....
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....Officer to extend this period of furnishing of audit report suo motu, the said proviso has been amended. Hence, while the Assessing Officer shall continue to have power to grant extension on an application made in this behalf by the assessee and when there are good and sufficient reasons for such extension, he can also grant such extension on his own. 27.4 Applicability: This amendment has been made applicable with effect from 1st April, 2008. Hence, from this date and onwards, the Assessing Officer shall also have power to extend the period of furnishing of audit report suo motu. 28. Correction of arithmetical mistakes and adjustment of incorrect claim under sub-section (1) of section 143 through Centralised Processing of Returns 28.1 Generally, tax administrations across countries adopt a two-stage procedure of assessment as part of risk management strategy. In the first stage, all tax returns are processed to correct arithmetical mistakes, internal inconsistency, tax calculation and verification of tax payment. At this stage, no verification of the income is undertaken. In the second stage, a certain percentage of the tax returns are selected for scrutiny/audit on the basi....
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....ral Government may issue a notification in the Official Gazette, directing that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. However, such direction shall not be issued after 31st March 2009. (d) every notification shall be laid before each House of Parliament as soon as such notification is issued. Along with the notification, the scheme referred above is also required to be laid before each House of Parliament. 28.5 Similar amendment has also been carried out in section 115WE of the Income-tax Act, relating to fringe benefits. 28.6 Applicability: These amendments have been made applicable with effect from 1st April, 2008. 29. Amendments in respect of reassessment proceedings to clarify correct legislative intention 29.1 The Income-tax Act empowers assessing officer to reopen a case under section 148 if he has reason to believe that any income has escaped assessment. Adequate safeguards have been provided so that such power of reopening is not arbitrarily used by the assessing officers. The issue of valid reopening of assessme....
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....ns recorded by the assessing officer. There is no further requirement for him to issue the notice himself. 29.2 Hence, in order to correctly reflect the legislative intention, the following amendments have been carried out:- (i) Section 148 of the Income-tax Act has been amended to provide that the assessing officer may assess or reassess an income which is chargeable to tax and has escaped assessment other than those income involving matters which are the subject matter of any appeal, reference or revision. (ii) Section 151 of the Income-tax Act has been amended to provide that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the assessing officer about fitness of a case for the issue of notice under section 148, need not issue the notice himself. 29.3 Similar amendments have also been carried out in the Wealth-tax Act. 29.4 Applicability: The amendment relating to section 148 has been made applicable with effect from 1st April, 2008. 29.5 The amendment relating to section 151 has been made applicable with retrospective effect from 1st October, 1998. 30. Provision for assessment in the c....
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....roceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Accordingly, the provisions of newly inserted subsection (2) of section 153A shall also apply in case of annulment of assessment order or proceeding u/s 153C of Income tax Act. 30.4 To illustrate, suppose, in the case of an assessee, a search proceeding under section 132 is initiated on 10th April, 2007. The last of authorization related to this search is also issued during the financial year 2007-08. As on the date of the search, assessment for assessment year 2005-06 was pending. In the given situation,- • in accordance with the provision of second proviso to renumbered sub­section (1) of section 153A, the assessment for assessment year 2005-06 shall abate; • assessment or reassessment with respect to each of the six assessment year, i.e., from assessment year 2002-03 to assessment year 2007-08 shall be required to be made under first proviso to renumbered sub-section (1) of section 153A; and • the time limit for completion of these assessments shall be 31st December, 2009 under clause (a) o....
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....roceeding for assessment year 2005-06 which had got revived under new sub-section (2) of section 153A will again get abated due to the provision of its proviso. If assessment order has already been made with respect to this assessment proceeding, that assessment order will get annulled automatically. 30.7 Applicability: These amendments have been made applicable with retrospective effect from 1st June, 2003. 31. Intimation under subsection (1) of section 143 deemed to be a notice of demand 31.1 Consequent to amendment in subsection (1) of section 143 with effect from 1st April, 2008, consequential amendment has been made in section 156 so as to provide that intimation under subsection (1) of section 143 shall be deemed to be a notice of demand for the purpose section 156. 31.2 Applicability: This amendment has been made applicable with effect from 1st April, 2008. 32. Removal of TDS on Corporate Bonds 32.1 Section 193 of the Income-tax Act provides for deduction of tax at source (TDS) on any income by way of interest on securities payable to a resident. In order to facilitate development of the corporate bond market for improving the availability of finances for infrast....
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....95 34.1 Sub-section (1) of section 195 requires any person responsible for paying any interest or any other sum chargeable to tax (except dividends and income under the head "salaries") to a non-resident or to a foreign company, to deduct tax at source at the rates in force. Currently, the person making the remittance is required to furnish an undertaking (in duplicate) addressed to the Assessing Officer accompanied by a certificate from an Accountant in a specified format. This undertaking and certificate is submitted to the Reserve Bank of India or its authorized dealers who in turn are required to forward a copy to the Assessing Officer. The purpose of the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it may not be possible to recover the tax at a later stage from the non-residents. There has been substantial increase in foreign remittances, making the manual handling and tracking of certificates difficult. 34.2 To monitor and track transactions in a timely manner, it is proposed to introduce e-filing of the information in the certificate and undertaking and accordingly section 195 of the Income-tax Act has been amended provi....
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....n of tax at source on dividends]. 36.2 Sub-section (1) of section 200 provides that any person deducting any tax at source on payments other than salary shall pay the sum so deducted to the Central Government or as the Board directs within the prescribed time. A view has been expressed that the provisions of sub-section (1) of section 201 do not cover failure to deduct tax at source. Such an interpretation is contrary to the intent of the legislature. 36.3 In view of the above, the sub-section (1) of section 201 has been amended to clarify that where a person, including the principal officer of a company who is required to deduct any sum in accordance with the provisions of Income-tax Act does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under the Income-tax Act, he shall be deemed to be an assessee in default under section 201. 36.4 Applicability: The amendment to substitute sub-section (1) of section 201 has been made applicable with retrospective effect from 1st June, 2002. 36.5 A similar amendment has also been carried out in Explanation to section 191. 36.6 Applicability: The amendment to substit....
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....gs were instituted before or during the pendency of settlement proceedings, then the assessee can approach the commissioner for immunity any time. However if the assessee has received any notice etc. from the Income tax authority for institution of prosecution, then he must apply to the commissioner for immunity, before actual institution of prosecution. • Immunity can be granted by the Commissioner on his satisfaction. • The satisfaction is required to be that the assessee has cooperated in the proceedings after abatement and has made a full and true disclosure of his income and the manner in which such income has been derived. • Where application for settlement under section 245C had been made before the 1st day of June, 2007, the Commissioner can also grant immunity from prosecution for any offence under this Act or under the Indian Penal Code or under any other Central Act. • Immunity can be subject to such conditions as the Commissioner may think to impose. • The immunity granted shall stand withdrawn, if such assessee fails to comply with any condition subject to which the immunity was granted. • The immunity granted may be withdrawn by the Commissione....
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....o to this sub-section provides that the ITAT may, on merit, pass an order of stay in any proceedings relating to an appeal. However, such period of stay cannot exceed 180 days from the date of such order and the ITAT shall dispose off the appeal within this period of stay. 38.3 The second proviso to this sub-section provides that where the appeal has not been disposed off within this period and the delay in disposing the appeal is not attributable to the assessee, the ITAT can further extend the period of stay originally allowed. However, the aggregate of period originally allowed and the period so extended should not exceed 365 days. The ITAT is required to dispose off the appeal within this extended period. 38.4 The third proviso to this sub-section provides that if such appeal is not decided within the period allowed originally or the period or periods so extended or allowed, the order of stay shall stand vacated after the expiry of such period or periods. 38.5 The intention behind these provisions has been very clear that the ITAT cannot grant stay either under the original order or under any subsequent order, beyond the period of 365 days in aggregate. 38.6 To make thi....
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....ther assessment year; or (b) any other assessee for the same or any other assessment year. • Where no appeal or application for reference has been filed by an income tax authority pursuant to the above mentioned orders/instructions/directions of the Board, it shall not be lawful for an assessee to contend that the income tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case. • The Appellate Tribunal or Court shall have regard to the above mentioned orders/ instructions/directions of the Board and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case. • Every order/instruction/direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) of this new section and all the provisions of this section shall apply to such order/instruction/direction. 39.4 Applicability: This amendment has been made applicable with retrospective effect from 1st April, 1999. 40. Clarification regarding satisfaction for initiation of penalty u....
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....decision, we are unable to agree…. We are, therefore, of the opinion that although the Assessing Officer must have satisfaction as required under section 273 of the Act, it is not necessary for him to record that satisfaction in writing before initiating penalty proceedings under section 273 of the Act.". 40.5 In view of conflicting judicial opinion on this issue, it was necessary to make legislative intervention and settle the matter. Therefore, a new sub-section (1B) in section 271 of the Income-tax Act has been inserted. This sub-section unambiguously provide that where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment, and such order contains a direction for initiating of penalty proceedings under sub-section (1) of section 271, such an order of assessment or reassessment shall be deemed to constitute satisfaction of the assessing officer for initiating penalty proceedings under sub-section (1) of that section. 40.6 The proposed amendment has been given retrospective effect in order to protect the revenue's contention on this issue in pending cases. However, this retrospective effect will not ....
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....come tax authority authorized by the Board for this purpose. 41.4 Applicability: This amendment has been made applicable with effect from the 1st June, 2008. 42. Service of notice and the time limit for issuance of notice under subsection (2) of section 143 of the Income-tax Act 42.1 Sub-section (2) of section 143 of the Income-tax Act provides that the notice under this sub-section shall be served on the assessee within a period of twelve months from the end of the month in which the return is furnished. Further, the service of such notice must be affected in a manner laid down in sections 282, 283 and 284 of the Income-tax Act, read with General Clauses Act. 42.2 Instances have come to the notice of the department, where notices under sub­section (2) of section 143, though issued by registered post within twelve months from the end of the month in which the return was furnished, have been held 'invalid' on the ground that the notice was actually received by the assessee after the limitation date and there was no 'service' as postulated under the section. This is notwithstanding the fact that the assessee has attended the assessment proceedings in response to the notic....
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....e "B" files his tax return on 15April 2007 and assessee "C" files his tax return on 16 October 2007. As on 1April, 2008 notice under the pre-amended provision of sub­section (2) of section 143 could not have been issued in case of "A" and could have been issued in cases of "B" and "C". Hence, the new provision shall apply for returns filed by "B" and "C" but not for return filed by "A". In cases of returns filed by "B" and "C", the notice under sub-section (2) of section 143 can be served on the assessee on or before 31September 2008. Any notice served on assessee in these two cases, after this date, will not be valid. 43. Presumption as to books of accounts, other documents, etc. 43.1 Section 292C of the Income-tax Act provides for a rebuttable presumption with respect to books of account, other documents, money, bullion, jewellery or other valuable article or thing found in the possession or control of any person in the course of a search under section 132. 43.2 Section 292C of the Income-tax Act has been amended so as to extend this presumption to - (i) books of account, other documents, etc., found in the possession or control of any person in the course of a survey....
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....ning on the 1st day of April, 2009. 44.6 Applicability: This amendment has been made applicable with effect from 1st April, 2008. 44.7 Further consequential amendment has been made in section 40 by omitting sub-clause (ib) of clause (a), which provides that any sum paid on account of STT under chapter VII of Finance (No. 2) Act, 2004 shall not be allowed as deduction. 44.8 Applicability: This amendment has been made applicable with effect from 1st April, 2009 and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. 44.9 Further, amendment has been made to provide that any amount of securities transaction tax paid by the assessee during the year in respect of taxable securities transactions entered into in the course of business shall be allowed as deduction under section 36 of the Income-tax Act subject to the condition that such income from taxable securities transactions is included under the head 'profits and gains of business or profession'. 44.10 Applicability: This amendment has been made applicable with effect from 1st April, 2009 and accordingly applies in relation to assessment year 2009-10 and subsequent assessment years. 45. Co....
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....he Finance Act, 2005. It provides for a levy at the rate of 0.1 per cent (10 basis points) on the taxable banking transaction. The 'taxable banking transaction' has been defined to mean a transaction being,- (i) withdrawal of cash (by whatever mode) exceeding specified limit on any single day from an account (other than a saving bank account) maintained with any scheduled bank; or (ii) receipt of cash exceeding a specified limit from any scheduled bank on any single day on encashment of one or more term deposits, whether on maturity or otherwise. 46.2 The specified limit is Rs. 50,000/-in the case of an individual and HUF and Rs. 1,00,000/-for other person. 46.3 A sunset clause has now been introduced by inserting a new sub-section (3) in section 95 of the Finance Act, 2005. The proposed new sub-section provides that no BCTT shall be charged in respect of any taxable banking transaction after the 31day of March, 2009. 46.4 Applicability: This amendment has been made applicable with effect 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-ta....