AMIT BAJAJ ADVOCATE

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Old Rates 

No change in rate of taxes in the cases of domestic and non domestic companies, Partnership firms, Local authorities and cooperative societies.

Amendment in section 9 relating to deemed to accrue or arise in India: The existing provisions of clause (i) of sub-section (1) of the aforesaid section 9 provide that all income  accruing or arising, whether directly or indirectly,  through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India shall be deemed to accrue or arise in India.

It is proposed to insert a new Explanation 4 in the aforesaid clause so as to clarify the expression “through” used in the said sub-section.

It is further proposed to insert a new Explanation 5 in the aforesaid clause (i) so as to clarify that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.

These amendments will take effect retrospectively from 1st April, 1962 and will, accordingly, apply in relation to the assessment year 1962-1963 and subsequent assessment years.

It is also proposed to insert a new Explanation 4 in clause (vi) of the aforesaid sub-section so as to clarify that the transfer of all or any rights in respect of any right,  property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.

It is also proposed to insert a new Explanation 5 in the aforesaid clause so as to clarify that the royalty includes and has always included consideration in respect of  any right, property or information, whether or not ––(a) the possession or control of such right, property or  information is with the payer;(b) such right, property or information is used directly by the payer;(c) the location of such right, property or information is in India.

It is also proposed to insert a new Explanation 6 in the aforesaid clause so as to clarify that the expression “process” includes and shall be deemed to have always included transmission by satellite (including up-linking,        amplification,    conversion            for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret.

These amendments will take effect retrospectively from 1st day of June, 1976 and will, accordingly, apply in  relation to the assessment year 1977-1978 and subsequent assessment years.

Receipts from LIC to be exempt only if the premium for the policy does not exceed ten per cent. of the actual capital sum assured: The existing provisions of clause (10D) of the aforesaid section provide that any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy other than any sum received under sub-section (3) of section 80DD or any sum received under a Keyman insurance policy, or any sum received under an insurance policy for which the premium amount exceeds twenty per cent. of the actual capital sum assured, shall be exempt.

It is proposed to allow exemption of any sum received under an insurance policy issued on or after 1st April,  2012 only if the premium for the policy does not exceed ten per cent. of the actual capital sum assured.

This amendment will take effect from 1st April, 2013, and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

Amendment in section 32: The existing provisions contained in clause (iia) of sub-section (1) of the aforesaid section 32, a further sum equal to twenty per cent. of the actual cost of new machinery or plant (other than ships and aircraft) acquired and installed after the 31st day of March, 2005 by an assessee engaged in the business of manufacture or production of any article or thing, is allowed as deduction as further depreciation.

It is proposed to amend aforesaid clause so as to allow deduction of a further sum equal to twenty per cent. of actual cost of any new machinery or plant (other than ships and aircraft) acquired and installed after 31st day of March, 2012, as further depreciation to an assessee engaged in the business of generation or generation and distribution of power.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

Amendment in section 40: It has been proposed that Where there is sufficient and good reason for not deducting the requisite tax and the assessee is not deemed as in default under the first proviso to section  201(1) then such assessee will be treated as if he has deducted and paid the requisite TDS and consequently there will be no disallowance u/s 40(a)(ia).

It is proposed to insert a new proviso to sub-clause (ia) of clause (a) to the aforesaid section 40 so as to provide  that where an assessee fails to deduct the whole or  any part of the tax in accordance with the provisions of  Chapter XVII-B on sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

Amendment in section 40A: The existing provisions of clause (a) of sub-section (2) of the aforesaid section 40A provides that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of the said section and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of expenditure as is so considered  by him to be excessive or unreasonable shall not be allowed as deduction.

It is proposed to amend the aforesaid clause so as to provide that no disallowance under this clause, on  account of any expenditure being excessive or unreasonable having regard to the fair market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if such transaction is at arm’s length price as defined in clause (ii) of section 92F.

The existing provisions of clause (b) of the  aforesaid sub-section defines the persons referred  to  in clause (a). Sub-clause (iv) of the said clause  defines the persons in a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm,  association or family, relative of such director, partner  or member.

It is proposed to amend the aforesaid clause (b) so as to include therein any other company carrying on a business or profession in which the company referred to in the  aforesaid sub-clause has substantial interest.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to assessment year 2013-2014 and subsequent assessment years.

Audit Limit u/s 44AB raised to 1 Crore in case of business and 25 lakh in case of professionals: The existing provisions in clause (a) of the aforesaid section

44AB make it obligatory for every person carrying on business to get his account of any previous year relevant to the assessment year audited by an accountant before the specified date if the total sales, turnover or gross receipts in business for the previous year exceeds sixty lakh rupees.

It is proposed to enhance the said limit from sixty lakh rupees to one crore rupees.

The existing provisions contained in clause (b) of the aforesaid section make it obligatory for every person carrying on profession to get his accounts of any previous year relevant to the assessment year audited by an accountant before the said specified date if his gross receipts in profession for the previous year exceed fifteen lakh rupees.

It is proposed to enhance the said limit from fifteen lakh rupees to twenty-five lakh rupees.

Due date under Section 139(1) will now be the specified date u/s 44AB:The existing provisions contained in clause (ii) of the Explanation to the aforesaid section defines that expression “specified date” in relation to the accounts of  the assessee of the previous year relevant to an assessment year, means the 30th day of September of the assessment year.

It is proposed to change the specified date from the 30th day of September of the assessment year to the due date for furnishing the return of income under sub-section (1) of section 139.

This amendment will take effect retrospectively from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013 and subsequent assessment years.

It is proposed to insert a new sub-section (6) to the aforesaid section 44AD so as to provide that the provisions of this section, notwithstanding anything  contained in the foregoing provisions, shall not apply to (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business.

This amendment will take effect retrospectively from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent assessment years.

Limit u/s 44AD raised to Rs. 1 crore: The existing provisions in clause (b) of the Explanation to the aforesaid section 44AD defines the term “eligible business” to mean any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE and whose total turnover or gross receipts  in  the previous year does not exceed sixty lakh rupees for the purpose of computing profits and gains of business on presumptive basis.

It is proposed to amend the aforesaid Explanation so  as to enhance the said limit from sixty lakh rupees to one crore rupees.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

Amedment in section 47:Under the existing provisions contained in sub-clause  (a) of clause (vii) of the aforesaid section 47, in case of a merger, any transfer of capital asset being shares, held by a shareholder in the amalgamating company, shall not  be regarded as transfer, if— (a) such transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company, and (b) the amalgamated company is an Indian Company.

It is proposed to amend the aforesaid sub-clause so as to provide that to the extent where the amalgamated company itself is the shareholder in the amalgamating company, it shall not be necessary for it to issue share or shares.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

Amendment in section 49:The existing provisions contained in the aforesaid section 49 provide that, in certain circumstances the cost of acquisition of the assets shall be deemed to be the cost for which the previous owner of the assets acquired it.

Clause (xiii) of section 47, inter alia, provides for transfer of any capital asset or intangible asset by a firm to company as a result of succession of the firm by a company and clause (xiv) of section 47 provides, inter alia, for transfer of any capital asset or intangible asset by a sole proprietary concern to a company as a result of succession by a sole proprietary concern to a company.

It is proposed to amend sub-clause (e) of clause  (iii) of sub-section (1) of the aforesaid section so as to bring the transfers referred to in clause (xiii) and clause (xiv) of section 47 within the scope of section 49 which deals with cost with reference to certain modes of acquisition.

This amendment will take effect retrospectively from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999-2000 and subsequent assessment years.

The existing provisions of the Income-tax Act provide that on the transfer of a capital asset, capital gains are  calculated as the difference between the sale consideration and the cost of acquisition.

It is proposed to insert a new section 50D so as to provide that where the consideration received or accruing as a result of the transfer of a capital asset by an assessee, is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

Benefit u/s 54B extended to HUFs:  The existing provisions contained in sub-section (1)  of the aforesaid section 54B provide that if an assessee transfers land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for  agricultural purposes, giving rise to capital gain and purchases any other land for being used for agricultural purposes, within two years after the date of such transfer, the capital gain is exempt to the extent such gain has been utilised for the aforesaid purpose.

It is proposed to amend the aforesaid sub-section so as to extend the benefit of exemption to the assessee being a Hindu undivided family.

This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years.

The said section seems to have been legislated so as to encourage incorporation of small and medium enterprises companies.

The proposed new section 54GB seeks to provide that where the capital gain arises from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee (herein referred to as the assessee) and such assessee before the due date of furnishing of return of income under sub-section (1) of section 139 utilises the net consideration for subscription in the equity shares of an eligible company (herein referred to as the company) and such company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset then, instead of the capital gain being  charged to income-tax as the income of the previous year in which the transfer takes place, it shall be dealt with in accordance with the following provisions of this section, that is to say, if the amount of the net consideration is greater than the cost of the new asset, then, so much of the capital gain as it bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 as the income of the previous year or if the amount of the net consideration is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 as the income of the previous year.

It is further proposed to provide that the amount of  the net consideration, which has been received by the company for issue of share to the assessee, to the extent it is not utilised by the company for the purchase of the new  asset before the said due date of furnishing of the return of income by the assessee under section 139, shall be deposited by the company, before the due date of furnishing, in an account in any such bank or institution as may be specified and shall be utilised in accordance with any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made.

It is also proposed to provide that for the purposes of sub-section (1), the amount, if any, already utilised by the company for the purchase of the new asset together with the amount deposited under sub-section (2) shall be deemed to be the cost of the new asset. However, if the amount so deposited is not utilised, wholly or partly, for the purchase of the new asset within the period specified in sub-section (1), then, the amount by which the amount of capital gain arising from the transfer of the residential property not charged under section 45 on the basis of the cost of the new asset, exceeds the amount that would not have been so charged had the amount actually utilisesd for the purchase of the new asset within the period specified in sub-section (1), been the cost of the new asset, shall be charged under section 45 as income of the assessee of the previous year in which the period of one year from the date of the subscription in equity shares by the assessee expires and the company shall be entitled to withdraw such amount in accordance with the scheme.

It is also proposed to provide that if the equity shares of the company or the new asset acquired by the company are sold or otherwise transferred within a period of five years from the date of their acquisition, the amount of capital gain arising from the transfer of the residential property not charged under section 45 as provided in sub-section (1) shall be deemed to be the income of the assessee chargeable under the head “capital gains” of the previous year in which such equity shares or such new asset are sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of shares or of the new asset, in the hands of the assessee or the company, as the case may be.

It is also proposed to provide that the provisions of this section shall not apply to any transfer of residential property made after the 31st day of March, 2017.

It is also proposed to define the expressions “eligible assessee”, “eligible company”, “net consideration” and  “new asset” for the purpose of this section.

These amendments will take effect from the 1st day of April, 2013 and will, accordingly, apply in relation to the assessment years 2013-2014 and subsequent assessment years.

Amendment in section 55A reference to DVO to be made when value of asset is in variance with Fair Market Value: The existing provisions contained in clause (a) of the aforesaid section 55A provide that an Assessing Officer  with a view to ascertain the fair market value of a capital asset may refer the valuation of a capital asset  to  a Valuation Officer where, in his opinion the value of the asset as claimed by the assessee is less than its fair market value.

It is proposed to amend the aforesaid clause so as to provide that reference may be made to the Valuation Officer for ascertaining the fair market value of a capital asset in case such value is at variance with its fair market value instead of making a reference only when such value is less than its fair market value.

This amendment will take effect from 1st July, 2012.

Members of HUF are HUF’s relative-Amendment in definition of relative u/s 56:

It is proposed to substitute the aforesaid clause (e) so as to provide that the definition of “relative” shall also include any sum or property received by a Hindu undivided family from its members apart from the persons referred to in the Explanation to clause (vi) of sub-section (2) of the said section.

This amendment will take effect retrospectively from 1st October, 2009.