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  Recent Amendments

Finance Act, 2010
applicable for May/June/Nov/Dec. 2011 Exams


Tax Rates

Individual / HUF / Association of Persons / Body of Individuals / Artificial Juridical Person

In case of Senior citizen

Total Income Range

Rates of Income Tax

Up to Rs.240000

Nil

Rs.240001 to Rs.500000

10% of the amount by which the total income exceeds Rs.240000

Rs.500001 to Rs.800000

Rs.26000 + 20% of the amount by which the total income exceeds Rs.500000

Rs.800001 and above

Rs.86000 + 30% of the amount by which total income exceeds Rs.800000

Senior Citizen means an individual who is resident in India and is of at least 65 years of age at any time during the relevant previous year.

 

In case of resident women aged below 65 years

Total Income Range

Rates of Income Tax

Up to Rs.190000

Nil

Rs.190001 to Rs.500000

10% of the amount by which the total income exceeds Rs.190000

Rs.500001 to Rs.800000

Rs.31000 + 20% of the amount by which the total income exceeds Rs.500000

Rs.800001 and above

Rs.91000 + 30% of the amount by which total income exceeds Rs.800000

 

In case of other Individual / HUF / Association of Persons / Body of Individuals / Artificial Juridical Person

Total Income Range

Rates of Income Tax

Up to Rs.160000

Nil

Rs.160001 to Rs.500000

10% of the amount by which the total income exceeds Rs.160000

Rs.500001 to Rs.800000

Rs.34000 + 20% of the amount by which the total income exceeds Rs.500000

Rs.800001 and above

Rs.94000 + 30% of the amount by which total income exceeds Rs.800000

Education Cess and Secondary and Higher Education Cess (SHEC)

Applicable on : All assessee.

Rate of education cess : 2% of Tax liability

Rate of Secondary and Higher Education Cess : 1% of Tax liability

 

Firm or Limited Liability Partnership (LLP)

A partnership firm (including limited liability partnership) is taxable at the rate of 30%

Education cess and SHEC : 2% of tax liability and 1% of tax liability respectively.

 

Company
Company
Rate

In the case of a domestic company

30%

In the case of a foreign company

40%

Surcharge : 7.5% (2.5% in case of foreign company) of income-tax (if total income exceeds Rs.1 crore otherwise Nil)

Education cess and SHEC : 2% of tax liability after surcharge and 1% of tax liability after surcharge respectively.

Charitable Purpose [Sec. 2(15)]

Background

Section 2(15) defines ‘charitable purpose’ to include, inter alia, ‘the advancement of any other object of general public utility’. The proviso to the said clause provides that: “the advancement of any other object of general public utility’ shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity 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 of application, or retention, of the income from such activity.

Amendment

A second proviso is inserted: “Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;”;

Effect

The first proviso shall not apply if the aggregate value of receipts from any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business (as referred to in the first proviso) is Rs.10 lakh or less in the previous year.

The amendment is applicable from 01-04-2009

Income deemed to accrue or arise in India [Sec. 9(1)]

Background

The Hon’ble Apex Court in Ishikawajma-Harima Heavy Industries Ltd. –vs.-DIT has held that fees for technical services rendered in India as well as utilised in India shall be considered as income deemed to be accrued or arise in India u/s 9(1)(vii). If both conditions are not satisfied, then such fees shall not be taxable in India. In order to nullify the said decision of the Apex Court, Finance Act, 2007 has inserted the following explanation to sec.9(2) w.r.e.f. 01-06-1976: “For the removal of doubts, it is hereby declared that for the purposes of this section, where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1), such income shall be included in the total income of the non-resident, whether or not the non-resident has a residence or place of business or business connection in India. However, Hon’ble Karnataka High Court in Jindal Thermal Power Co. Ltd. –vs.- CIT(TDS) has held that law framed by the Apex Court in Ishikawajma-Harima Heavy Industries Ltd. is a good law inspite of the retrospective insertion of the Explanation in sec.9(2) by the Finance Act, 2007.

Amendment

Explanation substituted with: Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,- (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India.”.

Effect

Now, the income of a non-resident shall be deemed to accrue or arise in India under Sec. 9(1)(v) / (vi) / (vii) and shall be included in the total income of the non-resident, whether or not, - (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-resident has rendered services in India.

The amendment is applicable from 01-06-1976

Scientific Research Association [Sec. 10(21)]

Background

Under section 10(21), in computing the total income of the previous year of any person, any income of a scientific research association for the time being approved for the purpose of sec.35(1)(ii) is not included.

Amendment

1. For the words “scientific research association”, wher¬ever they occur, the words “research association” is sub¬stituted.

2. In the opening portion, after the word, brackets and figures “clause (ii)”, the words, brackets and figures “or clause (iii)” shall be inserted;

Effect

Clause (21) is amended so as to make it also applicable to a research association which has as its object, undertaking research in social science or statistical research, provided such research association is approved and notified under sec.35(1)(iii). Consequently, the income of such association shall not be included in its total income.

The amendment is applicable from 01-04-2011

Unit in Special Economic Zone (SEZ) [Sec. 10AA]

Background

Earlier, the profits derived from the export of articles or things or services shall be the amount which bears to the profits of the business of the undertaking, being the unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the assessee. However, w.e.f. 01-04-2010, the Finance (No. 2) Act, 2009 has substituted the reference to ‘assessee’ by the word ‘undertaking’.

Amendment

“Provided that the provisions of this sub-section [as amended by section 6 of the Finance (No. 2) Act, 2009 (33 of 2009)] shall have effect for the assessment year beginning on the 1st day of April, 2006 and subsequent assessment years.”

Effect

The provisions of the said amended sub-section shall be effective retrospectively from 1-4-2006.

Cancellation of Registration [Sec. 12AA]

Background

Under sec. 12AA(3), if the activities of the trust or institution, which has been granted registration under sec. 12AA(1), are not genuine or are not being carried out in accordance with the objects of the trust or institution, the Commissioner shall, after giving a reasonable opportunity of being heard to the said trust or institution, cancel the registration so granted. However, there is view that under aforesaid section, any trust of institution registered u/s 12A cannot be cancelled as reference to the said section has not been given in the provision.

Amendment

In section 12AA of the Income-tax Act, in sub-section (3), after the word, brackets and figure “sub-section (1)”, the words, figures, letter and brackets “or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]” shall be inserted.

Effect

It is also provided that commissioner can also cancel registration obtained under section 12A.

The amendment is applicable from 01-06-2010

Depreciation [Sec. 32(1)]

Background

Fifth proviso to Section 32(1) provides that the aggregate depreciation allowable to the predecessor and successor business entities in case of succession or amalgamation shall not exceed in any previous year the deduction allowable at prescribed rates as if the succession or amalgamation had not taken place and such deduction shall be apportioned between the two entities in the ratio of the number of days for which the assets were used by them.

Amendment

In the fifth proviso, for the words, brackets and figures “clause (xiii) and clause (xiv)”, the words, brackets, figures and letter “clause (xiii), clause (xiiib) and clause (xiv)” shall be substituted.

Effect

The amendment has made reference to sec. 47(xiiib) in the aforesaid fifth proviso to sec. 32(1) to provide that in case of succession of a private company or unlisted public company by limited liability partnership, the aggregate depreciation allowable to the predecessor company and the successor limited liability partnership shall not exceed, in any previous year, the deduction calculated at the prescribed rate as if no succession has taken place and such deduction shall be apportioned between the two entities in the ratio of the number of days for which the assets were used by them. The amendment is applicable from 01-04-2011

Scientific Research [Sec. 35]

Background

  1. Section 35(1)( ii ) provides for weighted deduction to the extent of 125% of any sum paid to a scientific research association which has the object of undertaking scientific research or to a university, college or other institution to be used for scientific research.
  2. Section 35(1)( iii ) provides that weighted deduction shall be allowed in respect of contributions made to an approved university, college or institution to be used for research in social science or statistical research.
  3. Section 35(2AA)( a ) provides for a weighted deduction to the extent of 125% of any sum paid to a National Laboratory or a University or an Indian Institute of Technology or a specified person for the purpose of an approved scientific research programme.
  4. Section 35(2AB)( 1 ) provides for weighted deduction of 150% of the expenditure incurred by a company on scientific research on an approved in-house research and development facility.

Amendment

•  In sub-section (1),-

( a ) for the words “scientific research association”, wher­ever they occur, the words “research association” shall be sub­stituted;

( b ) in clause ( ii ), for the words “one and one-fourth”, the words “one and three-fourth” shall be substituted;

( c ) in clause ( iii ),-

( A ) for the words “any sum paid to a university”, the words “any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university” shall be substituted;

( B ) in the proviso, for the words “such university”, at both the places where they occur, the words “such association, university” shall be substituted;

•  In sub-section (2AA), in clause ( a ), for the words “one and one-fourth”, the words “one and three-fourth” shall be sub­stituted;

•  In sub-section (2AB), in clause ( 1 ), for the words “one and one-half”, the word “two” shall be substituted.

Effect

  1. Any sum paid to a scientific research association which has the object of undertaking scientific research or to a university, college or other institution to be used for scientific research is eligible for weighted deduction of 175% u/s 35(1)(ii).
  2. Contributions made to an approved and notified research associations , which have as their object, undertaking of research in social science or statistical research shall be eligible for weighted deduction of 125% u/s 35(1)(iii).
  3. Contributions made to a National Laboratory or a University or an Indian Institute of Technology or a specified person for the purpose of an approved scientific research programme is eligible for weighted deduction of 175% u/s 35(2AA)( a ).
  4. The expenditure incurred by a company on scientific research on an approved in-house research and development facility is eligible for weighted deduction of 200% u/s 35(2AB)( 1 ).

 

In nutshell,

Particulars

Purpose

Deduction

Any payment made to a notified (by the Central Government) research association or to an approved university, college or other institutions [Sec. 35(1)(ii)]

Scientific research (whether related to business or not)

Weighted deduction @ 175% of the amount paid.

Note : No other deduction in respect of the said contribution shall be allowed under any other provisions of the Act.

Any payment to National Laboratory or a University or Indian Institute of Technology or a specified person. [Sec. 35(2AA)]

Scientific research undertaken under programmme approved by the prescribed authority (whether related to business or not)

Any payment made to a notified (by the Central Government) research association, university, college or other institution [Sec. 35(1)(iii)].

Research in Social science or Statistical Research (whether related to business or not)

Weighted deduction @ 125% of the amount paid.

Note : No other deduction in respect of the said contribution shall be allowed under any other provisions of the Act.

Any payment to an approved Indian company (main object of whom is scientific research & development) 3 [Sec. 35(1)(iia)]

Scientific research (whether related to business or not)

Any expenditure (other than cost of land or building) incurred by a company [Sec. 35(2AB)(1)]

Scientific research on an approved in-house research and development facility

Weighted deduction @ 200% of the amount incurred.

The amendment is applicable from 01-04-2011

Deduction in respect of expenditure on specified business [Sec. 35AD]

Background

Investment linked deduction u/s 35AD is applicable in case of following types of specified business:

•  setting up and operating a cold chain facility;

•  setting up and operating a warehousing facility for storage of agricultural produce; or

•  laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network.

Amendment

In section 35AD of the Income-tax Act -

a)  in sub-section (2), in clause ( iii ), in sub-clause ( c ), for the words “one-third of its total pipeline capacity”, the words, brackets and figures “such proportion of its total pipe­line capacity as specified by regulations made by the Petroleum and Natural Gas Regulatory Board established under sub-section (1) of section 3 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006)” shall be substituted;

b)  for sub-section (3), the following sub-section shall be substituted with effect from the 1st day of April, 2011, namely:-

‘(3) Where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading “ C.—Deductions in respect of certain incomes ” in relation to such specified business for the same or any other assessment year.';

c) In sub-section (5), with effect from the 1st day of April, 2011,-

•  in clause ( a ), the word “and”, occurring at the end, shall be omitted;

•  after clause ( a ), the following clauses shall be inserted, namely:-

“( aa ) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hotel of two-star or above category as classified by the Central Government;

( ab ) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hospital with at least one hundred beds for patients;

( ac ) on or after the 1st day of April, 2010, where the specified business is in the nature of developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and which is notified by the Board in this behalf in accordance with guidelines as may be prescribed; and”;

•  in clause ( b ), for the word, brackets and letter “clause ( a )”, the words, brackets and letters “clause ( a ), clause ( aa ), clause ( ab ) and clause ( ac )” shall be substituted;

d)  in sub-section (8), in clause ( c ), after sub-clause ( iii ), the following sub-clauses shall be inserted with effect from the 1st day of April, 2011, namely :—

“( iv ) building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;

( v ) building and operating, anywhere in India, a new hospital with at least one hundred beds for patients;

( vi ) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed;”.

Effect

The provision of sec.35AD is also applicable to following specified business:

a.  building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;

b.  building and operating, anywhere in India, a new hospital with at least 100 beds for patients;

c.  developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government (or a State Government) and notified by the Board.

The entire amended provisions of sec. 35AD are enumerated below:

Applicable to

Specified assessee engaged in the business of:

•  setting up and operating a cold chain facility ## ;

•  setting up and operating a warehousing facility for storage of agricultural produce; or

•  laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network

Note : The project has been approved by the Petroleum and Natural Gas Regulatory Board and being notified by the Central Government.

•  building and operating, anywhere in India, a new hotel of two-star or above category as classified by the Central Government;

•  building and operating, anywhere in India, a new hospital with at least 100 beds for patients;

•  developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government (or a State Government) and notified by the Board

Conditions to be satisfied        

 

Cross-country oil pipeline

Cold Chain Facility

Storage of agricultural produce

Other specified business

Owned by

An Indian company or by a consortium of such companies or by an authority or a board or a corporation established or constituted under any Central/State Act

Any assessee

Date of commencement of business

On or after 01-04-2007

On or after 01-04-2009

On or after 01-04-2010

Restriction on usage

It has made not less than such proportion of its total pipeline capacity as specified by the Petroleum and Natural Gas Regulatory Board ß available for use on common carrier basis by any person other than the assessee or an associated person # .

No Restriction

New Business

Such business should not be set up by splitting up, or the reconstruc­tion, of a business already in existence.

New Plant Machinery

Such business should not be set up by the transfer to the specified business of machinery or plant previously used for any purpose

Exceptions

i)  A plant or machinery is deemed as new asset if the following conditions are satisfied -

•  Such plant or machinery is imported into India ;

•  Depreciation on such asset has not been allowed under this Act to any person; and

•  The assessee was the first user of such asset in India .

ii)  Where the total value of old plant and machinery transferred to the new business does not exceed 20% of total value of plant and machinery used in such business, then this condition is deemed to be satisfied.

Audit

Books of account should be audited by a Chartered Accountant

Quantum of deductions

100% of capital expenditure ( other than any expenditure incurred on the acquisition of any land or goodwill or financial instrument ) incurred during the previous year, wholly and exclusively, for the purposes of any specified busi­ness.

Exceptions

•  Not considered as capital expenditure : Capital expenditure does not include any expenditure incurred on the acquisition of any land or goodwill or financial instrument.

•  Pre-commencement expenditure : Where the expenditure is incurred prior to the commencement of its operations which has been capitalised in the books of account of the assessee on the date of commencement of its operations, shall be allowed as deduction in the previous year in which the assessee commences such business.

•  Transitional Provisions : In case, where business of laying and operating a cross-country natural gas distribution network is commenced at any time between 01-04-2007 and 31-03-2009, the capital expenditure ( other than any expenditure incurred on the acquisition of any land or goodwill or financial instrument ) incurred between these dates shall be allowed as deduction u/s 35AD for the A.Y. 2010-11 provided no deduction for such expenditure has been allowed in any earlier previous year.

Other Points

•  No Double Deduction : No deduction for such expenditure shall be allowed to the assessee under any other section in any previous year or under this section in any other previous year. Further, the assessee shall not be allowed any deduction u/s 80HH to 80RRB in respect of the specified business for the same or any other assessment year.

•  Actual cost of asset for depreciation : The actual cost of any capital asset for the purpose of computing depreciation, on which deduction has been allowed to the assessee u/s 35AD, shall be treated as ‘nil'.

•  Treatment of Realisation : If the whole of the expenditure on capital asset has been allowed as a deduction u/s 35AD, any sum received or receivable (in cash or kind) on account of such capital asset being demolished, destroyed, dis­carded or transferred shall be taxable as business income.

•  Carry forward and set off of losses [Sec. 73A] : Any loss, computed in respect of such specified business shall be set off only against profits and gains, if any, of any other specified busi­ness. Further, if there is no such profit or such loss is not fully adjusted with such profit, the unabsorbed loss shall be carried forward for set off against the profits and gains, if any, of any specified business in the next assessment year and so on.

•  Inter-unit transfer : Where -

  1. Assessee carries on at least two units
  2. Out of such units at least one is eligible u/s 35AD and at least one is not eligible for exemption
  3. Goods or services are transferred from eligible unit to any non eligible unit or vice versa
  4. The consideration for such transfer does not correspond to the market value of such goods as on the date of transfer

then, deduction shall be computed as if the transfer, in either case, had been made at the market value $ of such goods or services as on that date.

# An “associated person”, in relation to the assessee, means a person:

a.  who participates, directly or indirectly, or through one or more intermediaries in the management or control or capi­tal of the assessee;

b.  who holds, directly or indirectly, 26% of equity share capital of the assessee;

c.  who appoints more than half of the Board of direc­tors or members of the governing board, or one or more executive directors or executive members of the governing board of the assessee (it is to be noted that appointing power does not suffice the purpose); or

d.  who guarantees not less than 10% of the total borrowings of the assessee;

## “Cold chain facility” means a chain of facilities for storage or transportation of agricultural and forest produce, meat and meat products, poultry, marine and dairy products, products of horticulture, floriculture and apiculture and proc­essed food items under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce.

$ Market value in relation to any goods or services

Case

Market value means

Sold or supplied

The price that such goods or services would fetch if these were sold by the unit in the open market, subject to statutory or regulatory restrictions, if any

Acquired

The price that such goods or services would cost if these were acquired by the unit from the open market, subject to statutory or regulatory restrictions, if any.

ß The Petroleum and Natural Gas Regulatory Board has specified following conditions for common carrier:

Particulars

Following proportion of total pipeline capacity should available for use on common carrier basis by any person other than the assessee or an associated person

Natural gas pipeline network

1/3 rd of total pipeline capacity

Petroleum product pipeline network

1/4 th of total pipeline capacity

Deduction in respect of Voluntary Retirement Scheme [Sec. 35DDA]

Background

Section 35DDA provides that where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee at the time of his voluntary retirement under any scheme of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year and the balance shall be deducted in equal instalments for each of the four immediately succeeding previous years.

Amendment

a. After sub-section (4), the following sub-section shall be inserted, namely:-

“(4A) Where there has been reorganisation of business, whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, the provisions of this section shall, as far as may be, apply to the successor limited liability partnership, as they would have applied to the said company, if reorganisation of business had not taken place.”;

b. in sub-section (5), for the words, brackets and figures “sub-section (3) and in the case of a firm or proprietary concern referred to in sub-section (4)”, the words, brackets, figures and letter “sub-section (3), in the case of a firm or proprietary concern referred to in sub-section (4) and in the case of a company referred to in sub-section (4A)” shall be substituted.

Effect

In case of succession of a private company or unlisted public company by a limited liability partnership, the provisions of the said section shall apply to the successor limited liability partnership as they would have applied to the predecessor company. Further, in case of such conversion, no deduction under the said section shall be allowed to the predecessor company in the previous year in which the conversion takes place.

The amendment is applicable from 01-04-2011

Disallowance Expenditure [Sec. 40a(ia)]

Background

The existing provisions of section 40(a)(ia) provide for the disallowance of expenditure like interest, commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return.

Amendment

(a) for the portion beginning with the words “has not been paid,-” and ending with the words “the last day of the previous year”, the words, brackets and figures “has not been paid on or before the due date specified in sub-section (1) of section 139” shall be substituted;

(b) for the proviso, the following proviso shall be substituted, namely:-

“Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.”.

Effect

No disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in sec. 139(1).

The amendment is applicable from 01-04-2010

Actual Cost of Asset [Sec. 43(1)]

Background

Explanation 13 to section 43(1) provides that the actual cost of any capital asset on which deduction has been allowed or is allowable u/s 35AD shall be treated as ‘nil’ in specified circumstances.

Amendment

In clause (1), in Explanation 13, in clause (b), in sub-clause (iii), for the brackets, figures and word “(xiii) and (xiv)”, the brackets, figures, letter and word “(xiii), (xiiib) and (xiv)” shall be substituted;

Effect

A reference to sec.47(xiiib) is made in Explanation 13(b)(ii), to provide that in case of succession of a private company or unlisted public company by a limited liability partnership, the actual cost of capital assets on which deduction has been allowed under section 35AD to the predecessor company shall be taken as ‘nil’ in case of the successor limited liability partnership.

The amendment is applicable from 01-04-2011

Written Down Value [Sec. 43(6)]

Amendment

After Explanation 2B, the following Explanation shall be inserted, namely:-

“Explanation 2C.—Where in any previous year, any block of assets is transferred by a private company or unlisted public company to a limited liability partnership and the conditions specified in the proviso to clause (xiiib) of section 47 are satisfied, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the limited liability partnership shall be the written down value of the block of assets as in the case of the said company on the date of conver¬sion of the company into the limited liability partnership.”.

Effect

In case of succession of private company or unlisted public company by limited liability partnership, the actual cost of the block of assets in case of successor limited liability partnership shall be the written down value of the block of assets as in the case of the predecessor company on the date of conversion.

The amendment is applicable from 01-04-2011

Tax Audit [Sec. 44AB]

Background

The existing provisions of sec. 44AB make it obligatory for every person carrying on business to get his accounts 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 Rs. 40 lakh. Similarly, every person carrying on profession is required to get his accounts of any previous year relevant to the assessment year audited by an accountant before the said specified data if his gross receipts in profession for the previous year exceed Rs. 10 lakh.

Amendment

(a) In clause (a), for the words “forty lakh rupees”, the words “sixty lakh rupees” shall be substituted;

(b) in clause (b), for the words “ten lakh rupees”, the words “fifteen lakh rupees” shall be substituted.

Effect

Every person carrying on business to get his accounts 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 Rs. 60 lakh. Similarly, every person carrying on profession is required to get his accounts of any previous year relevant to the assessment year audited by an accountant before the said specified data if his gross receipts in profession for the previous year exceed Rs. 15 lakh.

The amendment is applicable from 01-04-2011

Presumptive Taxation [Sec. 44AD]

Background

Explanation to sec. 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 previous year does not exceed Rs. 40 lakh for the purpose of computing profits and gains of business on presumptive basis.

Amendment

In the Explanation, in clause (b), in sub-clause (ii), for the words “forty lakh rupees”, the words “sixty lakh rupees” shall be substituted

Effect

‘Eligible business’ means 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 previous year does not exceed Rs. 60 lakh for the purpose of computing profits and gains of business on presumptive basis.

The amendment is applicable from 01-04-2011. For more on Presumptive Taxation [Sec. 44AD] ... click here

Profits & gains in connection with the business of exploration, etc. of mineral oils [Sec. 44BB]

Background

Income of a non-resident assessee who is engaged in the business of providing services or facilities in connection with, of supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils is computed at 10%. However, it is provided that section 44AB shall not apply in a case where the provisions of sec. 42, 44D, 115A or 293A apply for the purposes of computing profits or gains or any other income referred to in those sections.

Amendment

In the proviso to sub-section (1), after the words, figures and letter “section 44D or”, the words, figures and letters “section 44DA or”

Effect

The reference of ‘section 44DA’ is inserted so as to clarify that the provisions of section 44BB shall also not apply in case where the provisions of section 44DA become applicable.

The amendment is applicable from 01-04-2011

Special provision for computing income by way of royalties, etc. in case of non-residents [Sec. 44DA]

Background

Section 44DA provides the procedure for computing income by way of royalty of fees for technical services, in case the right, property or contract giving rise to such income are effectively connected with the permanent establishment of the non- resident, through which business is carried out in India.

Amendment

In sub-section (1), after the proviso, the following proviso shall be inserted: “Provided further that the provisions of section 44BB shall not apply in respect of the income referred to in this section.”

Effect

The provisions of section 44BB shall not apply in respect of income referred to in section 44DA.

The amendment is applicable from 01-04-2011

Conversion of an unlisted company into a LLP – not regarded as Transfer [Sec. 47(xiiib)]

Amendment

After clause (xiiia), the following shall be inserted:

‘(xiiib) any transfer of a capital asset or intangible asset by a private company or unlisted public company (hereafter in this clause referred to as the company) to a limited liability partnership or any transfer of a share or shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008 (6 of 2009):

Provided that -

(a) all the assets and liabilities of the company immedi¬ately before the conversion become the assets and liabilities of the limited liability partnership;

(b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same pro¬portion as their shareholding in the company on the date of conversion;

(c) the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership;

(d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent at any time during the period of five years from the date of conversion;

(e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and

(f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion.

Explanation. - For the purposes of this clause, the expressions “private company” and “unlisted public company” shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008 (6 of 2009);’.

Effect

Any transfer of -

a. a capital asset or intangible asset by a private company or unlisted public company (hereafter referred to as the company) to a limited liability partnership (LLP); or

b. a share(s) held in the company by a shareholder as a result of conversion of the company into a limited liability partnership (LLP)

shall not regarded as a transfer, if following conditions are satisfied:

i. All the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the LLP;

ii. All the shareholders of the company immediately before the conversion become the partners of the LLP and their capital contribution and profit sharing ratio in the LLP are in the same proportion as their shareholding in the company on the date of conversion;

iii. The shareholders of the company do not receive any consideration or benefit other than by way of share in profit and capital contribution in the LLP;

iv. The aggregate of the profit sharing ratio of the shareholders of the company in the LLP shall not be less than 50% at any time during the period of 5 years from the date of conversion;

v. The total sales, turnover or gross receipts in business of the company in any of the 3 previous years preceding the previous year in which the conversion takes place does not exceed Rs.60 lakh; and

vi. No amount is paid (directly or indirectly) to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of 3 years from the date of conversion.

Notes

  • The expressions “private company” and “unlisted public company” shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008.
  • Such conversion should be in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008. The amendment is applicable from 01-04-2011
Withdrawal of exemption u/s 47(xiiib) [Sec. 47A(4)]

Amendment

After sub-section (3), the following sub-section shall be inserted:

“(4) Where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset or share or shares not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the require¬ments of the said proviso are not complied with.”.

Effect

As per sec. 47(xiiib), any transfer of capital assets or intangible asset or share(s) on conversion of a private company or unlisted company (hereinafter referred as ‘company’) into a limited liability partnership (LLP) shall not be treated as transfer, subject to certain conditions as discussed earlier in this chapter. However, on violation of such conditions, exemption earlier allowed to the company or shareholder shall be withdrawn by virtue of sec. 47A(4).

Consequences of withdrawal of exemption

Amount of profits or gains arising from the transfer of such capital asset or intangible asset or share(s) not charged earlier shall be deemed to be the profits and gains chargeable to tax of the successor LLP or the shareholder (of predecessor company) for the previous year in which the requirements of sec. 47(xiiib) are violated.

Taxpoint

Withdrawal of exemption

The benefits availed shall be treated as deemed income

Year of taxability

The year in which condition u/s 47(xiiib) are violated.

Who will be liable to tax

For exemption available to the company: Successor LLP

For exemption available to the shareholder: Such shareholder

Benefit of indexation

Available up to the year when succession took place.

Cost of acquisition of transferred asset in hands of the LLP

If conditions u/s 47(xiiib) are satisfied: Cost of asset in hands of the company

If conditions u/s 47(xiiib) are satisfied: Value at which such asset were transferred to the LLP at the time of conversion

Period of holding in hands of the LLP

In any circumstances, period of holding starts afresh. In other words, holding period of the previous owner cannot be considered.

The amendment is applicable from 01-04-2011

Cost of acquisition [Sec. 49]

Amendment

In section 49 of the Income-tax Act,-

i. in sub-section (1), in clause (iii), in sub-clause (e), for the words, brackets, figures and letters “clause (vicb) of section 47”, the words, brackets, figures and letters “clause (vicb) or clause (xiiib) of section 47” shall be substituted with effect from the 1st day of April, 2011;

ii. after sub-section (2AA), the following sub-section shall be inserted with effect from the 1st day of April, 2011, namely :-

“(2AAA) Where the capital asset being rights of a partner referred to in section 42 of the Limited Liability Partnership Act, 2008 (6 of 2009) became the property of the assessee on conversion as referred to in clause (xiiib) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the company immediately before its conversion.”;

iii. in sub-section (4), after the word, brackets and figures “clause (vii)”, at both the places where they occur, the words, brackets, figures and letter “or clause (viia)” shall be inserted with effect from the 1st day of June, 2010.

Effect

a) Sec.49(1)(iii)(e) is amended so as to make a reference to sec. 47(xiiib) to provide that in case of succession of a private company or unlisted public company by a limited liability partnership, the cost of acquisition of the assets for the successor limited liability partnership shall be deemed to be the cost for which the predecessor company acquired it.

b) Sec. 49(2AAA) provides that where the capital asset being rights of a partner referred to in section 42 of the Limited Liability Partnership Act, 2008 became the property of the assessee on conversion as referred to in sec. 47(xiiib), the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the company immediately before its conversion.

c) Under 49(4), where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax u/s 56(2)(vii), the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the sec. 56(2)(vii). Section 49(4) is amended so as to provide that the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purpose of sec. 56(2)(viia) also.

Gift [Sec. 56(2)(vii) / (viia)]

Amendment

In section 56 of the Income-tax Act, in sub-section (2),—

( a ) in clause ( vii ),—

( i ) for sub-clause ( b ), the following sub-clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 2009, namely:
“( b ) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;”;

( ii ) in the Explanation, in clause ( d ),-

( A ) in the opening portion, for the word “means-”, the words “means the following capital asset of the assessee, namely:-” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 2009;

( B ) in sub-clause ( vii ), the word “or” shall be omitted with effect from the 1st day of June, 2010;

( C ) in sub-clause ( viii ), the word “or” shall be inserted at the end with effect from the 1st day of June, 2010;

( D ) after sub-clause ( viii ), the following sub-clause shall be inserted with effect from the 1st day of June, 2010, namely:—

“( ix ) bullion;”;

( b ) after clause ( vii ), the following shall be inserted with effect from the 1st day of June, 2010, namely:—

‘( viia ) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,—
( i ) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggre­gate fair market value of such property;

( ii ) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause ( via ) or clause ( vic ) or clause ( vicb ) or clause ( vid ) or clause ( vii ) of section 47.

Explanation. —For the purposes of this clause, “fair market value” of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause ( vii );'.

Effect

The entire revised provision of sec. 56(2)(vii) and newly inserted sec. 56(2)(viia) are enumerated below:

Gift [Sec. 56(2)(vii)]

Following receipts by an individual or a HUF shall be considered as his income:

Category

Nature of Receipt

Conditions to be satisfied for considering income

Extent of Income

Remarks

A

Any sum of money

•  During the previous year, such individual or HUF has received any sum of money (cash, cheque, draft, etc.) from one or more persons

•  Such sum is received without consideration

•  The aggregate value of such receipt during the previous year exceeds Rs.50000

The whole of the aggregate value of such sum shall be considered as income of that previous year.

Aggregate amount of cash gift received during the period shall be considered.

B

Any immovable property

•  During the previous year, such individual or HUF has received immovable property

•  Such immovable property is received without consideration.

•  The stamp duty value of such property exceeds Rs.50000

•  Such asset is a capital asset in hands of recipient.

The stamp duty value of such property shall be considered as income of that previous year.

The limit of Rs.50000/- is applicable per incidence

C

Any movable property

•  During the previous year, such individual or HUF has received movable property from one or more persons

•  Such movable property is received without consideration

•  The aggregate fair market value of such receipts during the previous year exceeds Rs.50000

•  Such asset is a capital asset in hands of recipient.

The whole of the aggre­gate fair market value of such property shall be considered as income of the previous year.

Aggregate amount of gift received during the period shall be considered.

D

Any movable property

•  During the previous year, such individual or HUF has received movable property from one or more persons

•  Such movable property is received for a consideration.

•  Such consideration is less than the aggregate fair market value of the property by an amount exceeding Rs.50000

•  Such asset is a capital asset in hands of recipient.

The aggregate fair market value of such property Less consideration paid, shall be considered as income of the previous year.

Aggregate amount of gift received during the period shall be considered.

Note : The limit of Rs.50000/- is also for per category. In other words, one may receive cash gift of Rs.35000 and gift in kind of Rs.36000 without attracting any tax.

Taxpoint :

•  The provision is applicable only if recipient is an individual or HUF

•  Computation of fair market value of movable property (for Category C & D)

Case

Fair Market Value (FMV)

Jewellery, archeological collections, drawings, paintings, sculptures or any work of art

•  If such asset is received by the way of purchase from a registered dealer

The invoice value of the asset shall be the FMV

•  If such asset is received by any other mode and the value of such asset exceeds Rs.50000/-

Assessee may obtain the report of registered valuer in respect of the price it would fetch if sold in the open market on that date

•  Other

The FMV of such asset shall be estimated to be the price which such asset would fetch if sold in the open market on the date on which the respective property is received by the assessee.

Quoted Shares and securities

•  if the quoted shares and securities are received by way of transaction carried out through any recognized stock exchange

The FMV of such asset shall be the transaction value as recorded in such stock exchange

•  if such quoted shares and securities are received by way of transaction carried out other than through any recognized stock exchange

The FMV of such asset shall be the lowest price of such shares and securities quoted on any recognized stock exchange on the valuation date

In cases where on the date of receipt, there is no trading in such asset on any recognized stock exchange

The FMV of such asset shall be the lowest price of such asset on any recognized stock exchange on a date immediately preceding the date of receipt of such asset

Unquoted equity shares

The FMV of unquoted equity shares = [(A-L) * (PV)] / (PE)

 

A =

Book value of the assets in Balance Sheet

***

 

 

Less: Advance Tax paid

**

 

 

Less: Profit & Loss A/c (Dr. Bal.)

**

 

 

Less: Other Debit balance which does not represent the value of any asset

**

 

 

A

***

 

L =

Book value of liabilities shown in the Balance Sheet

***

 

 

Less: Paid-up equity capital

**

 

 

Less: The amount set apart for payment of dividends on preference shares & equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company i.e. proposed dividend

**

 

 

Less: Any reserves, other than those set apart towards depreciation

**

 

 

Less: Profit & Loss Account (Cr. Balance)

**

 

 

Less: Any amount representing provision for tax, other than amount paid as advance tax under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto

**

 

 

Less: Any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

**

 

 

Less : Any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.

**

 

 

L

***

 

PE =

Total amount of paid up equity share capital as shown in Balance Sheet.

***

 

PV =

The paid up value of such equity shares.

***

Unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange

The fair market value of such asset shall be estimated to be price it would fetch if sold in the open market on the date of receipt. Assessee may obtain a report from a merchant banker or an accountant in respect of such valuation.


Exceptions

This section shall not apply to any sum of money or any property received

•  from any relative # .

# Relative here means—

 i. spouse of the individual;

 ii. brother or sister of the individual;

 iii. brother or sister of the spouse of the individual;

 iv. brother or sister of either of the parents of the individual;

 v. any lineal ascendant or descendant of the individual;

 vi. any lineal ascendant or descendant of the spouse of the individual;

 vii. spouse of the person referred to in clauses (ii) to (vi).

•  on the occasion of the marriage of the individual (whether gift is received from relative or outsiders).

•  under a will or by way of inheritance.

•  in contemplation of death of the payer.

•  from local authority

•  from any fund or foundation or university or other educational institutions or hospital or other medical institutions or any trust or institution referred u/s 10(23C).

•  from a registered trust.

Exemption of Compensation on account of Disaster [Sec. 10(10BC)] : Any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster.

Other Points

•  Fair market value of a property, other than an immov­able property, means the value determined in accordance with the method as may be prescribed;

•  Property means the following capital asset of the assessee, namely

Immovable property being land or building or both

Shares & securities

Jewellery

Drawings

Archaeological collections

Paintings

Sculptures

Any work of art

Bullion (w.e.f. 01-06-2010)

 

 

 

Taxpoint :

•  Property does not include furniture, clothes, etc. (provided it does not fall in the definition of Jewellery).

•  If an assessee receives aforesaid assets without consideration (or against inadequate consideration in some cases) as stock in trade, the provision of this section shall not apply.

•  Stamp duty value means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

•  Dispute in stamp valuation : The Assessing Officer can refer the case to the Valuation Officer (as appointed under Wealth Tax Act) for the purpose of valuation of asset transferred if following conditions are satisfied:

•  Assessee claims before any Assessing Officer that the value adopted or assessed or assessable by such authority (i.e. Stamp Valuation authority) exceeds the fair market value of the property as on the date of transfer; and

•  The value so adopted or assessed by the stamp valuation authority has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court.

Consequences where the value is determined by the Valuation Officer

Case

Result

If the value determined by the Valuation Officer exceeds the value adopted or assessed for the purpose of stamp duty

Value adopted or assessed for the purpose of stamp duty shall be considered.

If the value determined by the Valuation Officer does not exceed the value adopted or assessed for the purpose of stamp duty

Value determined by the Valuation Officer shall be considered.

Receipt of shares by Firm or Closely-held Company [Sec. 56(2)(viia)] [W.e.f. 01-06-2010]

Following receipts by a firm or a company not being a company in which the public are substantially interested (i.e. closely held company) shall be considered as his income:

Category

Nature of transaction

Conditions to be satisfied for considering income

Extent of Income

A

Receipt of shares of a closely held company without consideration

•  During the previous year, the assessee (i.e., firm or closely held company) has received shares of a closely held company from one or more persons

•  Such shares are received without consideration

•  Such shares are received on or after 01-06-2010

•  The aggregate fair market value of such asset received during the previous year exceeds Rs.50000

The whole of the aggregate fair market value of such sum shall be considered as income of that previous year.

B

Receipt of shares of a closely held company for inadequate consideration

•  During the previous year, the assessee (i.e., firm or closely held company) has received shares of a closely held company from one or more persons

•  Such shares are received on or after 01-06-2010

•  Such shares are received for a consideration.

•  Such consideration is less than the aggregate fair market value of the shares by an amount exceeding Rs.50000

The aggregate fair market value of such shares Less consideration paid, shall be considered as income of the previous year.

Note : The limit of Rs.50000/- is for per category.

Taxpoint :

•  The provision is applicable only if recipient is a firm or a closely held company

•  The provision is applicable only in case shares of a company not being a company in which the public are substantially interested. Where the asset involved is listed shares, the provision is not applicable.

•  For valuation of fair market value of shares – Refer sec. 56(2)(vii)

•  The provision is also applicable in case of buy-back of own shares by a closely held company itself.

Exception

The provision is not applicable to any such property received by way of a transaction not regarded as transfer u/s 47( via ) or ( vic ) or ( vicb ) or ( vid ) or ( vii ) [i.e. amalgamation, demerger, etc.]

Carry forward & set off of accumulated loss and unabsorbed depreciation in case of amalgamation, demerger or succession, etc. [Sec. 72A]

Amendment

In section 72A of the Income-tax Act -

(a) after sub-section (6), the following shall be inserted, namely:-

“(6A) Where there has been reorganisation of business whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor company, shall be deemed to be the loss or allowance for depreciation of the successor limited liability partnership for the purpose of the previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly :

Provided that if any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor limited liability partnership, shall be deemed to be the income of the limited liability part¬nership chargeable to tax in the year in which such conditions are not complied with.”;

(b) in sub-section (7), for clauses (a) and (b), the following clauses shall, respectively, be substituted, namely:-

‘(a) “accumulated loss” means so much of the loss of the predecessor firm or the proprietary concern or the private company or unlisted public company before conversion into limited liability partnership or the amalgamating company or the demerged company, as the case may be, under the head “Profits and gains of business or profession” (not being a loss sustained in a speculation business) which such predecessor firm or the proprietary concern or the company or amalgamating company or demerged compa¬ny, would have been entitled to carry forward and set off under the provisions of section 72 if the reorganisation of business or conversion or amalgamation or demerger had not taken place;

(b) “unabsorbed depreciation” means so much of the allowance for depreciation of the predecessor firm or the proprietary concern or the private company or unlisted public company before conversion into limited liability partnership or the amalgamating company or the demerged company, as the case may be, which remains to be allowed and which would have been allowed to the predecessor firm or the proprietary concern or the company or amalgamating company or demerged company, as the case may be, under the provisions of this Act, if the reorganisation of busi¬ness or conversion or amalgamation or demerger had not taken place;’.

Effect

A new sub-section (6A) has been inserted which provides that in case of succession of business, whereby, a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in sec. 47(xiiib), notwithstanding anything contained in any other provisions of the Act, the accumulated loss and the unabsorbed depreciation of the predecessor company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the successor limited liability partnership for the previous year in which business reorganisation was effected and the other provisions of the Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. However, if the conditions stipulated in sec. 47(xiiib) are not complied with, the set off of loss or allowance of depreciation which had been allowed shall be deemed to be the income chargeable to tax of the successor limited liability partnership for the previous year in which the conditions stipulated in sec. 47(xiib) are not complied with. Clause (a) and clause (b) of sub-section (7) define the expressions ‘accumulated loss’ and ‘unabsorbed depreciation’ respectively for the purpose of the aforesaid section.

The amendment is applicable from 01-04-2011

Deduction [Sec. 80A]

Amendment

In section 80A of the Income-tax Act, after sub-section (6) and the Explanation thereto, the following sub-section shall be inserted:

‘(7) Where a deduction under any provision of this Chapter under the heading “C.-Deductions in respect of certain incomes” is claimed and allowed in respect of profits of any of the specified business referred to in clause (c) of sub-section (8) of section 35AD for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year.’.

Effect

A new sub-section (7) has been inserted to provide that where a deduction under any provision of this Chapter under the heading ‘C. - Deductions in respect of certain incomes’ is claimed and allowed in respect of profits of any of the specified business referred to sec. 35AD(8)(c) for any assessment year, no deduction shall be allowed under the provisions of sec. 35AD in relation to such specified business for the same or any other assessment year.

The amendment is applicable from 01-04-2011

Deduction in respect of investment in long-term infrastructure bonds [Sec. 80CCF]

Amendment

After section 80CCE of the Income-tax Act, the following section shall be inserted:

“80CCF. Deduction in respect of subscription to long-term infrastructure bonds - In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, the whole of the amount, to the extent such amount does not exceed twenty thousand rupees, paid or deposited, during the previous year relevant to the assessment year beginning on the 1st day of April, 2011, as subscription to long-term infrastructure bonds as may, for the purposes of this section, be notified by the Central Government.”.

Effect

Applicable to

An individual or an HUF (irrespective of residential status or citizenship)

Conditions to be satisfied

Subscription to long-term infrastructure bonds: During the previous year, the assessee has paid or deposited as subscription to long-term infrastructure bonds as notified by the Central Government.

Quantum of deduction

Minimum of the following -

a) Amount deposited; or

b) Rs.20000

Taxpoint: The deduction u/s 80CCF is over and above the deduction u/s 80C, 80CCC and 80CCD. In other words, an eligible assessee can reduce his total income by Rs.1,20,000/- through investment being specified u/s 80C, 80CCC, 80CCD & 80CCF.

The amendment is applicable from 01-04-2011

Deduction in respect of medical insurance [Sec. 80D]

Background

Under sec. 80D(2)(a), the whole of the amount paid by any mode, other than cash, in the previous year out of the income of the assessee, being an individual, to effect or keep in force an insurance on his health or the health of his family as does not exceed in the aggregate Rs.15,000, is allowed to be deducted in computing the total income of the assessee.

Amendment

In section 80D of the Income-tax Act, in sub-section (2), in clause (a), after the words “his family”, the words “or any contribution made to the Central Government Health Scheme” shall be inserted with effect from the 1st day of April, 2011.

Effect

Clause (a) is amended so as to also allow the benefit of the deduction in respect of a contribution made by the assessee during the previous year to the Central Government Health Scheme within the said limit. However, said amendment is not applicable where payer is HUF.

The amendment is applicable from 01-04-2011

Deduction in respect of donations for scientific research, etc. [Sec. 80GGA]

Background

Section 80GGA provides that donations made to a university, college or other institution to be used for research in social science or statistical research qualify for deduction under that section provided such university, college or institution is approved for the purposes of sec. 35(1)(iii).

Amendment

Amended is made so as to also include a research association which has as its object undertaking of research in social science or statistical research and which for the time being is approved for the purposes of sec. 35(1)(iii).

Effect

Any sum paid to such research association will be eligible for deduction under section 80GGA.

The amendment is applicable from 01-04-2011

Deduction in respect of housing project [Sec. 80-IB(10)]

Background

Under sec. 80-IB(10), deduction is available in respect of profits derived by an undertaking from developing and building housing projects approved by a local authority before 31-3-2008. It is further provided that where a housing project has been, or, is approved by the local authority on or after 1-4-2004, it should be completed within 4 years from the end of the financial year in which the housing project is approved by the local authority. Under the existing provisions, the built-up area of the shops and other commercial establishments included in the housing project should not exceed five per cent of the aggregate built-up area of the housing project or 2,000 square feet, whichever is less.

Amendment

In section 80-IB of the Income-tax Act, in sub-section (10),-

(i) in clause (a),-

(a) in sub-clause (ii), after the words, figures and letters “the 1st day of April, 2004”, the words, figures and letters “but not later than the 31st day of March, 2005” shall be inserted;

(b) after sub-clause (ii), the following sub-clause shall be inserted, namely:-

“(iii) in a case where a housing project has been ap¬proved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.”;

(ii) in clause (d),-

(a) for the words “five per cent”, the words “three per cent” shall be substituted;

(b) for the words “two thousand square feet, whichever is less”, the words “five thousand square feet, whichever is higher” shall be substituted.

Effect

The period for completion of a housing project, approved on or after 1-4-2005, is increased from 4 years to 5 years. The existing limit of built-up area of the shops and other commercial establishments included in the housing project is revised to 3% of the aggregate built-up area of the housing project or 5,000 square feet, whichever is higher.

Deduction in respect of profit from business of hotels & convention centres in specified area [Sec. 80-ID]

Background

Section 80-ID(2) provides that the provisions of the said section apply to any undertaking engaged in the business of hotel or in the business of building, owning and operating a convention centre, located in the specified area, if such hotel or convention centre is constructed and has started or starts functioning at any time during the period beginning on 1-4-2007 and ending on 31-3-2010.

Amendment

In section 80-ID of the Income-tax Act, in sub-section (2):

(a) in clause (i), for the words, figures and letters “the 31st day of March, 2010”, the words, figures and letters “the 31st day of July, 2010” shall be substituted;

(b) in clause (ii), for the words, figures and letters “the 31st day of March, 2010”, the words, figures and letters “the 31st day of July, 2010” shall be substituted.

Effect

The said period is extended up to 31-7-2010. The amendment is applicable from 01-04-2011

Carry forward of MAT Credit [Sec. 115JAA]

Background

Section 115JAA provides that where any amount of tax is paid u/s 115JB by a company for any assessment year beginning on or after 1-4-2006, credit in respect of tax so paid shall be allowed to it in accordance with the provisions of sec. 115JAA.

Amendment

In section 115JAA of the Income-tax Act, after sub-section (6), the following shall be inserted:

‘(7) In case of conversion of a private company or unlisted public company into a limited liability partnership under the Limited Liability Partnership Act, 2008 (6 of 2009), the provisions of this section shall not apply to the successor limited liability partnership.

Explanation.—For the purposes of this section, the expressions “private company” and “unlisted public company” shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008 (6 of 2009).’.

Effect

The provisions of section 115JAA shall not apply to a limited liability partnership which has been converted from a private company or unlisted public company under the Limited Liability Partnership Act, 2008.

The amendment is applicable from 01-04-2011.

Rate of MAT [Sec. 115JB]

Background

Under section 115JB in case of a company, if the tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after 1-4-2010, is less than 15% of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be 15% of such book profit.

Amendment

In section 115JB of the Income-tax Act, in sub-section (1):

(a) for the words, figures and letters “the 1st day of April, 2010”, the words, figures and letters “the 1st day of April, 2011” shall be substituted;

(b) for the words “fifteen per cent” at both the places where they occur, the words “eighteen per cent” shall be substituted.

Effect

If the income-tax payable on the total income as computed under the Income-tax Act in respect any previous year relevant to the assessment year commencing on or after 1-4-2011 is less than 18% of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be 18% of such book profit.

The amendment is applicable from 01-04-2011.

Return in case of Research Association [Sec. 139(4C)]

Background

Under sec. 139(4C), every scientific research association referred to in sec. 10(21), shall, if the total income in respect of such scientific research association (without giving effect to the provisions of sec. 10) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year.

Amendment

In section 139 of the Income-tax Act, in sub-section (4C), for the words “scientific research association” at both the places where they occur, the words “research association” shall be substituted

Effect

A research association having its object undertaking research in social science or statistical research is also require to furnish its return of income u/s 139(4C).

The amendment is applicable from 01-04-2011.

Estimation by Valuation Officer [Sec. 142A]

Background

Section 142A provides that where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any billion, jewellery or other valuable article referred to in section 69A or section 69B is required for the purpose of making an assessment or reassessment under the Act, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him.

Amendment

In section 142A of the Income-tax Act, in sub-section (1), for the words, figures and letter “section 69B is required to be made”, the words, figures, letter and brackets “section 69B or fair market value of any property referred to in sub-section (2) of section 56 is required to be made” shall be substituted

Effect

The amended provision shall also enable the Assessing Officer to make reference to the Valuation Officer for making an estimate of fair market value of any property referred to in sec. 56(2) of the Act.

The amendment is applicable from 01-07-2010.

Centralized Processing of Return [Sec. 143(1B)]

Under section 143(1B), the Central Government may, for the purpose of giving effect to the scheme made u/s 143(1A), by notification in the Official Gazette, direct that any of the provisions of the Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification. However, no direction is to be issued after 31-3-2010. The said time limit is extended from 31-3-2010 to 31-3-2011.

Intimation to the Central Government [Proviso to Sec. 143(3)]

Under proviso to section 143(3), the Assessing Officer is under obligation to intimate the Central Government or the prescribed authority any contravention of provisions of sec. 10(21), by the association referred to in the said clause. The provisions also state that the Assessing Officer shall not withdraw exemption u/s 10 unless the intimation has been given by him to the prescribed authority and the approval granted to the association has been withdrawn.

The first proviso to sec. 143(3) is amended for giving effect to the applicability of sec. 10(21) to a research association which has as its object undertaking research in social science or statistical research. The references to scientific research association are substituted by references to research association.

Threshold limit for TDS Provisions

The revised threshold limit is as follow

Sl . No.

Section

Nature of payment

Existing threshold limit of payment (Rupees)

Revised threshold limit of payment (Rupees)

1 .

194B

Winnings from lottery or crossword puzzle

5,000

10,000

2 .

194BB

Winnings from horse race

2,500

5,000

3 .

 

194C

 

Payment to contractors

 

20,000

(for a single transaction)

30,000

(for a single transaction)

50,000

(for aggregate of transaction s during financial year)

75,000

(for aggregate of transaction s during financial year)

4 .

194D

Insuranc e commission

5,000

20,000

5 .

194H

Commission or Brokerage

2,500

5,000

6 .

194-I

Rent

1,20,000

1,80,000

7 .

194J

Fees for professional or technical services

20,000

30,000

The revised limit is applicable from 01-07-2010

Interest on default in payment of TDS [Sec. 201(1A)]

Under section 201(1A), the person, principal officer and the company referred to in section 201(1), in case of failure of deduction or payment of tax, are liable to pay simple interest at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid and such interest shall be paid before furnishing the statement in accordance with the provisions of sec. 200(3).

Sub-section (1A) is amended so as to increase the interest chargeable under that sub-section from 1% to 1.5% for every month or part of a month for tax deducted but not paid.

In nutshell, interest u/s 201(1A) is payable at following rates

Period

Rate of Interest

From the date on which such tax was deductible to the date on which such tax is deducted

Simple interest @ 1% per month or part thereof

From the date on which such tax was deducted to the date on which such tax is actually paid

Simple interest @ 1.50% per month or part thereof

TDS / TCS Certificate [Sec. 203(3) and 206C(5)]

Under section 203(3), where the tax has been deducted or paid in accordance with the provisions of Chapter XVII-B on or after 1-4-2010, there is no requirement to furnish a TDS certificate by the deductor to the deductee. Similarly, the first proviso to section 206C(5) provides that on or after 1-4-2010, no certificate shall be required to be furnished where the tax has been collected in accordance with the provisions of the aforesaid section. Both the aforesaid provision is now omitted. Hence, certificate of TDS / TCS is required to be issued to the deductee.

Settlement Commission

The entire revised provisions are enumerated hereinbelow

Application for settlement of cases [Sec. 245C & Rule 44C]

Who can apply

Any assessee

When to apply

At any stage of a Case

Conditions to be satisfied for application

•  The assessee has furnished the return of income, if he is required to do so; and

•  The additional amount of income-tax payable on the income disclosed in the application exceeds specified amount.

•  such tax and the interest thereon, which would have been paid under the provisions of this Act had the income disclosed in the application been declared in the return of income before the Assessing Officer on the date of application, has been paid on or before the date of making the application and the proof of such payment is attached with the application

Submission of application form

A settlement application shall be presented in Form No. 34B (in quintuplicate) by the applicant in person or by his agent, to the Secretary at the headquarters of the Commission at New Delhi or of the Bench within whose jurisdiction his case falls or to any officer authorised in this behalf by the Secretary, or shall be sent by registered post addressed to the Secretary, or to such officer.

A settlement application sent by post shall be deemed to have been presented on the day on which it is received in the office of the Commission.

Information to be given in the form

Following information are required to be given in application form –

•  Full and true disclosure of his income which has not been disclosed before the Assessing Officer;

•  The manner in which such income has been derived;

•  The additional amount of income-tax payable on such income; and

•  Such other particulars as may be prescribed.

If disclosure is made in given case after the assessee felt that game is over or when he has been pushed to wall and concealment of income has been established, such a disclosure may not be a disclosure as contemplated within the mischief of sec. 245C [ Nirmal & Navin (P) Ltd. vs Deputy Commissioner ]

Fees

The application should be accompanied by fee of Rs.500.

Signature on application

Every application and other document accompanied with such application must be signed by the person who is authorised to sign return of income u/s 140

Intimation to the AO

An assessee shall, on the date on which he makes an application, also intimate the AO in the prescribed manner of having made such application to the Commission

1. Case

Case means any proceeding for assessment, of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application is made.

Taxpoint

•  Proceedings for assessment shall not include followings:

•  a proceeding for assessment or reassessment or recomputation u/s 147 (Such proceeding shall be deemed to have commenced from the date on which a notice u/s 148 is issued)

•  a proceeding for making fresh assessment in pursuance of an order u/s 254/263/264, setting aside or cancelling an assessment (Such proceeding shall be deemed to have commenced from the date on which the order u/s 254/263/264, setting aside or cancelling an assessment was passed.)

•  A proceeding for assessment for any assessment year, other than the proceedings of assessment or reassessment referred above shall be deemed to have commenced from the 1st day of the assessment year and concluded on the date on which the assessment is made.

•  A proceeding for assessment or reassessment for any of the assessment years u/s 153A/153B, shall be deemed to have commenced on the date of issue of notice initiating such proceedings and concluded on the date on which the assessment is made

2. Additional amount of income tax

The additional amount of income-tax payable shall be calculated in accordance with the following provisions–

•  Where the income disclosed in the application relates to only one previous year -

Situation

Income for the purpose

Additional amount of tax

Col. 1

Col. 2

Col. 3

If return of such year has not been filed u/s 139 (whether or not assessment has been made)

Income disclosed in the application

Tax as calculated on income shown in col. 2

If return of such income has been submitted (whether or not assessment has been made)

Income disclosed in the application as well as in the return

Tax as calculated on income shown in col. 2

Less : Tax calculated on the total income returned for that year

****

(***)

•  Where the income disclosed in the application relates to more than one previous year –

•  Calculate additional amount of income tax payable (as mentioned above) in respect of each year for which the application has been made.

•  The aggregate amount of the additional income tax of each of the years shall be the additional amount of income-tax payable.

3 Specified amount

Particulars

Amount

Where an application before the Commission is filed in a case where proceedings for assessment or reassessment have been initiated as a result of search or as a result of requisition of books of account or assets, etc.

Additional amount of income tax payable on the income disclosed in application should exceeds Rs.50 lakh

In any other case

Additional amount of income tax payable on the income disclosed in application should exceeds Rs.10 lakh

Taxpoint : An application made to the Commission shall not be allowed to be withdrawn by the assessee.

Procedure on receipt of an application [Sec. 245D]

Admission or rejection of application

On receipt of an application, the Settlement Commission shall within 7 days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of 14 days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with:

Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with

Report from the Commissioner

•  The Commission shall ( in respect of an application which is allowed to be proceeded) within thirty days from the date on which the application was made call for a report from the Commissioner, and the Commissioner shall furnish the report within a period of 30 days of the receipt of communication from the Settlement Commission.

•  On the basis of the report and within a period of 15 days of the receipt of the report, by an order in writing (and after giving an opportunity of being heard), declare the application in question as invalid and shall send the copy of such order to the applicant and the Commissioner:

•  Where the Commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Commissioner

Examination of Records and Passing of order

•  The Commission in respect of an application which has not been declared invalid may call for the records from the Commissioner

•  After examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case

•  The Commissioner shall furnish the report within a period of 90 days of the receipt of communication from the Settlement Commission. Where the Commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pass an order without such report.

•  After -

a.  examination of the records and the report of the Commissioner, if any, received

b.  giving an opportunity to the applicant and to the Commissioner to be heard (either in person or through a representative)

c.  and after examining such further evidence as may be placed before it or obtained by it,

the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner.

•  Every such order shall provide for -

a.  The terms of settlement including any demand by way of tax, penalty or interest;

b.  The manner in which any sum due under the settlement shall be paid;

c.  All other matters to make the settlement effective; and

d.  The settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresenta­tion of facts.

•  Such order shall be passed within 18 months [If application has been filed on or after 1-6-2007 but before 1-6-2010, such order shall be passed within 12 months from the end of the month in which application was made] from the end of the month in which the application was made

Time limit for payment of tax

Any tax payable in pursuance of order of settlement commission must be paid within 35 days of the receipt of a copy of the order.

Interest on late payment of tax due on settlement

Where tax, as settled by the Commission, is not paid within 35 days of the receipt of a copy of the order (whether or not the Commission has extended the time for payment), the assessee shall be liable to pay simple interest @ 1.25% p.m. on the amount remaining unpaid from the date of expiry of the period of 35 days.

Settlement obtained by fraud, etc.

The settlement shall be void, if it is subsequently found by the Settlement Commission, that it has been obtained by fraud or misrepresentation of facts.

Consequences where the settlement becomes void

•  Where a settlement becomes void, the proceedings shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission.

•  The income-tax authority concerned may complete such proceedings before the expiry of two years from the end of the financial year in which the settlement became void.

Power of Settlement Commission

To order provisional attachment to protect revenue [Sec. 245DD]

•  Where, during the pendency of any proceeding, the Settlement Commission is of the opinion that for the purpose of protecting the interests of the revenue it is necessary to do so, it may, by order, attach provisionally (in the manner provided in the Second Schedule) any property belonging to the applicant.

•  Cessation of attachment: Every provisional attachment shall cease to have effect after the expiry of a period of 6 months from the date of such order. However, the Commission may, for reasons to be recorded in writing, extend the period by such further period(s) as it thinks fit.

To provide inspection, etc., of reports [Sec. 245G]

•  No person shall be entitled to inspect or obtain copies of, any reports given by any income-tax authority to the Commission. However, on an application, the Commission may furnish copies thereof to any such person on payment of the prescribed fee.

•  For the purpose of enabling assessee to rebut any evidence brought on record against him in any such report, the Settlement Commission shall furnish him with a certified copy of any such report or part thereof relevant for the purpose. For this purpose, assessee needs to make an application and payment of the prescribed fee.

To grant immunity from prosecution and penalty [Sec. 245H]

•  The Settlement Commission may grant immunity (subject to such conditions as it may think fit to impose) from –

a.  Prosecution for any offence under this Act or under the Wealth Tax Act; and

b.  Imposition of any penalty (wholly or partly) under this Act,

- with respect to the case covered by it.

•  Such immunity can be granted by the Commission, if the assessee -

a.  has co-operated with the Settlement Commission in the proceedings before it;

b.  has made a full and true disclosure of his income; and

c.  has made a full and true disclosure of the manner in which such income has been derived.

Taxpoint

•  Such immunity shall not be granted by the Settlement Commission in cases where the proceedings for the prosecution have been instituted before the date of receipt of the application u/s 245C.

•  The Settlement Commission does not have the power to reduce or waive interest statutorily payable u/s 234A, 234B and 234C, except to the extent of granting relief under circulars issued by the Board.

•  It has to be noted that waiver or reduction of interest u/s 220(2A) and other provisions is waived or reduced with certain conditions. If these conditions are satisfied, the Commission has the power to direct waiver or reduction

•  Interest u/s 234B shall be charged upto date of the order of Settlement Commission u/s 245D(4)

Withdrawal of immunity granted

An immunity granted to a person shall stand withdrawn if –

•  Such person fails to -

a.  Pay any sum specified in the order of settlement within the time allowed by the Settlement Commission; or

b.  Comply with any other condition(s) subject to which the immunity was granted.

•  Such person had, in the course of the settlement proceedings, concealed any particulars material to the settlement or had given false evidence.

Consequences of withdrawal of immunity granted

On withdrawal of immunity granted the provisions of this Act shall apply as if such immunity had not been granted.

Other Power [Sec. 245F]

•  In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers, which are vested in an income-tax authority under this Act.

•  The Commission shall have exclusive jurisdiction from the date on which the application was made. Where an application is rejected or not allowed to be further proceeded or declared invalid, the Commission shall have such exclusive jurisdiction upto the date on which application is rejected, etc.

•  The Commission shall have power to regulate its own procedure and the procedure of Benches thereof in all matters or of the discharge of its functions, including the places at which the Benches shall hold their sittings.

•  In the absence of any express direction to the contrary by the Settlement Commission, nothing contained in this section shall affect the operation of any other provision of this Act -

a. Requiring the applicant to pay tax on the basis of self-assessment in relation to the matters before the Settlement Commission; and

b. Related to any matters other than those before the Settlement Commission.

Abatement of proceeding [Sec. 245HA]

•  Where an application has been rejected or not been allowed to be proceeded or declared as invalid or has been allowed but no order has been passed within prescribed time (12 months), the proceedings before the Settlement Commission shall abate on the specified date (i.e. the day on which application is rejected or declared invalid or time limit of 12 months expires).

•  Where a proceeding before the Commission abates, the AO before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application u/s 245C had been made.

•  The AO shall be entitled to use all the material and other information produced by the assessee before the Commission or the results of the inquiry held or evidence recorded by the Commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the AO or held or recorded by him in the course of the proceedings before him.

•  For the purposes of the time-limit u/s 149, 153, 153B, 154, 155, 158BE & 231 and for the purposes of payment of interest u/s 244A, for making the assessment or reassessment, the period commencing on and from the date of the application to the Settlement Commission and ending with specified date shall be excluded.

•  Where a proceeding before the Settlement Commission abates, the period of limitation available u/s 153 to the AO for making an order of assessment shall, after the exclusion of the said period, be not less than 1 year; and where such period of limitation is less than 1 year, it shall be deemed to have been extended to 1 year.

Credit for tax paid in case of abatement of proceedings [Sec. 245HAA]

Where an application made u/s 245C is rejected or not allowed to be proceeded or declared invalid or an order has not been passed within the time of 12 months, the Assessing Officer shall allow the credit for the tax and interest paid on or before the date of making the application or during the pendency of the case before the Settlement Commission.

Order of settlement to be conclusive [Sec. 245-I]

Every order of settlement shall be conclusive as to the matter stated therein. Any matter covered by such order shall not be reopened in any proceeding under this Act or under any other law for the time being in force.

Note : An order, which have a mistake apparent from the record, can be rectified by Commission u/s 154

Recovery of sums due under order of settlement [Sec. 245J]

Any sum specified in an order of settlement may, subject to such conditions, if any, as may be specified therein, be recovered, and any penalty for default in making payment of such sum may be imposed and recovered in accordance with the provisions of Chapter XVII, by the Assessing Officer having jurisdiction over the person who made the application for settlement.

Restriction on subsequent application for settlement in certain cases [Sec. 245K]

•  Where -

a.  an order of settlement provides for the imposition of a penalty on the person who made the application for settlement, on the ground of concealment of particulars of his income; or

b.  after the passing of an order of settlement, such person is convicted of any offence under Chapter XXII in relation to that case; or

then, he shall not be entitled to apply for settlement in relation to any other matter.

•  Where a person has made an application and if such application has been allowed to be proceeded with, such person shall not be subsequently entitled to make an application for settlement. That means, settlement can be made once in life time.

Power of High Court [Sec. 260A / 256]

Background

Section 260A(2) provides 120 days from the date of receipt of the order appealed against, as the period of limitation for filing of an appeal to the High Court.

Amendment

In section 256 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1981, namely:-

“(2A) The High Court may admit an application after the expiry of the period of six months referred to in sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.”

In section 260A of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1998, namely:-

“(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.”

Effect

A new sub-section (2A) is inserted so as to empower the High Court to admit an appeal after the expiry of said period of 120 days if it is satisfied that there was sufficient cause for not filing the appeal within the said period. Similar amendment is also been made u/s 260A

Penalty u/s 271B

Section 271 B provide that if any person fails to get his accounts audited in respect of any previous year relevant to an assessment year or furnish a report of such audit as required u/s 44AB, the Assessing Officer may impose a penalty equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or a sum of Rs. 1 lakh, whichever is less. The said limit is enhanced from Rs. 1,00,000 to Rs. 1,50,000.

Document Identification Number [Sec. 282B]

Under section 282B, the income-tax authority is required to allot a computer generated Document Identification Number before issue of every notice, order, letter or any correspondence issued by him to any other income-tax authority or assessee or any other person and such number shall be quoted thereon. It also provides that every document, letter or correspondence received by an income-tax authority or on behalf of such authority, shall be accepted only after allotting and quoting of a computer generated Document Identification Number. The provisions of this section will come into force with effect from 1- 10-2010. Section 282B is amended so as to provide that Document Identification Number will be required to be allotted on or after 1-7-2011

Taxation of Income of non-life insurance business [Rule 5(b) of the First Schedule]

Background

Under clause (b) of rule 5 of Schedule I, as inserted by the Finance (No. 2) Act, 2009, adjustment shall be made by way of deduction in respect of any amount either written off or provided in the accounts to meet diminution in or loss on realisation of investments in accordance with the regulations made by the Insurance Regulatory and Development Authority. Adjustment shall also be made by way of increase in respect of any amount taken credit for in the accounts on account of appreciation of or gains on realisation of investments in accordance with the regulations made by the Insurance Regulatory and Development Authority.

Amendment

In the First Schedule to the Income-tax Act, in rule 5, for clause (b) [as inserted by clause (ii) of section 80 of the Finance (No. 2) Act, 2009 (33 of 2009)], the following clause shall be substituted with effect from the 1st day of April, 2011, namely:

“(b) (i) any gain or loss on realisation of investments shall be added or deducted, as the case may be, if such gain or loss is not credited or debited to the profit and loss account;

(ii) any provision for diminution in the value of investment debited to the profit and loss account, shall be added back;”.

Effect

Any gain or loss on realisation of investments shall be added or deducted, as the case may be, if such gain or loss is not credited or debited to the profit and loss account and any provision for diminution in the value of in-vestment debited to the profit and loss account shall be added back.