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    TDS on rent reduced for individuals and HUFs, lowering withholding obligations for specified high-value rent payments.
    Section 194-IB presently obliges individuals and Hindu undivided families (except those excluded by the second proviso to section 194-I) paying rent above the monthly threshold to deduct tax at source; the Finance Bill amends the provision to reduce the TDS rate from five percent to two percent, with the amendment operative from 1 October 2024.
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    Section 194-O obliges an e-commerce operator to deduct tax at source on the gross amount of sales or services when that amount is credited to an e-commerce participant's account or paid, whichever is earlier. The Finance Bill proposes reducing the operator's TDS rate to achieve parity with lower rates applicable to comparable offline provisions, with an effective date specified in the Bill.
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    Tax credit for collected or deducted tax: salaried employees may use such credits to reduce salary TDS, easing compliance.
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    Interest on TCS increased to align with TDS parity, raising monthly simple interest for late remittance to government account.
    The Bill amends section 206C(7) to increase the simple interest rate for failure to remit tax collected at source from one percent to one and one-half percent per month or part thereof, calculated from the date of collection until actual payment to the Government; the amendment is prospective and effective from 1 April 2025.
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    Remuneration limit for working partners raised, permitting higher deductible partner compensation starting in the next assessment year.
    The Finance Bill raises the allowable deduction threshold for remuneration to working partners under section 40(b)(v), preserving the two-tier structure that gives a more favourable limit on the initial portion of book-profit and a lower ceiling on the balance. The amendment takes effect from 1 April 2025 and applies to assessment year 2025-26 and subsequent years, with deductions permitted only where remuneration is authorised by and accords with the partnership deed.
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    TCS credit for minor's income: parents may claim tax collected where the minor's income is clubbed with the parent.
    Proposal empowers the Board to notify rules permitting allocation of tax collected at source to persons other than the collectee, addressing cases where tax is collected in a minor's name. Credit of a minor's TCS is allowed only when the minor's income is included in the parent's total income under the income clubbing rule, thereby conditioning credit on that inclusion and providing safeguards against misuse.
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    Taxation of buy-back proceeds treated as deemed dividend, with capital loss carry-forward to offset future gains.
    Sums paid by a domestic company for purchase of its own shares are proposed to be treated as deemed dividend taxable in the hands of recipient shareholders at applicable rates with no expense deductions; concurrently, the extinguished shares will generate a capital loss (consideration deemed nil less cost of acquisition) which may be carried forward and set off against future capital gains on remaining or subsequently sold shares, preserving the shareholder's original cost of acquisition for later capital gains computation.
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    Securities Transaction Tax increase expands levy on options and futures, broadening the taxable derivative market from the Bill's commencement.
    The Finance (No.2) Act, 2004 is amended to increase Securities Transaction Tax rates: the levy on sale of an option in securities is increased to a higher rate of the option premium and the levy on sale of a futures in securities is increased to a higher rate of the traded futures price. Recognised stock exchanges, specified funds, insurers and lead merchant bankers remain responsible for collecting STT and remitting it to the Central Government within the prescribed monthly timeline. The amendment responds to the growth of derivative trading and is set to commence on the Bill's stated future effective date.
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    Income from house property: rental receipts must be reported under that head, not as business income, tightening tax base.
    Amendment clarifies that income from letting out a residential house or part thereof shall be chargeable under Income from House Property and not under Profits and Gains of Business or Profession, to prevent misclassification of rental receipts and tighten the tax base.
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    Gift transfers of capital assets now exempt only when made by individuals or Hindu undivided families, narrowing the prior exclusion.
    The amendment restricts the exclusion from capital gains chargeability for transfers by gift, will or irrevocable trust so that it applies only where the transferor is an individual or a Hindu undivided family, thereby preventing use of gift transfers by companies to avoid capital gains tax and aligning the non-recognition rule with fair market value anti-avoidance provisions; the substitution applies prospectively to the announced assessment year and subsequent years.
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    TDS on partner payments introduced: firms must deduct on salary, remuneration, interest and commissions paid to partners.
    A new provision imposes TDS on partnership firms for payments to partners - salary, remuneration, commission, bonus and interest - including amounts credited to capital accounts, where aggregate payments to a partner in a financial year exceed a specified threshold; the applicable rate is ten percent and the provision takes effect from the commencement of the stated financial year.
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    Tax collection at source on luxury goods expanded to cover notified high-value goods, enhancing tracking and widening the tax base.
    Amendment expands the Tax Collection at Source provision that applies to high-value motor vehicle sales to include other notified high-value luxury goods; sellers must collect TCS from buyers on notified goods exceeding the prescribed value threshold at the rate specified by law, to enhance tracking of luxury expenditure and to widen and deepen the tax base, effective from 1 January 2025.
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    TDS on immovable property transfers: aggregate consideration across parties triggers deduction, curbing avoidance by splitting payments.
    Amendment clarifies that for deduction under section 194-IA the consideration, and thus the threshold exemption and deduction obligation, is the aggregate amount paid or payable where more than one transferor or transferee is involved, countering treatment of individual buyer payments in isolation and addressing related tax avoidance.
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    Tax deduction at source on interest payments for floating rate savings bonds now applies, expanding the tax base and anti-avoidance.
    Amendment to Section 193 mandates deduction of tax at source at the time of payment of interest to residents where interest exceeds the prescribed threshold, specifically covering Floating Rate Savings (Taxable) Bonds (FRSB) 2020 and any Central or State Government security as may be specified by the Central Government; the amendment is effective from 1 October 2024.
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    Non admissible business expenses: added back to life insurance profits, tightening deductions from assessment year 2025-26.
    Amendment to Rule 2 of the First Schedule mandates that any expenditure not admissible under section 37 shall be included (added back) to the profits and gains of life insurance business, supplementing the actuarial surplus based computation and preventing misuse of deductions. The change takes effect from 1 April 2025 and applies from assessment year 2025 26.
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    Inclusion of foreign tax withheld amounts as deemed income to align income computation with foreign tax credit claims.
    Proposed amendment deems amounts deducted under Chapter XVII-B and income tax paid outside India by way of deduction, where credit is allowed against tax payable under the Act, to be income received for computing an assessee's total income, preventing under reporting and double benefit from foreign tax credits.
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    Exclusion of professional fees from contractor TDS rules clarifies which payments require withholding under professional services provisions.
    The amendment expressly excludes sums covered by section 194J from the definition of "work" in the Explanation to section 194C, removing overlap where payments for professional or technical services could otherwise be taxed as contractor payments; the change is framed as an anti avoidance clarification and takes effect from 1st October 2024.
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    Deductibility of settlement payments excluded, preventing business expense claims for amounts paid to settle contraventions under notified laws.
    The amendment clarifies that expenditure incurred to settle proceedings relating to a contravention under any law, as notified by the Central Government, falls within the definition of expenditure "for any purpose which is an offence or which is prohibited by law" and therefore shall not be allowable as a deduction for business or profession.

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      Unraveling the Principles of Delay Condonation: A Comprehensive Analysis by the Supreme Court

      8 August, 2024

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      Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

      Reported as:

      2024 (5) TMI 1319 - Supreme Court

      Introduction

      This article provides an in-depth analysis of a significant judgment delivered by the Supreme Court of India concerning the condonation of delay in filing appeals. The judgment delves into the applicability of the Limitation Act provisions, the discretionary power of courts in condoning delays, and the principles governing such decisions. The court's reasoning and findings offer valuable insights into the legal framework surrounding the issue of delay in filing appeals.

      Arguments Presented

      The primary argument presented by the petitioners was that the delay in filing the appeal for the enhancement of compensation should be condoned, citing instances where the Supreme Court had previously condoned delays in similar situations. The petitioners relied on two specific cases: DHIRAJ SINGH (DEAD) THROUGH LEGAL REPRESENTATIVES AND OTHERS VERSUS STATE OF HARYANA AND OTHERS - 2014 (7) TMI 1303 - SUPREME COURT and IMRAT LAL VERSUS LAND ACQUISITION COLLECTOR - 2013 (11) TMI 1813 - SUPREME COURT, where delays were condoned, and compensation was enhanced, albeit with conditions.

      Discussions and Findings of the Court

      The court engaged in a comprehensive discussion of the principles governing the condonation of delay in filing appeals. The following key points were highlighted:

      1. Law of Limitation and Public Policy

      The court emphasized that the law of limitation is founded on public policy, aiming to put an end to litigation by forfeiting the right to remedy rather than the right itself. The court stated that a right or remedy that has not been exercised or availed of for a long time must come to an end or cease to exist after a fixed period.

      2. Strict Interpretation of Section 3 and Liberal Interpretation of Section 5

      The court stressed that different provisions of the Limitation Act require different interpretations. Section 3, being a substantive law of mandatory nature, must be interpreted strictly, while Section 5, which empowers courts to condone delays, should be construed liberally.

      3. Discretionary Power and Sufficient Cause

      The court reiterated that courts have discretionary power to condone delays if sufficient cause is established. However, this power is discretionary, and delays may not be condoned even if sufficient cause is shown, considering factors such as inordinate delay, negligence, and lack of due diligence.

      4. Reliance on Previous Decisions

      The court rejected the petitioners' reliance on previous decisions where delays were condoned, stating that the facts and reasons for condonation in those cases were not identical or similar to the present case. The court emphasized that merely because some persons obtained relief in similar matters does not entitle others to the same benefit if the court is not satisfied with the cause shown for the delay.

      5. High Court's Discretion

      The court found no occasion to interfere with the High Court's exercise of discretion in refusing to condone the delay, citing reasons such as the claimants' negligence in pursuing the reference and filing the appeal, acceptance of the decision by most claimants, and the petitioners' failure to apply for procedural review.

      Analysis and Decision by the Court

      After a comprehensive analysis of the legal principles, the court concluded that it did not deem it proper and necessary to interfere with the High Court's decision refusing to condone the inordinate delay in filing the proposed appeal. The court dismissed the Special Leave Petition, upholding the High Court's decision.

      Doctrine or Principle Discussed

      The judgment primarily discussed the doctrine of limitation and the principles governing the condonation of delay in filing appeals. It emphasized the need to strike a balance between the strict interpretation of Section 3 of the Limitation Act, which mandates the dismissal of appeals filed beyond the prescribed period, and the liberal interpretation of Section 5, which allows courts to condone delays if sufficient cause is established.

      Comprehensive Summary of the Judgment

      The Supreme Court's judgment provides a comprehensive analysis of the legal framework surrounding the condonation of delay in filing appeals. The court emphasized the need to strike a balance between the strict interpretation of Section 3 of the Limitation Act, which mandates the dismissal of appeals filed beyond the prescribed period, and the liberal interpretation of Section 5, which allows courts to condone delays if sufficient cause is established.

      The court highlighted that the law of limitation is founded on public policy, aiming to put an end to litigation by forfeiting the right to remedy rather than the right itself. It stressed that different provisions of the Limitation Act require different interpretations, with Section 3 being interpreted strictly and Section 5 being construed liberally.

      While acknowledging the discretionary power of courts to condone delays if sufficient cause is established, the court emphasized that this power is not absolute and may not be exercised in cases of inordinate delay, negligence, and lack of due diligence. The court rejected the petitioners' reliance on previous decisions where delays were condoned, stating that the facts and reasons for condonation in those cases were not identical or similar to the present case.

      The court found no occasion to interfere with the High Court's exercise of discretion in refusing to condone the delay, citing reasons such as the claimants' negligence in pursuing the reference and filing the appeal, acceptance of the decision by most claimants, and the petitioners' failure to apply for procedural review.

      Ultimately, the Supreme Court dismissed the Special Leave Petition, upholding the High Court's decision to refuse condonation of the inordinate delay in filing the proposed appeal.

       


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      2024 (5) TMI 1319 - Supreme Court

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      ActsIncome Tax