iamendments in direct tax for the assessment year 2010-11
This query is : Resolved
04 March 2010
dear friends,
im in need of amendments in direct tax for the asessment year 2010-11.
im in need of amendments in direct tax for the asessment year 2010-11.
05 March 2010
PROPOSED AMENDMENTS IN THE FINANCE BILL (2) OF 2009 (Direct Tax and Service Tax)
1. Increase in exemption limit for individual and women by Rs. 10000/- and for Sr. Citizens by Rs. 15000/-.
2. Slab rates of tax remaining the same.
3. No surcharge for all Assessee’s except Companies.
4. Education cess and higher education cess continue for all assessees.
5. Education cess and higher education cess will not be levied on tax deducted or collected at source in the case of a domestic company and any other person who is resident in India.
6. Education cess and higher education cess will be applied on tax deducted at source in the case of salary payments.
7. Definition of charitable purpose broadened to include preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest.
8. Definition of “firmâ€, “partner†and “partnership†in the context of an entity registered under the Limited Liability Partnership Act, 2008 is defined and retained same as the definitions of “firmâ€, “partner†and “partnership†in the context of a partnership formed under the Indian Partnership Act, 1932.
9. The expression “manufacture†has been defined the term “manufacture†with its gramatical variations would mean a change in a non-living physical object or article or thing resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use, or bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.
10. In cases of relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under section 10 shall be allowed to him in relation to such, or any other, assessment year.- w.e.f. A.Y. 2010-11.
11. Sunset Clause under section 10A allowed upto AY 2011-12.
12. Sunset clause under section 10B allowed upto AY 2011-12.
13. The word assessee has been substituted by the word “undertaking†in section 10AA.- w.e.f. AY 2010-11.
14. Section 17 which relates to definitions of “salaryâ€, “perquisite†and “profits in lieu of salary†has been amended to provide that perquisite include the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. It is also proposed to provide that perquisite include the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees and the value of any other fringe benefit or amenity as may be prescribed. These amendments will take effect from the 1st April, 2010 and will, accordingly, apply to the assessment year 2010-11 and subsequent assessment years.
15. Section 28 is amended to provide that any sum, whether received or receivable, in cash or kind, by reason of any capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, shall be chargeable to income-tax under the head “Profit and gains of business or profession, if the whole of the expenditure on such capital asset has been allowed as a deduction under section 35AD which contains provisions relating to deduction in respect of expenditure on specified business.
16. Section 32 of the Income tax Act, relating to depreciation is amended to omit reference to “block of assets†from Explanation 3 to sub-section (1) of section 32. Consequent to proposed amendments, the expression “block of assets†shall have the same meaning as assigned to it in clause (11) of section 2 of the said Act. The dual definition of block of asset has been corrected.
17. Section 35 relating to weighted deducted @ 150% of expenditure on scientific research which was available for specified businesses has been extended to all businesses except a small negative list.
18. A new section 35AD has been introduced which relates to deduction in respect of Expenditure on specified business. The specified business has been defined to mean the business of setting up and operating of cold chain facilities for storage or transportation of agricultural produce, dairy products and other related items. It would also include the business of warehousing for storing agricultural produce and the business of 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. The proposed section would, inter alia, allow one hundred per cent deduction in respect of any capital expenditure incurred, other than expenditure incurred on the acquisition of any land or goodwill or financial instrument, during the year by the specified business subject to the provisions contained in that section.
19. It is proposed to omit the commodity transaction tax retrospectively with effect from 1st April, 2009.
20. Section 40 relating to amounts not deductible is proposed to revise the limits of remuneration paid to the partners and provide uniform limits for both professional firms and non-professional firms as under–
(a) on the first Rs.3,00,000 of the book-profit or in case of a loss Rs. 1,50,000 or at the rate of 90 per cent. of the book-profit, whichever is more;
21. Section 40A relating to expenses or payments not deductible in certain circumstances. It is proposed to insert a second proviso so as to provide that in case of payment made for plying, hiring or leasing goods carriages, the ceiling of payment in cash of twenty thousand rupees shall be enhanced to thirty-five thousand rupees. The proposed amendment will take effect from 1st October, 2009.
22. Section 43 relating to definitions of certain terms relevant to income from profits and gains of business or profession. The proposed amendment seeks to insert a new Explanation to provide that the actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee under section 35AD.
23. Section 44AA relating to maintenance of accounts by certain persons carrying on profession or business. If it is claimed that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD (8% of gross receipts) and if the income exceeds the maximum amount which is not chargeable to income tax the books are to be maintained. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
24. Section 44AB relating to the audit of accounts of certain persons carrying on business or profession. The proposed amendment seeks to provide that in the case of an assessee, who is covered under the new proposed section 44AD (8% of the gross receipt), the audit of books of account is required if he claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD and if his income exceeds the maximum amount which is not chargeable to income-tax. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
25. Section 44AD of the Act relating to special provision for computing profits and gains of business on presumptive basis. The proposed new section 44AD seeks to provide for estimating income of assessee who is engaged in any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE, at a sum equal to eight per cent. of the total turnover or gross receipts in the previous year on account of such business, or, as the case may be, a sum higher than the aforesaid sum claimed to be earned by the assessee. The scheme will apply to such resident assessee who is an individual, Hindu undivided family and partnership firm but not limited liability partnership firm. It is also proposed that the provisions of advance tax shall not apply to the assessee, who opts for the above scheme in respect of such business. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
26. Section 44AE relating to special provision for computing profits and gains of business of plying, hiring or leasing goods carriages. It is proposed to enhance aforesaid amounts of profits and gains from (a) three thousand five hundred rupees to five thousand rupees per month or part of a month or the amount claimed to be actually earned by the assessee, whichever is higher in the case of heavy goods vehicles and (b) from three thousand one hundred and fifty rupees to four thousand five hundred rupees per month or part of a month or the amount claimed to be actually earned by the assessee, whichever is higher in the case of vehicles other than heavy goods vehicles. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
27. Section 49 relates to cost with reference to certain modes of acquisition. It is proposed to provide that where the capital gain arises from the transfer of specified security or sweat equity shares, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account for the purposes of the said sub-clause. This amendment will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.
28. Section 50B relating to special provision for cost of computation of capital gains in case of slump sale. It is proposed to provide that for computing the net worth, the aggregate value of total assets shall be, (a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub item (C) of item (i) of sub-clause (c) of clause (6) of section 43; (b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable as a deduction.
29. Section 50C relating to special provision for full value of consideration in certain cases. It is proposed to amend the said section so as to substitute the words “or assessed†wherever they occur in the said section by the words “or assessed or assessableâ€. This amendment will take effect from the 1st October, 2009.
30. Section 56 relating to income from other sources. The proposed amendment seeks to tax specified properties, including a sum of money, received without consideration or for inadequate consideration. This amendment will take effect from 1st October, 2009.
31. A new section 73A which contains provisions relating to carry forward and set off of losses by specified businesses is proposed.
32. Section 80A relating to deductions to be made from the gross total income in computing total income. The proposed amendment provides that where in the case of an assessee any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be.
It is also further provided that where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provisions of Chapter III under the heading “Câ€. These amendments will take effect retrospectively from the 1st April, 2003 and will, accordingly, apply in relation to assessment year 2003-2004 and subsequent years.
Further it is proposed that where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business 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. This amendment will take effect retrospectively from 1st April, 2009.
33. Section 80CCD relating to deduction in respect of contribution to pension scheme notified by the Central Government. It is proposed to amend the said sub-section so as to allow deductions under the aforesaid section to any other assessee in addition to an assessee, being an individual, employed by the Central Government or any other employer on or after the 1st day of January, 2004.
34. Section 80DD which relates to deduction in respect of maintenance including medical treatment of a dependant, who is a person with disability. The proposed amendment seeks to enhance the present limit of seventy five thousand rupees to one hundred thousand rupees for a dependant who is a person with severe disbaility.
35. Section 80E relating to deduction in respect of interest on loan taken for higher education. It is proposed to provide that “higher education†will mean any course of study pursued after passing the senior secondary examination or its equivalent from any school.
36. Section 80G relating to deductions in respect of donations to certain funds, charitable institutions, etc. The proposed amendment seeks to do away with the time limit specified in the aforesaid proviso. The proposed amendment will take effect from1st day of October, 2009.
37. Section 80GGB which relates to deduction in respect of contributions given by companies to political parties. It is proposed to amend the aforesaid section so as to bring “electoral trust†within the scope of the above said section.
38. Section 88GGC which relates to deduction in respect of contributions given by any person to political parties. It is proposed to amend the aforesaid section so as to bring “electoral trust†within the scope of the above said section.
39. Section 80-IA relating to deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Under the existing provisions a deduction is allowed to an undertaking which, – (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on 1st April, 1993 and ending on 31st March, 2010; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2010; (c) undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on 1st April, 2004 and ending on 31st March, 2010. It is proposed to amend sub-clauses (a), (b) and (c) of the said clause so as to extend the time limit from 31st March, 2010 to 31st March, 2011. These amendments will take effect retrospectively from 1st April, 2009.
40. Section 89 relating to relief when salary, etc., is paid in arrears or in advance. It is proposed to insert a proviso to the said section so as to provide that no relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service. This amendment will take effect from 1st April, 2010, and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.
41. Section 90 relating to agreement with foreign countries. It is proposed to substitute the said section 90 by a new section so as to confer power upon the Central Government to enter into agreement with the Government of any specified territory outside India in addition to entering into agreement with foreign countries as provided in the said existing section 90. It is further proposed to insert an Explanation in the new section 90 to define “specified territories†which means any area outside India which may be notified as such by the Central Government for the purposes of said section. This amendment will take effect from 1st October, 2009.
42. Section 92C which relates to computation of arm’s length price. It is proposed to substitute the existing proviso so as to provide that where more than one price is determined by the most appropriate method, the arm’s length price shall be taken to be the arithmetical mean of such prices. It is further provided that the variation between the arm’s length price so determined and price at which the international transaction has actually been undertaken does not exceed five per cent. of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price. This amendment will take effect from 1st October, 2009.
43. A new section 92CB relating to power of Board to make ‘safe harbour rules’. The proposed new section seeks to provide that the determination of arm’s length price under section 92C or section 92CA shall be subject to safe harbour rules. It is also proposed that the Board may make rules for ‘safe harbour’. It is also proposed to insert an Explanation to provide that ‘safe harbour’ means circumstances in which the income tax authorities shall accept the transfer price declared by the assessee. This amendment will take effect retrospectively from 1st April, 2009.
44. Section 115BBC relating to anonymous donations to be taxed in certain cases. It is proposed to amend the said section so as to provide that anonymous donations, to the extent the aggregate of anonymous donations exceeds five per cent of the total income of the assessee or an amount of rupees one lakh, whichever is higher, would be taken into account for the purposes of aforesaid section.
45. Section 115JA relating to deemed income relating to certain companies. It is proposed to amend the said section so as to provide that any provision for diminution in the value of any asset will also be included in the computation of book profit under the said section. This amendment will take effect retrospectively from 1st April, 1998 and will, accordingly, apply in relation to the assessment year 1998-99 and subsequent years.
46. Section 115JAA relating to tax credit (MAT credit) in respect of tax paid on deemed income relating to certain companies. It is proposed to amend to provide that the amount of tax credit determined shall not be allowed to carry forward beyond the tenth assessment year (instead of seventh assessment year) immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A).
47. Section 115JB relating to special provision for payment of tax by certain companies (MAT). It is proposed to amend the said section to provide that if the income-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 1st April, 2010 is less than fifteen per cent. 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 fifteen per cent. of such book profit. Any provision for diminution in the value of any asset will also be included in the computation of book profit under the said section. This amendment will take effect retrospectively from 1st April, 2001 and will, accordingly, apply in relation to the assessment year 2001-02 and subsequent assessment years.
48. Section 115-O relating to tax on distributed profits of domestic companies. It is proposed to amend the said section so as to provide that the amount referred to in that section shall also be reduced by the amount of dividend, if any, paid to any person for, or on behalf of, the New Pension System Trust. This amendment will take effect retrospectively from 1st April, 2009.
49. Section 115WE relating to Assessment of FBT. It is proposed to amend the said section so as to extend the time limit from 31st March, 2009 to 31st March, 2010. This amendment will take effect retrospectively from 1st April, 2009.
50. A new section 115WM provides that nothing contained in Chapter XII-H shall apply in respect of any assessment for the assessment year commencing on 1st April, 2010 or any subsequent year. Accordingly the provisions of FBT becomes non operative for assessment year 2010-11.
51. Section 131 which relates to power regarding discovery, production of evidence, etc. has been amended by inserting new section 144C in the Income-tax Act so as to provide that the assessee shall file his objections among others to the Dispute Resolution Panel against the draft of the proposed order of assessment of Assessing Officer. It is, therefore, proposed to provide in section 131 that Dispute Resolution Panel referred to in section 144C shall have the same power as are vested in a court under the Code of Civil Procedure, 1908. This amendment will take effect from 1st October, 2009.
52. Section 132 of the Income-tax Act relating to search and seizure. It is proposed to amend the said sub-section so as to clarify various authorities having power to issue warrant of authorization for conducting search and seizure under the said section. This amendment will take effect retrospectively from 1st June, 1994.
53. Section 132A relating to powers to requisition books of account, etc. It is proposed to amend the said section so as to include that Additional Director or Additional Commissioner may be authorized to exercise the powers specified in the said section. This amendment will take effect retrospectively from 1st June, 1994.
54. Section 139A relating to Permanent Account Number (PAN). It is proposed to amend the said sub-section so as to provide that every person deducting tax under this Chapter shall quote the Permanent Account Number of the person to whom such sum or income or amount has been paid by him. It is proposed to amend the said sub-section so as to provide that in case of tax collected at source, every person collecting tax in accordance with the provisions of section shall quote the Permanent Account Number of every buyer or licensee or lessee. This amendment will take effect from 1st October, 2009.
55. Section 140 relating to return by whom to be signed in the case of a limited liability partnership, the return shall be signed and verified by the designated partner and where for any unavoidable reason the designated partner is not able to sign the return or where there is no designated partner by any other partner.
56. A new section 144C relating to Dispute Resolution Panel. With a view to provide speedy disposal, it is proposed to amend the Income-tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism. This amendment will take effect from 1st October, 2009.
57. Section 145A which relates to method of accounting in the cases of compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.
58. Section 147 relating to income escaping assessment. It is proposed to insert Explanation to the said section so as to provide that for the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. This amendment will take effect retrospectively from 1st April, 1989 and will, accordingly, apply in relation to the assessment year 1989-1990 and subsequent years.
59. A new section 167C relating to liability of partners of limited liability partnership in liquidation. The proposed new section seeks to provide that where any tax is due from a limited liability partnership in respect of any income of any previous year or from any other person in respect of any income of any previous year during which such other person was a limited liability partnership cannot be recovered, then, every person who was a partner of the limited liability partnership at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership.
60. Section 194C relating to deduction of tax at source on payment to contractors and sub-contractors. The proposed amendment seeks to substitute section 194C. Sub-section (1) of the proposed amendment to provide that any person shall deduct tax at source at the rate of one per cent if the payee is an individual or a Hindu undivided family or at the rate of two per cent in the case of any other person, on payment to a resident contractor for carrying out any work. It is further provided that where any sum is paid or credited for carrying out any work, tax shall be deducted at source on the invoice value excluding the value of material if such value is mentioned separately in the invoice, or on the whole of the invoice value if the value of material is not mentioned separately in the invoice. The proposed amendment further provides that no tax shall be deducted at source in case of payment for plying, hiring or leasing goods carriages provided that the contractor provides his Permanent Account Number.
It is further defined the expression “work†to include advertising, broadcasting and telecasting including production of programmes for such broadcasting or telecasting, carriage of goods or passengers by any mode of transport other than by railways, catering and manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. The Explanation further provides that the work shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person other than such customer. This amendment will take effect from 1st October, 2009.
61. Section 194-I which relates to deduction of tax at source on any income payable by way of rent. It is proposed to change the rate of deduction as below :
(a) two per cent. for the use of any machinery or plant or equipment; and
(b) ten per cent. for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings.
These amendments will take effect from 1st October, 2009.
62. A new section 200A providing for processing of statements of tax deducted at source. The proposed new section 200A provides that the statement of tax deduction at source shall be processed and sums deductible shall be computed after making adjustments of any arithmetical error or apparent incorrect claim in the statement and interest, if any, shall be charged on the sum so computed. The sum payable or refundable to the deductor shall be determined after adjusting the aforesaid computed sum against any amount paid and any amount paid otherwise by way of tax or interest. Intimation shall be sent to the deductor specifying the amount payable or refundable to the deductor. Further, no intimation shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. It is further provided that for the processing of statements, the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor. These amendments will take effect from 1st April, 2010.
63. It is further provided that time limit for passing of order under sub-section (1) of section 201 in case of resident tax payers. It provides that no order shall be made under sub section (1) of section 201, deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax in the case of a person resident in India, at any time after the expiry of two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed. It further provides that in any other case such order shall not be made at any time after four years from the end of the financial year in which payment is made or credit is given. It further provides that such order for a financial year commencing on or before 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. This amendment will take effect from 1st April, 2010.
64. A new section 206AA relating to requirement to furnish Permanent Account Number. The said section specifies that any person who is entitled to receive any sum or income or amount on which tax is deductible (hereinafter referred to as the deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereinafter referred as the deductor), failing which tax shall be deducted at the rate mentioned in the relevant provisions of the Act or at the rate in force or at the rate of twenty per cent (20%) whichever is higher. It is further proposed that the declaration filed under section 197A shall not be valid unless the person filing the declaration furnishes his Permanent Account Number in such declaration. The proposed amendment provides that in case any declaration becomes invalid, the deductor shall deduct the tax at source on a higher rate of deduction i.e. 20%.
It is also proposed for obtaining lower deduction / no deduction of tax certificate from AO, no such certificate under section 197 shall be granted unless it contains the Permanent Account Number of the applicant.
It is also further provided that the deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all correspondence, bills, vouchers and other documents which are exchanged between them, where the Permanent Account Number provided by the deductee is invalid or it does not belong to the deductee, then it shall be deemed that Permanent Account Number has not been furnished to the deductor and tax shall be deducted at a higher rate of 20%. This amendment will take effect from 1st April, 2010.
65. Section 208 relating to conditions of liability to pay advance tax. Limit has been enhanced from five thousand rupees to ten thousand rupees. This amendment will take effect retrospectively from 1st April, 2009.
66. Section 282 which relates to service of notice generally. Under the existing provisions contained in the said section a notice or requisition under the Act may be served on the person therein named either by post or as if it were a summons issued by a court. It is proposed to provide that the service of notice or summon or requisition or order or any other communication may be made by delivering or transmitting a copy thereof by post or courier service or in such manner as provided in the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; or by any other means of transmissions as may be provided by rules made by the Board in this behalf. It is also proposed that the Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which such communication may be delivered. This amendment will take effect from 1st October, 2009.
67. A new section 282B relating to allotment of Document Identification Number. It is proposed to insert a new section 282B in the Income-tax Act so as to provide that every income tax authority shall allot a computer generated Document Identification Number in respect 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 is further proposed that where the notice, order, letter or any correspondence issued by any income-tax authority does not bear a Document Identification Number, such notice, order, letter or any correspondence shall be treated as invalid and shall be deemed never to have been issued. It is also proposed to provide that every document, letter or any 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. It is also proposed to provide where the document, letter or any correspondence received by any income-tax authority or on behalf of such authority does not bear Document Identification Number, such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received. This amendment will take effect from 1st October, 2010.
68. A new section 293C relating to power to withdraw the approval. It is proposed to insert a new section 293C in the Income-tax Act so as to provide that the income-tax authority, who has been conferred upon the power under any provision of this Act to grant any approval to any assessee, may withdraw such approval at any time. This amendment will take effect from 1st October, 2009.
69. It is further proposed to amend the Thirteenth Schedule of the Income-tax Act. The said Schedule specifies the list of articles or things, Excise classification, and the States for the purposes of availing of deductions in the case of the State of Himachal Pradesh and the State of Uttranchal under section 80-IC of the said Act. It is proposed to substitute serial number 19 (paper) under Part B of the said Thirteenth Schedule which specifies certain new articles or things and Excise classification. This amendment will take effect from 1st April, 2010.
Wealth-tax
Section 3 of the Wealth tax Act, relating to charge of wealth tax is proposed at the rate of one per cent. of the amount by which the net wealth exceeds thirty lakh rupees compare to the earlier limit of fifteen lakh.
Service Tax
- Imposition of service tax on transportation of goods by railways.
- imposition of service tax on services provided or to be provided to any person, by any person, in relation to cosmetic surgery or plastic surgery other than the surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma.
- Imposition of service tax on services provided or to be provided to any person, by any person, in relation to transport of coastal goods and goods through inland water.
- imposition of service tax on services provided or to be provided to any business entity, by any business entity, in relation to advice, consultancy or assistance in any branch of law excluding appearance before any court, tribunal or authority and the term ‘business entity’ has been defined to include association of persons, body of individuals, company or firm but not to include an individual.
Changes in the Works Contract (Composition Scheme for Payment of Service
Tax) Rules, 2007: These rules provide a simplified procedure for working out the tax
liability by the service providers providing works contract service. Instead of
working out the service element from the value of works contract and paying service
tax at full rate (i.e. 10%) the service provider is allowed to pay 4% on the ‘gross
amount charged’ for the works contract. The reason for prescribing the lower rate
under the scheme is that the service provider need not bifurcate the gross value of
works contract. It was expected that the gross value should be shown to include the
total value of materials as well as services used in providing the taxable services.
However, it has been reported that in certain cases, the taxpayers are not including
the full value of the goods required for execution of works contract for working out service tax liability under the Composition Scheme by either excluding the value of
goods received free of cost from their client or splitting the contract into a sale
contract (for a portion of goods required to execute the works contract) and works
contract (for only a portion of the total value of goods and the labor charges), thus
reducing the value of works contract for the purposes of calculating service tax. In
order to plug this loophole, the Explanation appearing in sub-rule (3) is being
amended to provide that the composition scheme would be available only to such
works contracts where the gross value of works contract includes the value of all
goods used in or in relation to the execution of works contract whether received free
of cost or for consideration under any other contract. This condition would not apply
to those works contracts, where either the execution of works contract has already
started or any payment (whether in part or in full) has been made on or before the
date of the amendment, i.e. 07.07.2009, from which the said amendment becomes
effective (refer notification No.23/2009-ST dated 07.07.2009).
2 Amendments made in CENVAT Credit Rules (pertaining to service tax)
2.1 Rule 3(5B) of the CENVAT Credit Rules provide that, if value of any input or
capital goods on which CENVAT credit has been taken, is written off fully or where
provision to write off has been made in the books of account before being put to use,
the ‘manufacturer’ shall pay an amount equivalent to the CENVAT credit taken on
such item. Similar provision is presently not prescribed in case of taxable service
provider. The said sub-rule is being amended to bring taxable service provider
within the ambit of the said restriction. This provision would come into force
immediately (Refer notification No.16/2009-CE (NT), dated 07.07.2009).
2.2 Rule 6(3) provides an option for a provider of taxable as well as exempt
services, using common inputs or input services, but opting not to maintain
separate accounts to pay an amount of 8 per cent of the value of exempted service.
This provision was made when the rate of tax on taxable services was 12 per cent.
Since the service tax rate has been reduced to 10 per cent, the said amount payable
on the exempted services is being reduced from 8 per cent to 6 per cent of the value
of exempted service. This provision would come into force immediately (Refer
notification No16/2009-CE (NT), dated 07.07.2009).
1. Increase in exemption limit for individual and women by Rs. 10000/- and for Sr. Citizens by Rs. 15000/-.
2. Slab rates of tax remaining the same.
3. No surcharge for all Assessee’s except Companies.
4. Education cess and higher education cess continue for all assessees.
5. Education cess and higher education cess will not be levied on tax deducted or collected at source in the case of a domestic company and any other person who is resident in India.
6. Education cess and higher education cess will be applied on tax deducted at source in the case of salary payments.
7. Definition of charitable purpose broadened to include preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest.
8. Definition of “firmâ€, “partner†and “partnership†in the context of an entity registered under the Limited Liability Partnership Act, 2008 is defined and retained same as the definitions of “firmâ€, “partner†and “partnership†in the context of a partnership formed under the Indian Partnership Act, 1932.
9. The expression “manufacture†has been defined the term “manufacture†with its gramatical variations would mean a change in a non-living physical object or article or thing resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use, or bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.
10. In cases of relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under section 10 shall be allowed to him in relation to such, or any other, assessment year.- w.e.f. A.Y. 2010-11.
11. Sunset Clause under section 10A allowed upto AY 2011-12.
12. Sunset clause under section 10B allowed upto AY 2011-12.
13. The word assessee has been substituted by the word “undertaking†in section 10AA.- w.e.f. AY 2010-11.
14. Section 17 which relates to definitions of “salaryâ€, “perquisite†and “profits in lieu of salary†has been amended to provide that perquisite include the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. It is also proposed to provide that perquisite include the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees and the value of any other fringe benefit or amenity as may be prescribed. These amendments will take effect from the 1st April, 2010 and will, accordingly, apply to the assessment year 2010-11 and subsequent assessment years.
15. Section 28 is amended to provide that any sum, whether received or receivable, in cash or kind, by reason of any capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, shall be chargeable to income-tax under the head “Profit and gains of business or profession, if the whole of the expenditure on such capital asset has been allowed as a deduction under section 35AD which contains provisions relating to deduction in respect of expenditure on specified business.
16. Section 32 of the Income tax Act, relating to depreciation is amended to omit reference to “block of assets†from Explanation 3 to sub-section (1) of section 32. Consequent to proposed amendments, the expression “block of assets†shall have the same meaning as assigned to it in clause (11) of section 2 of the said Act. The dual definition of block of asset has been corrected.
17. Section 35 relating to weighted deducted @ 150% of expenditure on scientific research which was available for specified businesses has been extended to all businesses except a small negative list.
18. A new section 35AD has been introduced which relates to deduction in respect of Expenditure on specified business. The specified business has been defined to mean the business of setting up and operating of cold chain facilities for storage or transportation of agricultural produce, dairy products and other related items. It would also include the business of warehousing for storing agricultural produce and the business of 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. The proposed section would, inter alia, allow one hundred per cent deduction in respect of any capital expenditure incurred, other than expenditure incurred on the acquisition of any land or goodwill or financial instrument, during the year by the specified business subject to the provisions contained in that section.
19. It is proposed to omit the commodity transaction tax retrospectively with effect from 1st April, 2009.
20. Section 40 relating to amounts not deductible is proposed to revise the limits of remuneration paid to the partners and provide uniform limits for both professional firms and non-professional firms as under–
(a) on the first Rs.3,00,000 of the book-profit or in case of a loss Rs. 1,50,000 or at the rate of 90 per cent. of the book-profit, whichever is more;
21. Section 40A relating to expenses or payments not deductible in certain circumstances. It is proposed to insert a second proviso so as to provide that in case of payment made for plying, hiring or leasing goods carriages, the ceiling of payment in cash of twenty thousand rupees shall be enhanced to thirty-five thousand rupees. The proposed amendment will take effect from 1st October, 2009.
22. Section 43 relating to definitions of certain terms relevant to income from profits and gains of business or profession. The proposed amendment seeks to insert a new Explanation to provide that the actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee under section 35AD.
23. Section 44AA relating to maintenance of accounts by certain persons carrying on profession or business. If it is claimed that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD (8% of gross receipts) and if the income exceeds the maximum amount which is not chargeable to income tax the books are to be maintained. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
24. Section 44AB relating to the audit of accounts of certain persons carrying on business or profession. The proposed amendment seeks to provide that in the case of an assessee, who is covered under the new proposed section 44AD (8% of the gross receipt), the audit of books of account is required if he claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD and if his income exceeds the maximum amount which is not chargeable to income-tax. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
25. Section 44AD of the Act relating to special provision for computing profits and gains of business on presumptive basis. The proposed new section 44AD seeks to provide for estimating income of assessee who is engaged in any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE, at a sum equal to eight per cent. of the total turnover or gross receipts in the previous year on account of such business, or, as the case may be, a sum higher than the aforesaid sum claimed to be earned by the assessee. The scheme will apply to such resident assessee who is an individual, Hindu undivided family and partnership firm but not limited liability partnership firm. It is also proposed that the provisions of advance tax shall not apply to the assessee, who opts for the above scheme in respect of such business. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
26. Section 44AE relating to special provision for computing profits and gains of business of plying, hiring or leasing goods carriages. It is proposed to enhance aforesaid amounts of profits and gains from (a) three thousand five hundred rupees to five thousand rupees per month or part of a month or the amount claimed to be actually earned by the assessee, whichever is higher in the case of heavy goods vehicles and (b) from three thousand one hundred and fifty rupees to four thousand five hundred rupees per month or part of a month or the amount claimed to be actually earned by the assessee, whichever is higher in the case of vehicles other than heavy goods vehicles. This amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.
27. Section 49 relates to cost with reference to certain modes of acquisition. It is proposed to provide that where the capital gain arises from the transfer of specified security or sweat equity shares, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account for the purposes of the said sub-clause. This amendment will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.
28. Section 50B relating to special provision for cost of computation of capital gains in case of slump sale. It is proposed to provide that for computing the net worth, the aggregate value of total assets shall be, (a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub item (C) of item (i) of sub-clause (c) of clause (6) of section 43; (b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable as a deduction.
29. Section 50C relating to special provision for full value of consideration in certain cases. It is proposed to amend the said section so as to substitute the words “or assessed†wherever they occur in the said section by the words “or assessed or assessableâ€. This amendment will take effect from the 1st October, 2009.
30. Section 56 relating to income from other sources. The proposed amendment seeks to tax specified properties, including a sum of money, received without consideration or for inadequate consideration. This amendment will take effect from 1st October, 2009.
31. A new section 73A which contains provisions relating to carry forward and set off of losses by specified businesses is proposed.
32. Section 80A relating to deductions to be made from the gross total income in computing total income. The proposed amendment provides that where in the case of an assessee any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be.
It is also further provided that where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provisions of Chapter III under the heading “Câ€. These amendments will take effect retrospectively from the 1st April, 2003 and will, accordingly, apply in relation to assessment year 2003-2004 and subsequent years.
Further it is proposed that where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business 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. This amendment will take effect retrospectively from 1st April, 2009.
33. Section 80CCD relating to deduction in respect of contribution to pension scheme notified by the Central Government. It is proposed to amend the said sub-section so as to allow deductions under the aforesaid section to any other assessee in addition to an assessee, being an individual, employed by the Central Government or any other employer on or after the 1st day of January, 2004.
34. Section 80DD which relates to deduction in respect of maintenance including medical treatment of a dependant, who is a person with disability. The proposed amendment seeks to enhance the present limit of seventy five thousand rupees to one hundred thousand rupees for a dependant who is a person with severe disbaility.
35. Section 80E relating to deduction in respect of interest on loan taken for higher education. It is proposed to provide that “higher education†will mean any course of study pursued after passing the senior secondary examination or its equivalent from any school.
36. Section 80G relating to deductions in respect of donations to certain funds, charitable institutions, etc. The proposed amendment seeks to do away with the time limit specified in the aforesaid proviso. The proposed amendment will take effect from1st day of October, 2009.
37. Section 80GGB which relates to deduction in respect of contributions given by companies to political parties. It is proposed to amend the aforesaid section so as to bring “electoral trust†within the scope of the above said section.
38. Section 88GGC which relates to deduction in respect of contributions given by any person to political parties. It is proposed to amend the aforesaid section so as to bring “electoral trust†within the scope of the above said section.
39. Section 80-IA relating to deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Under the existing provisions a deduction is allowed to an undertaking which, – (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on 1st April, 1993 and ending on 31st March, 2010; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on 1st April, 1999 and ending on 31st March, 2010; (c) undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on 1st April, 2004 and ending on 31st March, 2010. It is proposed to amend sub-clauses (a), (b) and (c) of the said clause so as to extend the time limit from 31st March, 2010 to 31st March, 2011. These amendments will take effect retrospectively from 1st April, 2009.
40. Section 89 relating to relief when salary, etc., is paid in arrears or in advance. It is proposed to insert a proviso to the said section so as to provide that no relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service. This amendment will take effect from 1st April, 2010, and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.
41. Section 90 relating to agreement with foreign countries. It is proposed to substitute the said section 90 by a new section so as to confer power upon the Central Government to enter into agreement with the Government of any specified territory outside India in addition to entering into agreement with foreign countries as provided in the said existing section 90. It is further proposed to insert an Explanation in the new section 90 to define “specified territories†which means any area outside India which may be notified as such by the Central Government for the purposes of said section. This amendment will take effect from 1st October, 2009.
42. Section 92C which relates to computation of arm’s length price. It is proposed to substitute the existing proviso so as to provide that where more than one price is determined by the most appropriate method, the arm’s length price shall be taken to be the arithmetical mean of such prices. It is further provided that the variation between the arm’s length price so determined and price at which the international transaction has actually been undertaken does not exceed five per cent. of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price. This amendment will take effect from 1st October, 2009.
43. A new section 92CB relating to power of Board to make ‘safe harbour rules’. The proposed new section seeks to provide that the determination of arm’s length price under section 92C or section 92CA shall be subject to safe harbour rules. It is also proposed that the Board may make rules for ‘safe harbour’. It is also proposed to insert an Explanation to provide that ‘safe harbour’ means circumstances in which the income tax authorities shall accept the transfer price declared by the assessee. This amendment will take effect retrospectively from 1st April, 2009.
44. Section 115BBC relating to anonymous donations to be taxed in certain cases. It is proposed to amend the said section so as to provide that anonymous donations, to the extent the aggregate of anonymous donations exceeds five per cent of the total income of the assessee or an amount of rupees one lakh, whichever is higher, would be taken into account for the purposes of aforesaid section.
45. Section 115JA relating to deemed income relating to certain companies. It is proposed to amend the said section so as to provide that any provision for diminution in the value of any asset will also be included in the computation of book profit under the said section. This amendment will take effect retrospectively from 1st April, 1998 and will, accordingly, apply in relation to the assessment year 1998-99 and subsequent years.
46. Section 115JAA relating to tax credit (MAT credit) in respect of tax paid on deemed income relating to certain companies. It is proposed to amend to provide that the amount of tax credit determined shall not be allowed to carry forward beyond the tenth assessment year (instead of seventh assessment year) immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A).
47. Section 115JB relating to special provision for payment of tax by certain companies (MAT). It is proposed to amend the said section to provide that if the income-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 1st April, 2010 is less than fifteen per cent. 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 fifteen per cent. of such book profit. Any provision for diminution in the value of any asset will also be included in the computation of book profit under the said section. This amendment will take effect retrospectively from 1st April, 2001 and will, accordingly, apply in relation to the assessment year 2001-02 and subsequent assessment years.
48. Section 115-O relating to tax on distributed profits of domestic companies. It is proposed to amend the said section so as to provide that the amount referred to in that section shall also be reduced by the amount of dividend, if any, paid to any person for, or on behalf of, the New Pension System Trust. This amendment will take effect retrospectively from 1st April, 2009.
49. Section 115WE relating to Assessment of FBT. It is proposed to amend the said section so as to extend the time limit from 31st March, 2009 to 31st March, 2010. This amendment will take effect retrospectively from 1st April, 2009.
50. A new section 115WM provides that nothing contained in Chapter XII-H shall apply in respect of any assessment for the assessment year commencing on 1st April, 2010 or any subsequent year. Accordingly the provisions of FBT becomes non operative for assessment year 2010-11.
51. Section 131 which relates to power regarding discovery, production of evidence, etc. has been amended by inserting new section 144C in the Income-tax Act so as to provide that the assessee shall file his objections among others to the Dispute Resolution Panel against the draft of the proposed order of assessment of Assessing Officer. It is, therefore, proposed to provide in section 131 that Dispute Resolution Panel referred to in section 144C shall have the same power as are vested in a court under the Code of Civil Procedure, 1908. This amendment will take effect from 1st October, 2009.
52. Section 132 of the Income-tax Act relating to search and seizure. It is proposed to amend the said sub-section so as to clarify various authorities having power to issue warrant of authorization for conducting search and seizure under the said section. This amendment will take effect retrospectively from 1st June, 1994.
53. Section 132A relating to powers to requisition books of account, etc. It is proposed to amend the said section so as to include that Additional Director or Additional Commissioner may be authorized to exercise the powers specified in the said section. This amendment will take effect retrospectively from 1st June, 1994.
54. Section 139A relating to Permanent Account Number (PAN). It is proposed to amend the said sub-section so as to provide that every person deducting tax under this Chapter shall quote the Permanent Account Number of the person to whom such sum or income or amount has been paid by him. It is proposed to amend the said sub-section so as to provide that in case of tax collected at source, every person collecting tax in accordance with the provisions of section shall quote the Permanent Account Number of every buyer or licensee or lessee. This amendment will take effect from 1st October, 2009.
55. Section 140 relating to return by whom to be signed in the case of a limited liability partnership, the return shall be signed and verified by the designated partner and where for any unavoidable reason the designated partner is not able to sign the return or where there is no designated partner by any other partner.
56. A new section 144C relating to Dispute Resolution Panel. With a view to provide speedy disposal, it is proposed to amend the Income-tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism. This amendment will take effect from 1st October, 2009.
57. Section 145A which relates to method of accounting in the cases of compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.
58. Section 147 relating to income escaping assessment. It is proposed to insert Explanation to the said section so as to provide that for the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. This amendment will take effect retrospectively from 1st April, 1989 and will, accordingly, apply in relation to the assessment year 1989-1990 and subsequent years.
59. A new section 167C relating to liability of partners of limited liability partnership in liquidation. The proposed new section seeks to provide that where any tax is due from a limited liability partnership in respect of any income of any previous year or from any other person in respect of any income of any previous year during which such other person was a limited liability partnership cannot be recovered, then, every person who was a partner of the limited liability partnership at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership.
60. Section 194C relating to deduction of tax at source on payment to contractors and sub-contractors. The proposed amendment seeks to substitute section 194C. Sub-section (1) of the proposed amendment to provide that any person shall deduct tax at source at the rate of one per cent if the payee is an individual or a Hindu undivided family or at the rate of two per cent in the case of any other person, on payment to a resident contractor for carrying out any work. It is further provided that where any sum is paid or credited for carrying out any work, tax shall be deducted at source on the invoice value excluding the value of material if such value is mentioned separately in the invoice, or on the whole of the invoice value if the value of material is not mentioned separately in the invoice. The proposed amendment further provides that no tax shall be deducted at source in case of payment for plying, hiring or leasing goods carriages provided that the contractor provides his Permanent Account Number.
It is further defined the expression “work†to include advertising, broadcasting and telecasting including production of programmes for such broadcasting or telecasting, carriage of goods or passengers by any mode of transport other than by railways, catering and manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. The Explanation further provides that the work shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person other than such customer. This amendment will take effect from 1st October, 2009.
61. Section 194-I which relates to deduction of tax at source on any income payable by way of rent. It is proposed to change the rate of deduction as below :
(a) two per cent. for the use of any machinery or plant or equipment; and
(b) ten per cent. for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings.
These amendments will take effect from 1st October, 2009.
62. A new section 200A providing for processing of statements of tax deducted at source. The proposed new section 200A provides that the statement of tax deduction at source shall be processed and sums deductible shall be computed after making adjustments of any arithmetical error or apparent incorrect claim in the statement and interest, if any, shall be charged on the sum so computed. The sum payable or refundable to the deductor shall be determined after adjusting the aforesaid computed sum against any amount paid and any amount paid otherwise by way of tax or interest. Intimation shall be sent to the deductor specifying the amount payable or refundable to the deductor. Further, no intimation shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. It is further provided that for the processing of statements, the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor. These amendments will take effect from 1st April, 2010.
63. It is further provided that time limit for passing of order under sub-section (1) of section 201 in case of resident tax payers. It provides that no order shall be made under sub section (1) of section 201, deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax in the case of a person resident in India, at any time after the expiry of two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed. It further provides that in any other case such order shall not be made at any time after four years from the end of the financial year in which payment is made or credit is given. It further provides that such order for a financial year commencing on or before 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. This amendment will take effect from 1st April, 2010.
64. A new section 206AA relating to requirement to furnish Permanent Account Number. The said section specifies that any person who is entitled to receive any sum or income or amount on which tax is deductible (hereinafter referred to as the deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereinafter referred as the deductor), failing which tax shall be deducted at the rate mentioned in the relevant provisions of the Act or at the rate in force or at the rate of twenty per cent (20%) whichever is higher. It is further proposed that the declaration filed under section 197A shall not be valid unless the person filing the declaration furnishes his Permanent Account Number in such declaration. The proposed amendment provides that in case any declaration becomes invalid, the deductor shall deduct the tax at source on a higher rate of deduction i.e. 20%.
It is also proposed for obtaining lower deduction / no deduction of tax certificate from AO, no such certificate under section 197 shall be granted unless it contains the Permanent Account Number of the applicant.
It is also further provided that the deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all correspondence, bills, vouchers and other documents which are exchanged between them, where the Permanent Account Number provided by the deductee is invalid or it does not belong to the deductee, then it shall be deemed that Permanent Account Number has not been furnished to the deductor and tax shall be deducted at a higher rate of 20%. This amendment will take effect from 1st April, 2010.
65. Section 208 relating to conditions of liability to pay advance tax. Limit has been enhanced from five thousand rupees to ten thousand rupees. This amendment will take effect retrospectively from 1st April, 2009.
66. Section 282 which relates to service of notice generally. Under the existing provisions contained in the said section a notice or requisition under the Act may be served on the person therein named either by post or as if it were a summons issued by a court. It is proposed to provide that the service of notice or summon or requisition or order or any other communication may be made by delivering or transmitting a copy thereof by post or courier service or in such manner as provided in the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; or by any other means of transmissions as may be provided by rules made by the Board in this behalf. It is also proposed that the Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which such communication may be delivered. This amendment will take effect from 1st October, 2009.
67. A new section 282B relating to allotment of Document Identification Number. It is proposed to insert a new section 282B in the Income-tax Act so as to provide that every income tax authority shall allot a computer generated Document Identification Number in respect 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 is further proposed that where the notice, order, letter or any correspondence issued by any income-tax authority does not bear a Document Identification Number, such notice, order, letter or any correspondence shall be treated as invalid and shall be deemed never to have been issued. It is also proposed to provide that every document, letter or any 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. It is also proposed to provide where the document, letter or any correspondence received by any income-tax authority or on behalf of such authority does not bear Document Identification Number, such document, letter or any correspondence shall be treated as invalid and shall be deemed never to have been received. This amendment will take effect from 1st October, 2010.
68. A new section 293C relating to power to withdraw the approval. It is proposed to insert a new section 293C in the Income-tax Act so as to provide that the income-tax authority, who has been conferred upon the power under any provision of this Act to grant any approval to any assessee, may withdraw such approval at any time. This amendment will take effect from 1st October, 2009.
69. It is further proposed to amend the Thirteenth Schedule of the Income-tax Act. The said Schedule specifies the list of articles or things, Excise classification, and the States for the purposes of availing of deductions in the case of the State of Himachal Pradesh and the State of Uttranchal under section 80-IC of the said Act. It is proposed to substitute serial number 19 (paper) under Part B of the said Thirteenth Schedule which specifies certain new articles or things and Excise classification. This amendment will take effect from 1st April, 2010.
Wealth-tax
Section 3 of the Wealth tax Act, relating to charge of wealth tax is proposed at the rate of one per cent. of the amount by which the net wealth exceeds thirty lakh rupees compare to the earlier limit of fifteen lakh.
Service Tax
- Imposition of service tax on transportation of goods by railways.
- imposition of service tax on services provided or to be provided to any person, by any person, in relation to cosmetic surgery or plastic surgery other than the surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma.
- Imposition of service tax on services provided or to be provided to any person, by any person, in relation to transport of coastal goods and goods through inland water.
- imposition of service tax on services provided or to be provided to any business entity, by any business entity, in relation to advice, consultancy or assistance in any branch of law excluding appearance before any court, tribunal or authority and the term ‘business entity’ has been defined to include association of persons, body of individuals, company or firm but not to include an individual.
Changes in the Works Contract (Composition Scheme for Payment of Service
Tax) Rules, 2007: These rules provide a simplified procedure for working out the tax
liability by the service providers providing works contract service. Instead of
working out the service element from the value of works contract and paying service
tax at full rate (i.e. 10%) the service provider is allowed to pay 4% on the ‘gross
amount charged’ for the works contract. The reason for prescribing the lower rate
under the scheme is that the service provider need not bifurcate the gross value of
works contract. It was expected that the gross value should be shown to include the
total value of materials as well as services used in providing the taxable services.
However, it has been reported that in certain cases, the taxpayers are not including
the full value of the goods required for execution of works contract for working out service tax liability under the Composition Scheme by either excluding the value of
goods received free of cost from their client or splitting the contract into a sale
contract (for a portion of goods required to execute the works contract) and works
contract (for only a portion of the total value of goods and the labor charges), thus
reducing the value of works contract for the purposes of calculating service tax. In
order to plug this loophole, the Explanation appearing in sub-rule (3) is being
amended to provide that the composition scheme would be available only to such
works contracts where the gross value of works contract includes the value of all
goods used in or in relation to the execution of works contract whether received free
of cost or for consideration under any other contract. This condition would not apply
to those works contracts, where either the execution of works contract has already
started or any payment (whether in part or in full) has been made on or before the
date of the amendment, i.e. 07.07.2009, from which the said amendment becomes
effective (refer notification No.23/2009-ST dated 07.07.2009).
2 Amendments made in CENVAT Credit Rules (pertaining to service tax)
2.1 Rule 3(5B) of the CENVAT Credit Rules provide that, if value of any input or
capital goods on which CENVAT credit has been taken, is written off fully or where
provision to write off has been made in the books of account before being put to use,
the ‘manufacturer’ shall pay an amount equivalent to the CENVAT credit taken on
such item. Similar provision is presently not prescribed in case of taxable service
provider. The said sub-rule is being amended to bring taxable service provider
within the ambit of the said restriction. This provision would come into force
immediately (Refer notification No.16/2009-CE (NT), dated 07.07.2009).
2.2 Rule 6(3) provides an option for a provider of taxable as well as exempt
services, using common inputs or input services, but opting not to maintain
separate accounts to pay an amount of 8 per cent of the value of exempted service.
This provision was made when the rate of tax on taxable services was 12 per cent.
Since the service tax rate has been reduced to 10 per cent, the said amount payable
on the exempted services is being reduced from 8 per cent to 6 per cent of the value
of exempted service. This provision would come into force immediately (Refer
notification No16/2009-CE (NT), dated 07.07.2009).
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