Finance Bill 2015 DirectTaxProvisions Analysis Banshi Mehta

BUDGET 2015
(FINANCE BILL, 2015)

DIRECT TAX PROVISIONS - ANALYSIS
BANSI S. MEHTA & CO.

Chartered Accountants
DIRECT TAX PROVISIONS ANALYSIS
BANSI S. MEHTA & CO

INDEX
Chapter
Content
Page no.
Rates of Taxes
1-4
Residential Status, Taxation of Non-Residents/FIIs
5-7
Business Trusts
8-12
Alternate Investment Funds
13-14
Depreciation, Additional Investment Allowance
18-20
Deductions Under Chapter VI-A
21-25
Deductions / Collection of Tax at Source
26-33
Penalties
34-40
Other Provisions
41-56
10
Wealth Tax
Privileged & Confidential

For Private Circulation only
57
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LIST OF ABBREVIATIONS:
Abbreviations
Full Name
Act
Income Tax Act, 1961
AE
Associated Enterprise
AIF
Alternate Investment Fund
ALP
Arms length Price
A.O.
Assessing Officer
AOP
Association of Persons
A.Y.
Assessment Year
BOI
Body of Individuals
CBDT
Central Board of Direct Taxes
CIT
Commissioner of Income-tax
CIT(A)
Commissioner of Income-tax (Appeals)
Cl
Clause
Companies Act
Companies Act, 2013
DDT
Dividend Distribution Tax
DTAA
Double Taxation Avoidance Agreement
EC
Education Cess
EPF
Employees Provident Fund
F.B.
Finance Bill, 2015
F.Y.
Financial Year
FEMA
Foreign Exchange Management Act, 1999
FII
Foreign Institutional Investment
GAAR
General Anti Avoidance Rules
HC
High court
HUF
Hindu Undivided Family
IIT
Infrastructure Investment Trust
ITAT
Income Tax Appellate Tribunal
LIC
Life Insurance Corporation
MAT
Minimum Alternate Tax
MF
Mutual Fund
NR
Non-resident

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PE
Permanent Establishment
PF
Provident Fund
P.Y.
Previous Year
SC
Supreme Court
SDT
Specified Domestic Transactions
SEBI
Securities and Exchange Board of India
Sec.
Section
SHEC
Secondary Higher Education Cess
SPV
Special Purpose Vehicle
STT
Securities Transaction Tax
RBI
Reserve Bank of India
REIT
Real Estate Investment Trust
Rules
Income Tax Rules, 1962
TCS
Tax Collected at Source
TDS
Tax Deducted at Source
TP
Transfer Pricing
u/s
Under section

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CHAPTER 1: RATES OF INCOME-TAX

1.1. Basic Tax Rate
No changes proposed in the rates of income-tax for all categories of assesses for A.Y. 201617.
a) For individual (other than in b and c below) / HUF/
AOP / BOI, whether
incorporated or not, or AJP u/s. 2(31)(vii) of the Act:

SLAB
RATE OF TAX
Upto 2,50,000
Nil
2,50,001 to 5,00,000
10%
5,00,001 to Rs.10,00,000
20%
Above Rs.10,00,001
30%
b) For resident individual, aged 60 years but < 80 years, during P.Y.:
SLAB
RATE OF TAX
Upto Rs.3,00,000
Nil
3,00,001 to 5,00,000
10%
5,00,001 to 10,00,000
20%
Above 10,00,001
30%
c) For resident individual, aged 80 years, during P.Y.:

SLAB
Upto 5,00,000
RATE OF TAX
Nil
5,00,001 to 10,00,000
20%
Above 10,00,001
30%
1 Privileged & Confidential

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d) For Co-operative society:

SLAB
RATE OF TAX
Upto 10,000
10%
10,000 to 20,000
20%
Above 20,001
30%
e) For Firm, Local Authority and Domestic Company:
30%
f) For Foreign Company:
40%
1.2. Surcharge on Income-tax
Rate of surcharge
Particulars
Proposed
Existing
1. Persons referred to in (a), (b),

(c), (d), (e) above, having total
income of:
i.
< 1 Cr.
Nil
Nil
ii.
> 1 Cr.
12%
10%
2. Domestic Company having

total income:
i.
> 1 Cr., < 10 Cr.
7%
5%
ii.
> 10 Cr.
12%
10%
3. Foreign Company having total

income:
i.
> 1 Cr.,< 10 Cr.
2%
2%
ii.
> 10 Cr.
5%
5%
1.3. Education Cess

The EC and SHEC continues at 2% and 1% respectively.

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1.4. Section 115-O: Dividend Distribution Tax:

There is no change in rates of DDT. However, surcharge on DDT is proposed to 12% from
10%. The effective rate is as follows:
Effective Rate
Particulars
Effective tax rate for dividend
Proposed
Existing
17.304%
16.995%
distribution
1.5. Section 115BBD: Tax on certain dividends received from foreign companies:
The concessional tax rate benefit on dividends from Foreign Companies u/s 115BBD has not
been proposed to be extended. Thus, the dividend received from foreign company would be
taxable @ 30%. The effective rate will be:
Rate of surcharge & Effective Rate

Proposed
Particulars
Surcharge
Effective
Existing
Surcharge
Tax Rate
1. Domestic
Company
Effective
Tax Rate
having
total income:
i. more than rupees one crore, but
7%
33.063%
5%
16.2225%
12%
34.608%
10%
16.995%
less than rupees ten crore

ii. income more than rupees ten
crore
1.6. Section 115JB: Minimum Alternate Tax

There is no change in tax rates u/s 115-JB. However, it is proposed to increase surcharge on
dividend distribution tax to 12% from earlier 10%. The effective rate is as follows:

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Rate of surcharge & Effective Rate

Particulars
Proposed
Surcharge
Effective
Existing
Surcharge
Tax Rate
Effective
Tax Rate
Domestic Company having total

income:
i. more than rupees one crore, but
7%
20.389%
5%
20.008%
12%
21.342%
10%
20.961%
less than rupees ten crore

ii. income more than rupees ten
crore

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CHAPTER 2 - RESIDENTIAL STATUS, TAXATION OF NON-RESIDENTS/FIIS.
2.1. Tests for determining residential status of a company are amended.

2.1.1. Test of Control and Management wholly in India is replaced by the test of Place
of Effective Management in India (POEM).
2.1.2. Intention is to ensure that by merely holding board meetings outside India, a
company should not be regarded as a non-resident although, in substance, its effective
management is in India.
2.1.3. POEM is an internationally recognized concept and is expected to provide certainty
of interpretation. It is defined as a place where key management decisions for conduct
of business entity taken as a whole are taken.
2.1.4. Government is expected to issue guiding principles in due course in this behalf.
2.2. Tests for determining number of days stay in India, in case of a crew member of a foreign
bound ship who is a citizen of India, shall be laid down in rules to be prescribed. This is with
a view to avoid uncertainties as regards such determination. This amendment is retrospective
w.e.f. A.Y. 2015-16.
2.3. Provisions relating to taxation of transfer of shares of Indian Companies indirectly held by
foreign entities (through another foreign shareholding entity) that were introduced in the 2012
Budget are partially amended to clarify as to when such transfers would be taxable.
2.3.1. Taxability would arise only if the value of the Indian Companys shares held by the
foreign shareholding entity exceeds 10 Crore and such shares represent at least 50%
of the value of all assets owned by the foreign shareholding entity.
2.3.2. Such value shall be determined in a manner to be prescribed in Rules.

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2.3.3. Where the shares of Indian Company are not the only assets held by the foreign
shareholding entity, the capital gains taxable in the hands of the transferor would be
determined based on some attribution methodology to be prescribed in Rules.
2.3.4. Such indirect transfers shall not be chargeable to tax in India if the transferor holds
less than 5% stake in the foreign shareholding entity and it does not have any rights
of management or control in the foreign shareholding entity.
2.3.5. If the shares in the foreign shareholding entity are transferred in an amalgamation or
a demerger taking place outside India, such transfer would enjoy exemption from
capital gains subject to certain conditions. Correspondingly, the cost of acquisition
in the hands of the amalgamated /resulting company shall be the cost of acquisition
of previous owner.
2.3.6. Indian entity in which assets are held by the foreign entity is obligated to furnish
details of offshore transactions modifying the ownership control or structure of the
Indian entity.
2.4. Section 9(1)(v) is amended to provide that if an Indian branch of a foreign bank pays interest
to its foreign head office or to any other foreign branch, such interest would be chargeable to
tax in India in the hands of the foreign bank. This is in addition to taxation of the branch profits
in India.
2.5. A foreign established investment fund, that employs a fund manager (not being an employee
of the fund) who is situated in India, shall not be taxed in India on its investment income merely
because the fund manager is situated in India. There are several conditions specified in this
behalf that need to be fulfilled by the fund and by the fund manager to enjoy this exemption.
The fund is required to comply with filing requirements that will be prescribed in Rules.
2.6. Tax on royalty and fees for technical services payable to a non-resident has been reduced from
the present rate of 25% to 10% on gross amount.

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2.7. When an employee of the foreign subsidiary of an Indian company who has earned GDRs of
the Indian company under ESOPs, becomes a resident in India and earns dividend on those
GDRs or earns long term capital gains on sale thereof, he enjoys concessional tax treatment
under section 115ACA. This tax regime was introduced when the earlier GDR scheme was in
force, which permitted GDR issue only for listed shares. Under the new GDR scheme, GDRs
can be issued even for unlisted shares. The definition of GDR in section 115ACA is amended
to clarify that the concessional tax treatment will be available only for GDRs issued in respect
of listed shares.
2.8. Income from transfer of securities (being long term capital asset) by Foreign Institutional
Investor (FII) is to be excluded from chargeability of MAT and corresponding expenses are
to be added to book profits u/s 115JB.
2.9. Section 195 is widened to require furnishing of prescribed information regarding foreign
payments irrespective of whether such payments are chargeable to tax or not.
2.10. Penal implications are introduced on submission of inaccurate/ non-submission of information

in the prescribed form and manner u/s 195.

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CHAPTER 3 BUSINESS TRUSTS.

3.1. Present Provisions:
3.1.1. Definition of Business Trust:
Presently, Business Trust is defined under Section 2(13A) of the Act. A tax pass
through status has been granted to Business Trust. The term business trust, as
introduced in the Finance (No. 2) Act, 2014 is defined as under:
"business trust" means a trust registered as an Infrastructure Investment

Trust or a Real Estate Investment Trust, the units of which are required to
be listed on a recognised stock exchange, in accordance with the regulations
made under the Securities and Exchange Board of India Act, 1992
(15 of 1992) and notified by the Central Government in this behalf.
3.1.2. Tax implications in the hands of the Business Trust:

a. Interest Income:
The Business Trust enjoys a pass though status in respect of interest income from
the SPV and the same shall be taxable in the hands of the Unit holder as discussed
later;
b. TDS in case of Interest Income:
No Tax to be deducted under Section 194A(3)(xi) by the SPV on payment of
interest to a Business Trust as the income is exempt under section 10(23FCA).
c. Capital Gains:
Capital gains at the time of sale of assets by the Business Trust is taxable in the
hands of the trust under Section 115UA(2) at the applicable rates under Section
111A and 112.
d. Other Income:
Other income of Business Trust is taxed at Maximum Marginal Rate under Section
115UA(2).

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3.1.3. Tax implications in the hands of the Unit Holder:

a. Interest Income:
Interest Income of a Business Trust exempt under section 10 (23FC) shall be
chargeable to tax in the hands of the Unit holder under Section 115UA(3).
b. TDS on Interest Income:
Business Trust to deduct TDS when distributing interest income allowed to be
passed through to its Unit holders under Section 194LBA (In case of Resident-10%
and Non-resident at 5%)
c. Capital Gains of the Trust:
If the Capital gains of a Business Trust are distributed, then the component of
distributed income attributable to the capital gains would be exempt in the hands
of the Unit holder under section 10(23FD).
d. Other Income:
If such income is then distributed, the same is exempt in the hands of the Unit
holder under Section 10(23FD);
e. Capital Gains in the hands of the Unit holder:
Units of the business trust when traded on a stock exchange would attract similar
tax treatments as equity shares i.e. these would be liable to the levy of Securities
Transaction Tax (STT), would be exempt from the levy of long-term capital
gains tax (LTCGT) and short-term capital gains tax (STCGT) would attract at
the rate of 15%;
This benefit is currently available to Unit holders who have acquired the units
otherwise than by way of exchange of shares held by them in the SPV. The transfer
of shares of SPV in exchange of units of Business Trust is an exempt transfer in
the hands of Unit holder under Section 47 (xvii). However, when the Unit holder
sells these units, though the period of holding of shares in SPV and cost of shares
in SPV would be considered while computing capital gain, the reduced rate of
STCGT under Section 111A at 15% and nil LTCGT under section 10(38) on

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payment of STT is not available. Accordingly, when a Unit holder sells his units,
he would be taxed @ 30% on STCG and 20% on LTCG.
3.2. Proposed Amendments:
3.2.1. Definition of Business Trust:
The Securities and Exchange Board of India (SEBI) has notified norms for
regulating;
a. Real Estate Investment trusts (REIT) under the SEBI (Real Estate
Investment Trusts) Regulations (REIT Regulations), 2014 on September 26,
2014;
b. Infrastructure Investment Trusts (InvIT) SEBI (Infrastructure Investment
Trusts) Regulations (InvIT Regulations), 2014 on September 26, 2014;
Before the notification of the aforesaid regulations, business trusts were governed
by SEBI (Alternative Investment Funds) Regulations, 2012.
The FB proposes to amend the definition of a business trust to mean a trust

registered as an InvIT under InvIT Regulations or as a REIT under the REIT
Regulations, 2014. The requirement to notify them with Central Government is
now done away with.
3.2.2. Rental Income in the hands of the Business Trust:

It is proposed to exempt the Income of a business trust, being a Real Estate
Investment Trust (REIT), by way of renting or leasing or letting out any real estate
asset owned directly by such business trust by insertion of section 10(23FCA). [FB
CL. 7 (III) (d)]
3.2.3. TDS in case of Rental Income:

No Tax to be deducted under Section 194-I where the rent income is credited or paid
to a REIT for income exempt under section 10(23FCA). [FB CL. 44]
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3.2.4. Rental Income in the hands of the Unit Holder:

Currently, the interest income of business trust is taxable in the like manner in the
hands of the investor under Section 115UA. Similar provisions are introduced for
distributed income which is in the nature of income by way of renting or leasing or
letting out any real estate asset owned directly by such REIT. [FB CL. 31]
3.2.5. TDS in case of Rental Income:

REIT to deduct TDS when distributing rental income allowed to be passed through
to its Unit holders under Section 194LBA (In case of Resident-10% and Nonresident at the rates in force). [FB CL. 45]
3.2.6. Capital Gains in the hands of the Unit holder:

It is now proposed to amend Section 10(38) and Section 111A to extend the benefit
of the reduced rate of STCGT under Section 111A at 15% and nil LTCGT under
section 10(38) on payment of STT even to a Unit holder who has been allotted units
by business trust in exchange of shares of SPV. [FB CL. 7. (III)(f) and Cl. 26].
3.3. Background for the amendments:
3.3.1. Further, in case of a business trust, being REITs, the income is predominantly in the
nature of rental income. This rental income arises from the assets held directly by
REIT or held by it through an SPV. The rental income received at the level of SPV
gets passed through by way of interest or dividend to the REIT, the rental income
directly received by the REIT is taxable at REIT level and does not get pass through
benefit. Thus, the proposed amendment.
3.3.2. The deferral of capital gains provided to the sponsor of business trust places such a
sponsor at a disadvantageous tax position vis-a vis direct listing of the shares of the
SPV. In case the sponsor holding the shares of the SPV decides to exit through the
Initial Public Offer (IPO) route, then the benefit of concessional tax regime relating
to capital gains arising on transfer of shares subject to levy of STT is available to
him. The tax on short term capital gains (STCG) in such cases is levied @ 15% and
the long term capital gain (LTCG) is exempt under section 10(38) of the Act.
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However, the benefit of concessional regime is not available to the sponsor at the
time it offloads units of business trust acquired in exchange of its shareholding in
the SPV through Initial offer at the time of listing of business trust on stock
exchange. The said sections are now amended to provide parity.
3.3.3. The lacuna in the provisions of the business trust is now filled in by the proposed
amendments.
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CHAPTER 4 ALTERNATE INVESTMENT FUNDS [SECTION 10(23FB) AND

CHAPTER XII-F]
4.1. Present Provisions

4.1.1. Currently, unlisted Venture Capital Companies (VCCs) and Venture Capital Fund
(VCFs) registered under AIF Regulations, 2012 as Category I AIFs enjoy tax
pass through status by virtue of provisions of sections 10 (23FB) and Chapter
XII-F (special provisions relating to taxation of venture capital VCCs and VCFs) of
the Act. Accordingly, income of VCC or VCF from investment in Venture Capital
Undertaking is exempt in the hands of VCC or VCF. The income credited or paid by
VCC or VCF to the unit-holders is taxable in the hands of unit-holder in the same
manner as if the investment made by VCC or VCF had been made by the unitholder.
However, from previous year 2015-16, such VCCs and VCFs would not be governed
by the special provisions relating to VCCs and VCFs but by special provisions
relating to taxation of AIFs as discussed in the following part. Section 10(23FB) is
proposed to be amended to exclude AIFs operating as VCCs and VCFs from
previous year 2015-16 (FB Cl. No. 30).
4.2. Proposed Amendments

The FB proposes to insert Chapter XII-FB (containing section 115UB) to grant pass
through to Category I and Category II AIFs (collectively referred to as investment funds)
in the following manner:
4.2.1. Income in the hands of Investment Funds (FB Cl. No. 7 and 32)
a.
Income other than Profits and Gains from Business and Profession (PGBP) shall
be exempt in the hands of investment funds by virtue of section 10(23FBA).
b.
Loss under any head of income before giving effect to exemption provision [i.e.
10(23FBA)] shall be carried forward and set-off in accordance with Chapter VI
by the investment fund. Such loss shall be ignored in the hands of unit holders.
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c.
Total taxable income1 of investment fund shall be charged to tax as follows:

i.
Where fund is a company or firm - at the rates specified in the Finance

Act.
ii.
d.
In any other case - at MMR.
Provisions relating to dividend distribution tax (applicable to companies u/s 115O and funds u/s 115-R) shall not apply to income paid by investment fund.
4.2.2. Income in the hands of unit-holders (FB Cl. No.7 and 32)
a. Income accruing or arising to unit holder of investment fund being that proportion
which is in the nature of PGBP shall be exempt in the hands of unit holder by
virtue of section 10(23FBB).
b. Income accruing or arising to or received by a unit holder from investment fund

shall be chargeable to tax in the same manner as if the investment made by the
fund were made directly by him.
c. If income accruing or arising to investment fund during a previous year is not

paid or credited to unit holders in that year, such income shall be deemed to have
been credited to their accounts in the proportion of their entitlement. Income
included in the total income of the unit holder on accrual basis shall not be
included in the total income in the year of actual receipt.
4.2.3. Provisions relating to deduction of tax at source (FB Cl. No. 46)
According to section 194LBB, income payable to unit holder of the nature other than
PGBP exempt u/s 10(23FBB) shall suffer tax deduction at the rate of 10%, at the
time of credit of such income or payment, whichever is earlier.
Taxable income would mean Profits and Gains from Business and Profession since income chargeable under other
heads is taxed in the hands of unit holders.
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4.2.4. Other Compliances (FB Cl. No. 32 and 34)

a. Statement of income paid or credited to unitholders shall be furnished by the
person responsible for making payment or crediting such income in the prescribed
manner to unit holders and to prescribed income tax authority.
b. Every investment fund shall be required to furnish return of income in every
previous year by virtue of section 139(4F).
4.3. Reasons / Background of amendments:

4.3.1. The existing provisions of section 10(23FB) of the Act provide that any income of a
Venture Capital Company (VCC) or a Venture Capital Fund (VCF) from investment
in a Venture Capital Undertaking (VCU) shall be exempt from taxation. Section
115U of the Act provides that income accruing or arising or received by a person out
of investment made in a VCC or VCF shall be taxable in the same manner, on current
year basis, as if the person had made direct investment in the VCU. These sections
provide a tax pass through (i.e. income is taxable in the hands of investors instead of
VCF/VCC) only to the funds, being set up as a company or a trust, which are
registered (i) before 21.05.2012 as a VCF under SEBI (Venture Capital Funds)
Regulations, 1996, or (ii) as venture capital fund being one of the sub-categories
under category-I Alternative investment fund (AIF) regulated by SEBI (AIF)
Regulations, 2012 w.e.f. 21.05.2012. The existing pass through is available only in
respect of income which arises to the fund from investment in VCU (Venture Capital
Undertaking), being a company which satisfies the conditions provided in SEBI
(VCF) Regulations, 1996 or SEBI (AIF) Regulations, 2012 (AIF regulations) .
Under the AIF regulations, various types of AIFs have been classified under three
separate categories as Category I, II and III AIFs. Category I includes AIFs which
invest in start-up or early stage ventures or social ventures or SMEs or infrastructure
or other sectors or areas which the Government or regulators consider as socially or
economically desirable. Category II AIFs are funds including private equity funds
or debt funds which do not fall in Category I and III and which do not undertake
leverage or borrowing other than to meet day-to-day operational requirements.
Category III AIFs are funds which employ diverse or complex trading strategies and
may employ leverage including through investment in listed or unlisted derivatives.
The funds can be set up as a trust, company, limited liability partnership and any
15

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other body corporate. Similarly, investment by AIFs can be in entities which can be
a company, firm etc. Pooled investment vehicles (other than hedge funds) engaged
in making passive investments have been accorded pass through in certain tax
jurisdictions. In order to rationalize the taxation of Category-I and Category-II AIFs
(hereafter referred to as investment fund) it is proposed to provide a special tax
regime. The taxation of income of such investment fund and their investors shall be
in accordance with the proposed regime which is applicable to such funds
irrespective of whether they are set up as a trust, company, or limited liability firm
etc.
4.4. Our Comments

4.4.1. A non-resident can be a unit-holder in an AIF according to AIF Regulations. The FB
proposes to insert Section 194LBB which provides that income payable to unit
holder of the nature other than PGBP exempt u/s 10(23FBB) shall suffer tax
deduction at the rate of 10%. The section does not make a distinction between a
resident unit-holder and a non-resident unit-holder. Further, section 195 of the Act
provides that any person responsible for making payment to non-resident
shareholder shall deduct tax at source at the rates in force. Therefore, there is conflict
between section 194LBB and 195 to the extent of payment to non-resident unitholders.
4.4.2. Under the old provisions, income of VCCs and VCFs from investment in venture
capital undertaking was exempt in the hands of the fund and taxable in the hands of
unit-holdeFurther, if income accruing or arising to the fund during a previous year
was not paid or credited to unit holders in that year, such income was deemed to be
credited to their accounts in the proportion of their entitlement. Therefore, any
distribution by VCC or VCF to unit-holders out of income of the earlier years would
not be taxable in the hands of unit-holders as it has already been taxed in the year of
accrual. Nevertheless, under the proposed provisions, income in the nature of PGBP
shall be exempt in the hands of unit-holders.
4.4.3. As mentioned earlier, under the old provisions, income from investment in venture
capital undertaking was exempt in the hands of VCC or VCF and taxed in the hands
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of unit-holdeThe FB proposes to tax income in the nature of PGBP in the hands of

fund itself and where the fund is a company or firm, the income would be chargeable
to tax at the applicable rates and in any other case at maximum marginal rate.
Therefore, the benefit of slab rates would not be available on such income under the
proposed provisions.
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CHAPTER 5 DEPRECIATION, ADDITIONAL INVESTMENT

ALLOWANCE
5.1. DEPRECIATION [Section 32]
5.1.1. The existing Section 32(1)(iia) provides that if any new plant or machinery is
acquired and installed by an assessee engaged in the business of manufacture or
production of article or thing, 20% of the actual cost of such machinery or plant shall
be allowed as deduction in addition to the allowable depreciation. Second Proviso to
Section 32(1) states that if the asset is acquired by the assessee in the previous year
and is put to use for the purpose of business or profession for a period less than 180
days in that year, the depreciation in respect of such assets will be restricted to 50%
of the amount of depreciation or such further allowance.
5.1.2. FB proposes to amend the Second Proviso to Sec 32(1) so as to allow the balance
50% of the allowance (including further allowance) in the immediately succeeding
financial year. (FB Cl. 10)
5.1.3. Delhi Tribunal in case of DCIT v. Cosmo Films Ltd. [2012] (139 ITD 628) has held
that the extra depreciation allowable under section 32(1)(iia) is an extra incentive
which has been earned and calculated in the year of acquisition but restricted for that
year to 50% on account of usage in that year. The said earned incentive must be
made available in the subsequent year. Similar view was taken in Apollo Tyres Ltd
v. ACIT (64 SOT 203) (Cochin ITAT) and ACIT v. SIL Investment Ltd. (2012) (54
SOT 54) (Delhi ITAT). FB proposes to confirm this position and avoid the possible
deferment of investment to ensure availing the entire additional allowance.
5.1.4. At the time of separation of Telanagana from Andhra Pradesh, CG had undertaken
to support economic development of the regions in both the resulting states. FB
proposes to expand Sec 32(i)(iia) to allow higher additional depreciation @ 35%
(instead of 20%) in relation to acquisition and installation of new plant and
machinery for setting up of manufacturing units in notified backward area in the
State of Andhra Pradesh and Telangana. (FB Cl. 10)
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5.2. ADDITIONAL INVESTMENT ALLOWANCE - Incentive for the States of Andhra

Pradesh and Telangana [New Section 32AD] (FB Cl. 11)
5.2.1. New Section 32 AD provides for deduction of 15% of the actual cost of new assets
acquired and installed by an assessee for setting up an undertaking or enterprise on
or after April 1, 2015 but before April 1, 2020 in a notified backward area in Andhra
Pradesh and Telangana.
5.2.2. If the new plant or machinery in respect of which deduction is claimed is sold or
otherwise transferred (except in connection with the amalgamation or demerger or
re-organisation of business) within a period of 5 years from the date of installation,
the deduction allowed under this section will be taxable as income of the assessee
under the head profits and gains from business and profession in the previous year
in which such new asset is transferred and will be taxable in addition to gains arising
on such transfer.
5.2.3. If the new assets is sold or otherwise transferred in connection with the
amalgamation or demerger or re-organisation within a period of 5 years from the
date of installation, the successor, that is the amalgamated company or the resulting
company, as the case may be, will be entitled to claim the deduction.
5.2.4. The new asset means any new plant and machinery (other than ship or aircraft)
excluding the following:
a) Any plant or machinery which, before its installation by the assessee, was used
by any person either in India or outside India;
b) Any plant and machinery installed in any office premises or any residential
accommodation or guest house;
c) Any office appliances including computer or computer software;
d) Vehicles; and
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e) Any plant or machinery whose actual cost is wholly allowed as deduction (by
way of depreciation or otherwise) in computing the income chargeable under
the head profits and gains of business and profession.
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Chapter 6: Deductions under Chapter VI-A

6.1. Section 80C It is proposed to allow 100% deduction of any sum paid or deposited by
the parent or legal guardian of a girl child to Sukanya Samriddhi Account Scheme. (FB
Cl. 15)
6.2. Section 80CCC Limit of deduction for contribution in certain pension funds increased
to 1,50,000 from 1,00,000. (FB Cl. 16)
6.3. Section 80CCD - Deduction in respect of contribution made to pension scheme of CG.
6.3.1. It is proposed to delete section 80CCD(1A), which restricted the deduction of

amount paid / deposited u/s. 80CCD(1) upto 1 lakh. Due to this proposed
amendment, the assessee would now be able to claim the deduction of 10% of his
salary / gross total income.
6.3.2. Further, it is proposed to insert sub-section (1B), whereby over and above the
deduction under sub-section (1), an additional deduction upto 50,000 of the
amount deposited would be allowed.
6.3.3. The above amendments are illustrated here as under:
Particulars
Present ( in Lakh)
Proposed ( in Lakh)
Case I
Case II
Case III
Case I
15.00
15.00
15.00
15.00
15.00
15.00
-%
10%
12%
20%
10%
12%
20%
- Amount
1.50
1.80
3.00
1.50
1.80
3.00
Income
Case II
Case III
Paid / Deposited
Eligible Deduction
- 80CCD(1) r.w.s. (1A)
21
1.00
1.00
1.00
- 80CCD(1)
1.50
1.50
1.50
- 80CCD(1B)
0.30
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6.4. Section 80D Deduction in respect of Health Insurance Premium.

6.4.1. In case of an Individual
a. For Himself or Family
Category
Expense
Existing Proposed
Not Senior Citizen
Insurance
15,000
15,000
Senior Citizen
Insurance
20,000
30,000
Very Senior Citizen
Medical
30,000
Aggregate deduction not to exceed 30,000.

b. For Parents
Category
Expense
Existing Proposed
Not Senior Citizen
Insurance
15,000
15,000
Senior Citizen
Insurance
20,000
30,000
Very Senior Citizen
Medical
30,000

6.4.2. In case of an HUF
a. For Members
Category
Expense
Existing Proposed
Not Senior Citizen
Insurance
15,000
25,000
Senior Citizen
Insurance
20,000
30,000
Very Senior Citizen
Medical
30,000
6.4.3. Further, an Explanation has been inserted after sub-section (5), which defines the
term senior citizen and very senior citizen as follows:
a. senior citizen is an individual resident in India who is of the age of sixty
years or more at any time during the relevant previous year; and
b. very senior citizen is an individual resident in India who is of the age of
eighty years or more at any time during the relevant previous year.
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6.4.4. As per the Budget Speech of the Finance Minister and the Explanatory
Memorandum to FB, the deduction in respect of Insurance premium paid for a
person not being a senior citizen is proposed to be increased to 25,000. However,
no amendment for the same has been made in the FB.
6.5. Section 80DD Deduction in respect of Maintenance including Medical Treatment
of a dependent who is the person with disability.
6.5.1. Presently, Section 80DD provides for a deduction of 50,000/- if the dependant is
suffering from disability and 1,00,000/- if the dependant is suffering from severe
disability (as defined under the said section).
6.5.2. Now, it is proposed to raise the above limit of deduction of 50,000 to 75,000
and of 1,00,000/- to 1,25,000/-.
6.6. Section 80DDB Deduction in respect of Medical Treatment.
6.6.1. Presently, deduction is allowed to an individual in respect of medical expenditure

incurred on himself or a dependant relative of certain specified diseases. Similar,
deduction is allowed to HUF and to its membe
6.6.2. It is proposed to provide that the assessee will be required to obtain a prescription
from a specialist doctor for the purpose of availing deduction. Earlier the assessee
was required to furnish a certificate from the doctor working in Government
Hospital for availing this deduction.
6.6.3. Further, it is also proposed to amend section 80DDB to provide for a higher limit
of deduction of upto eighty thousand rupees, for the expenditure incurred in respect
of the medical treatment of a very senior citizen, who is an individual resident in
India and aged eighty years or more at any time during the relevant previous year.
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6.7. Section 80U Deduction in case of Person with disability.

6.7.1. Presently, deduction of 50,000/- is allowed if the person is suffering from
disability and 1,00,000/- if the person is suffering from severe disability (as
defined under the said section).
6.7.2. It is proposed to raise the above limit of deduction of 50,000 to 75,000 and
of 1,00,000/- to 1,50,000/-.
6.8. Section 80G This section deals with the deduction in respect of donations to certain
funds, charitable institutions, etc. It has been proposed to allow 100% deduction for the
contributions made by the assessee to Swachh Bharat Kosh, Clean Ganga Fund and
National Fund for Control of Drug Abuse. The contribution in the Swachh Bharat Kosh
and Clean Ganga Fund should be other than the sum spent by the assessee in pursuance of
Corporate Social Responsibility under sub section (5) of section 135 of the Companies
Act, 2013.
6.9. Section 80JJAA This section deals with the deduction in respect of employment of new
workmen.
6.9.1. It is proposed to omit the words being an Indian Company from the sub-section
(1). Due to this proposed amendment the deduction would be extended to noncorporate assessees also.
6.9.2. Also, it is proposed to substitute clause (a) of sub-section (2) by new clause (a)
wherein the assessee who has acquired the factory by way of transfer from any
other person or as a result of business reorganisation would not be eligible for
deduction. Earlier the deduction was deniable only to cases where the factory was
acquired under a scheme of amalgamation or demerger.
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6.9.3. Further, it is proposed to amend the definition of additional wages so as to reduce

the number of additional workmen required for availing deduction to 50 workmen
from earlier 100 workmen.
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CHAPTER 7 - SUMMARY OF THE PROPOSED AMENDMENTS RELATING TO TDS

AND TCS
7.1.
Section 192: TDS on Salary
7.1.1. Presently, Section 192(2B) read with Rule 26B of the Income Tax Rules, 1962
permits an employee to furnish the details of income chargeable under other heads
of income (including only loss under the head Income from House Property) and
TDS on such income to the employer. The employer is permitted to consider such
other income and TDS thereon while computing the estimated Salary of the
employee for a FY subject to the condition that except in case of loss under the
head Income from House Property, the total amount of tax deducted is not less
than the tax deductible from income from salaries only. However, the employer is
allowed to rely on the declaration and details furnished by the employee and is not
necessarily required to obtain external evidences, as far as he exercises due
diligence.
7.1.2. Sub-section (2D) is proposed to be inserted to provide that for the purpose of
estimating Salary of the employees, or computing TDS therefrom under subsection (1), the employer should obtain from his employees evidences or proof or
particulars of prescribed claims (including claim for set off of loss) under the Act
in the prescribed manner and form.
7.1.3. With the proposed provision, the employer has a highly onerous task in as much as
he has to obtain actual evidences/proofs to allow claims of his employees while
computing the estimated salary. Especially, for large corporates having multilocation based employees, it will be cumbersome not just to collect such evidences
apart from there being no surety of their authenticity or completeness.
7.1.4. In a case where the employer is not adequately equipped to handle huge
information and data resulting from the foregoing additional requirement, he may
take a conservative view and the employees could suffer higher TDS.
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7.1.5. The proposed provision attempts to overrule settled legal position that u/s 192 that
an employer is expected to make a fair and honest estimate of the salary of his
employees and if he has done so, if such estimate was incorrect, that alone cannot
be the basis to treat him as an assessee in default u/s 201. See, e.g.:
a. Gwalior Rayon Silk Co. Ltd. vs. CIT 140 ITR 832 (MP);
b. Indian Airlines Ltd. vs. CIT 59 ITD 353 (TMum);
c. Mahindra & Mahindra Ltd. vs. ITO 55 TTJ 174 (TMum);
d. Nestle India Ltd. vs. ACIT 61 ITD 444 (Del) (TDel)
e. CIT vs. Nestle Ltd. 243 ITR 345 (Del);
f. CIT vs .Maruti Udyog Ltd. 350 ITR 81 (Del) [Departments SLP dismissed]
7.1.6. More recently, in CIT vs. Larsen & Toubro Ltd. 313 ITR 1 (SC), it has been held
that the employer is not under any statutory obligation under the income-tax law or
rule books to check that the employee had actually utilized the amount paid towards
travel concession conveyance. Honble SC endorsed the view of Honble
Karnataka HC that the employer is not expected to collect and examine the
supporting evidence to the declaration to be submitted by the employee. The ratio
of Larsen & Toubro stands overruled by the proposed amendment.
7.1.7. Further, Form 12C was the notified form under Rule 26B which was omitted from
October 1, 2003. One needs to see in what form the new form to be prescribed
under sub-section (2D), will be issued.
7.1.8. The provision applies from June 1, 2015.
7.2.
Section 192A: TDS on payment of accumulated balance due to an employee: [ New

provision]
7.2.1. The proposed applies to the Trustees of the Employees Provident Fund Scheme
(EPFS) framed u/s. 5 of the Employees Provident Funds and Miscellaneous
Provisions Act, 1952 (EPFA). Under this provision, such Trustees will now be
obliged to deduct tax at source at 10% or where the deductee does not furnish his
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PAN, at the MMR, from the accumulated balance due to an employee, at the time
of payment of such balance if the conditions in Rule 8 of Part A of the Fourth
Schedule to the Act are not satisfied.
7.2.2. Rule 8 of Part A of the Fourth Schedule to the Act specifies the conditions under
which the accumulated balance due to and payable to an employee participating in
a Recognised Provident Fund (RPF) would be excluded from the total income of
such an employee. In case, either of these conditions are not satisfied, the trustees
of the RPF are required to deduct tax at source under Rule 9 r.w. Rule 10 of Part A
of the Fourth Schedule. . The term RPF is defined u/s 2(38) of the Act to include
the provident fund established under the scheme framed under the EPFA.
Therefore, Rule 8 applies even to the Fund under the EPFA.
7.2.3. EM justifies the flat rate of 10%/ MMR on the ground that under the RPF of private
employers, it is possible for the trustees to get the details of tax liability under rule
9 which may not be possible for the trustees of EPFO.
7.2.4. EM further clarifies that some of the employees may be subject to the higher rate
of 20%/30%. For such employees furnishing of PAN is mandatory so as to come
out of section 206AA. Therefore, MMR is specified for TDS where the valid PAN
is not furnished by the employee.
7.2.5. Small cases involving payment of less than 30,000/- are, however, excluded.
7.2.6. The provision applies from June 1, 2015.
7.3.
Section 197A: No TDS in certain cases
7.3.1. There is a consequential amendment in 197A (1A) and 197A(1C) to include

references to section 192A.
7.3.2. Form 15G and Form 15H are the prescribed forms under sub-sections (1A) and
(1C) respectively. These forms are self-declarations by the payee to the effect that
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the tax on his estimated total income for the previous year in which income covered
by the specified sections is nil. Thus, u/s 197A if tax on the total accumulated
payment due under the EPFS is nil, no tax is to be deducted at source on furnishing
Form 15G/15H.The new provision in section 192A gives exemption from TDS
only till 30,000/-.
7.3.3. The Proposed amendment applies from June 1, 2015.
7.4.
Section 194A: Interest other than Interest on Securities

7.4.1. Upto A.Y. 2015-16, the threshold limit of 10,000/- in respect of interest on Time
Deposit (TD) paid by a banking company was computed with reference to a
branch of such bank.
7.4.2. Now, the second proviso to section 194A(1) is proposed to be introduced to provide
that the limit of 10,000/- for interest on time deposit with a bank would be
computed with regard to the total interest paid or credited to the account of the
payee, where such bank follows Core Banking Solutions. Thus, the threshold,
which was earlier available qua each branch, will now be single limit at the level
of the bank. Hence, this provision would bring more cases and higher interest a
mounts under the TDS.
7.4.3. Upto A.Y. 2015-16, the exemption from the requirement of TD, in 194A(3)(v)
referred to co-operative societies. There were instances where certain co-operative
societies which were carrying on banking business claimed exemption under the
said clause in respect of interest paid to its members and their appeals were allowed
by Honble ITAT. See, for eg:
a. ACIT vs. Vishakhapatnam Co-operative Bank Ltd. 47 SOT 295
(Vishakhapatnam);
b. Bagalkot District Co-operative Bank vs. JCIT 48 taxmann.com 117 (Bg);
c. ACIT vs. Ozer Merchant Co-operative Bank Ltd. 41 taxmann.com 110 (Pune).
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7.4.4. It is now proposed to exclude co-operative banks by specifically excluding them

from the term co-operative societies in clause (v) (supra)
7.4.5. It is further proposed to insert an Explanation to clause (v) (supra) to the effect that
co-operative bank shall have the meaning under Part V of the Banking
Regulations Act , 1949.
7.4.6. Upto A.Y. 2015-16, clause (ix) of sub-section (3) to section 194A provided an
exemption from TDS in respect of interest paid or credited on the compensation
amount awarded by the Motor Accident Claims Tribunal where the amount of
income paid or credited did not exceed 50,000/- in a financial year.
7.4.7. It is now proposed to substitute new clauses (ix) and (ixa) in place of the existing
clause (ix), the effect of which is that the threshold of 50,000/- is to be computed
only with reference to the interest paid.
7.4.8. The EM states that the proposed amendment is to bring the provision in line with
section 145A(b) under which, regardless of the method of accounting employed by
an assessee, any interest on compensation or enhanced compensation is to be taxed
on receipt basis.
7.4.9. The foregoing amendments apply from June 1, 2015.
7.5.
Section 194C: TDS on payments to contractors
7.5.1. Upto Assessment `Year 2015-16, there was an exemption from the requirement of
TDS from payments/credits to any contractor during the course of his business of
plying, hiring or leasing of goods or carriages if such contractor furnishes his PAN
to the payer.
7.5.2. It is now proposed to restrict the aforesaid exemption only in cases where the
contractor owns less than ten goods carriages at any time during the previous year
and furnishes a self -declaration to this effect to the payer. Since the requirement is
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to own the carriages, it would not apply if the contractor only leases the carriages
instead of owning them.
7.5.3. It is to be noted that for section 192, the employer is required to obtain
evidences/proof for claims of employees whilst in the proposed amendment, the
payer has to specifically rely on self-declarations.
7.5.4. The foregoing amendment applies from June 1, 2015.
7.6.
Section 194LD: Interest on certain bonds and Government Securities
7.6.1. This provision prescribes the rate of 5% on interest paid on rupee denominated
bonds and Government Security with the sun set clause for payment of interest as
June 1, 2015.
7.6.2. The proposed amendment extend the foregoing sun set clause to July 1, 2017.
7.7.
Section 195: Payment to non-residents
7.7.1. Upto Assessment Year 2015-16, sub-section (6) required the payer to furnish Form
15CA (electronically) and obtain Form 15CB (Chartered Accountants certificate)
under rule 37BB of the Rules.
7.7.2. Rule 37BB exempted the payer from filing Form 15CA and obtaining Form 15CB
in respect of certain remittances such as investments abroad, travel for educational
purposes including fees, travel for medical purposes, etc.
7.7.3. Further, due to the language of sub-section (6), the payers were not required to
obtain Form 15CA and 15CB where payments/credits were not chargeable to tax
under the Act.
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7.7.4. It is proposed to substitute the existing sub-section (6) by a new provision as per
which the payer would be required to submit the information relating to such
payment whether or not the sums are chargeable to tax.
7.7.5. The EM provides the rationale behind the amendment as the need to collect
information even on foreign remittances on which tax was deductible but was not
deducted. However, the proposal would increase the burden of reporting on the
payer.
7.7.6. Under the proposed amendment, even personal payments, credit card payments
abroad, remittances made to say a relative living abroad, etc, would be covered.
Similarly, all imports would be required to be reported, though they are not
chargeable to tax in India.
7.7.7. It would, therefore, have to be seen as to what reporting requirements are

introduced under the amended provision.
7.7.8. The language used is the person, which would mean the person referred to earlier
in the provision. Now, sub-section (1) of section 195 refers to a person responsible
for paying to non-resident. Section 204(iii) provides that the person responsible
for paying is the payer himself or in case of a company, the principal officer, if the
payment is of a sum chargeable under the provisions of this Act. Hence, there is
an anomaly in the proposed amendment.
7.8.
Section 200A: Processing of statements of TDS

7.8.1. The present provision set out the procedure for processing the statement for TDS
or correction statements filed by the deductor.
7.8.2. It is now proposed that the fee for late filing the statement of TDS, which is payable
u/s 234E of the Act would be adjusted in computing the final demand or refund due
to the deductor on account of TDS.
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7.8.3. The proposed amendment is in line with the decision of Honble Bombay High
Court in Rashmikant Kundalia and other vs. Union Of India (Writ Petition No. 771
of 2014), delivered recently, which upheld the constitutional validity of section
234E.
7.9.
Section 203A: Tax deduction and collection account number
7.9.1. The proposed insertion of sub-section (3) give power to the Central Government to
notify persons to whom the said provisions would not apply.
7.9.2. The EM explains the purpose behind such insertion as the need to reduce the
compliance burden on individuals and HUFs who are not subject to tax audit u/s
44AB. It further states the purpose can also be achieved by obtaining PAN of such
individuals and HUFs.

7.10. Section 206CB: Processing of Statement of tax collected at source (TCS)
7.10.1. This is a new provision proposed to be inserted on the lines of section 200A in
respect of TCS.
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CHAPTER 8 PENALTIES
8.1.
Penalty u/s. 271(1) For Concealment or Furnishing Inaccurate Particulars
8.1.1. In the course of any proceedings under the Act, if the AO or CIT(A) or PC or
Commissioner is satisfied that any person has concealed the particulars of income
or furnished inaccurate particulars of income, then, penalty at least equal to the
amount but not more than three times of tax sought to be evaded, can be imposed.
As per existing Explanation 4 to Section 271(1)(i) of the Act, tax sought to be
evaded in a case, is interpreted to be:
(a)
tax on amount of income by which returned loss is reduced or is converted

into the income, in other words, tax on income in respect of which there is
concealment or furnishing of inaccurate of particulars of income;
(b)
cases to which Explanation 3 to Section 271 applies, tax on total income

assessed as reduced by advances tax, TDS, TCS and SAT paid before issue
of reopening notice u/s. 148;
(c)
in any other case, difference between the tax on total income assessed and
tax on returned income.
8.1.2. Now, it is proposed to substitute Explanation 4. Under the proposed Explanation

4, the tax sought to be evaded shall be determined as follows:
Tax sought to be evaded = (A-B) + (C-D), where

A is, tax on assessed income under the general provisions of the Act;
B is, tax on assessed income as reduced by the tax on concealed income or income
in respect of which inaccurate particulars has been filed;
C is, tax on book profit assessed u/s. 115JB or 115JC of the Act;
D is, tax on assessed book profits reduced by tax on concealed income or income
in respect of which inaccurate particulars has been filed.
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It has been provided that where the amount of income in respect of which
particulars have been concealed or inaccurate particulars have bene furnished on
any issue which has been considered under the general provisions and u/s. 115JB
or 115JC, then such amount shall not be reduced from the total income assessed
while determining the amount under item D. It has been further provided that if
provisions of Section 115JB or 115JC are not applicable, the item (C-D) shall be
ignored.
(FB Cl. 68)
8.1.3. Problems have arisen in the computation of tax sought to be evaded where the
concealment of income or furnishing inaccurate particulars of income occurs in the
computation of income u/s. 115JB or 115JC and also under the normal provisions.
Further, Courts have held that penalty u/s. 271(1)(c) cannot be levied in cases
where the concealment of income occurs under the income computed under normal
provisions and the tax is paid u/s. 115JB or 115JC. Tax paid u/s. 115JB or 115JC
over and above the tax liability arising under general provisions is available as
credit for set off against future tax liability. Understatement of income and the tax
liability thereon under general provisions results in larger amount of such credit
becoming available to the assessee for set off in future yeaTherefore, where
concealment of income, as computed under the normal provisions, has taken place,
penalty u/s. 271(1)(c) is considered leviable even if the tax liability has been
determined u/s. 115JB or 115JC.
Accordingly, it is proposed to amend section 271 of the Act so as to provide that

the amount of tax sought to be evaded shall be the summation of tax sought to be
evaded under the general provisions and the tax sought to be evaded u/s. 115JB or
115JC.
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8.1.4. A table is presented herein below, to understand the effect of amendment:

a. Assessed Income under General Provisions is more than Assessed Book
Profits.
Particulars
General Provisions
Book Profit
Returned Income
1,50,000
1,00,000
Addition / Disallowance
1,00,000
1,00,000
Assessed Income
2,50,000
2,00,000
Penalty as per Proposed Amendment: (A-B) + (C-D)

A:
Tax @ 30% on Assessed Income under General Provisions 75,000
B:
Tax @ 30% on ( 2,50,000 minus 1,00,000)
45,000
(A-B)
30,000
Since, Income assessed under general provisions is higher than the book profits,
therefore, assessment would be made on general income. Accordingly, in view
of the proposed proviso to Explanation 4, (C-D) would not be computed.
Therefore, penalty as per proposed amendments would be 30,000.
Penalty as per existing provisions: It would be the tax effect of difference

between assessed income and returned income i.e. 30% of 1,00,000 =
30,000.
Therefore, in the above scenario, there is no difference in levy of penalty.

b. Assessed Book Profits is more than Assessed Income under Normal
Provisions.
Particulars
36
Normal Provisions
Book Profit
Returned Income
1,00,000
2,00,000
1,00,000
50,000
Assessed Income
2,00,000
2,50,000

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A: Tax @ 30% on Assessed Income under Normal Provisions
60,000
B: Tax @ 30% on ( 2,00,000 minus 1,00,000)
30,000
(A-B)
30,000
C: Tax @ 18.5% on Assessed Book Profits
46,250
D: Tax @ 18.5% on ( 2,50,000 minus 50,000)
37,000
(C-D)
9,250
Total Penalty Leviable = (A-B) + (C-D)
39,250

between assessed book profits and returned book profits i.e. 18.5% of
1,00,000 = 18,500.
c. Addition / Disallowance made while assessing income under general
provisions and book profit is identical.
Particulars
Normal Provisions
Book Profit
Returned Income
1,00,000
2,00,000
1,00,000
1,00,000
Assessed Income
2,00,000
3,00,000

A:
Tax @ 30% on Assessed Income under Normal Provisions 60,000
B:
Tax @ 30% on ( 2,00,000 minus 1,00,000)

(A-B)
30,000
30,000
C:
Tax @ 18.5% on Assessed Book Profits
55,500
D:
Tax @ 18.5% on ( 3,00,000 minus 0 (Refer Note 55,500

Below))
(C-D)
Nil
Total Penalty Leviable (A-B) + (C-D)
30,000
Note: As per Proviso to Explanation 4, if addition / disallowance is similar

both under general provisions and book profits, then, while computing item D,
such addition / disallowance would not be reduced from Assessed book profits,
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resultantly, there would be no penalty on addition / disallowance made u/s.

115JB or 115JC.

between assessed book profits and returned book profits i.e. 18.5% of
1,00,000 = 18,500.
The Computation under Scenario (b) & (c) suggests that as per the proposed
amendments, the Assessee would be liable to pay more penalty even if the
assessment is finally made u/s. 115JB or 115JC. Explanation proposed to be
substituted would override several judgements wherein it was held that penalty
u/s. 271(1)(c) was not to be imposed where income was assessed u/s. 115JB.
Following decisions would also be overridden:
(a) Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Delhi) (SLP
Dismissed)
(b) Unisons Hotels Ltd. (2013) (40 taxmann.com 237) (Delhi),
(c) Gujarat State Fertilizers & Chemicals Ltd. (2013) 36 taxmann.com 533
(Guj.),
(d) CIT v. Aleo Manali Hydro Power P. Ltd. 38 taxmann.com 288 (All.),
(e) CIT v. Jindal Polyester & Steel Ltd. 365 ITR 225 (All.),
(f) BSEL Infrastructure Realty Ltd. v. ACIT 137 ITD 61 (Mumbai Tribunal).
8.1.5. Proposed Explanation 4 would apply only to the offences committed after
April 01, 2016.
8.2. Penalty u/s. 271FAB For Failure to furnish statement or information u/s. 9A(5)
8.2.1. The proposed regime provides that in the case of an eligible investment fund, the
fund management activity carried out through an eligible fund manager acting on
behalf of such fund shall not constitute business connection in India of the said
fund.
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8.2.2. The FB has proposed certain conditions for a person to an eligible fund manager
The FB has also proposed that every eligible investment fund shall, in respect of
its activities in a financial year, furnish within ninety days from the end of the FY,
a statement in the prescribed form to the prescribed income-tax authority,
containing information relating to the fulfilment of the conditions or any
information or document which may be prescribed. However, if any eligible
investment fund fails to furnish statement / information / documents, as required
u/s. 9A(5), within the prescribed time period, the prescribed income tax-authority
may impose a penalty of 50,00,00/-. (FB Cl. 71)
8.3. Penalty u/s. 271GA For Failure to Furnish Information or document u/s. 285A
8.3.1. If any Indian Concern fails to furnish any information or document as required u/s.
285A, the prescribed income-tax authority u/s. 285A may direct such Indian
Concern to pay penalty of:
a. 2% of the value of transaction which has effect of directly or indirectly

transferring the right of management or control in relation to Indian Concern
and failure is committed in respect of reporting of such transaction;
b. in any other case, 5,00,000.
(FB Cl. 72)
8.3.2. The FB has cast a reporting obligation on Indian concern through or in which the
Indian assets are held by the foreign company or the entity. The Indian entity shall
be obligated to furnish information relating to the off-shore transaction having the
effect of directly or indirectly modifying the ownership structure or control of the
Indian company or entity. To avoid non-compliance of such reporting
requirements, imposition of penalty has been proposed.
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8.4. Penalty u/s. 271-I For Failure to Furnish information u/s. 195
8.4.1. The proposed amendment in Section 195(6) requires that the person responsible
for paying to a non-resident (not being a company), or to a foreign company, any
sum whether or not chargeable under the Act, shall in respect of such sum, furnish
such information as may be prescribed.
8.4.2. If the information as required u/s. 195(6) are not furnished or inaccurate
information is furnished, the AO may impose a penalty of 1,00,000. (FB Cl. 73)
8.4.3. These amendments will be effective from June 01, 2015.
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CHAPTER 9 OTHER PROVISIONS

9.1.
TRANSFER PRICING PROVISIONS IN RESPECT OF SPECIFIED DOMESTIC

TRANSACTION (Section 92BA)
9.1.1
The existing Section 92BA specifies transactions, not being international

transactions, to be included in the ambit of specified domestic transactions for the
purpose of computing the arms length price. The provisions of Section 92BA are
applicable if the aggregate of such specified domestic transactions entered into by
the assessee in the previous year exceeds 5 crores.
9.1.2
The FB proposes to amend the existing threshold limit of 5 Crores to 20 Crore.

(FB Cl. 24)
9.1.3
This amendment is introduced to address the issue of compliance cost in case of

small businesses.
9.2.
DEFERMENT OF PROVISIONS RELATING TO GENERAL ANTI AVOIDANCE

RULE (GAAR) Chapter X-A
9.2.1. Finance Act, 2013 introduced the GAAR provisions to come into effect from
1.04.2016 (FY 2015-16).
9.2.2. FB proposes to defer GAAR provisions by two years i.e. the provisions of GAAR
will be made applicable from F.Y. 2017-18 (A.Y. 2018-19) and subsequent
yea(FB Cl. 25)
9.2.3. Consequently, income prior to F.Y. 2017-18 and investments made upto March 31,
2017 will not be subjected to GAAR provisions. (Though, there is no such specific
amendment in the proposed Bill, reliance can be placed on following decisions
wherein it has been held that on interpreting a provision, resort can be made to the
speech of the Finance Minister. Refer Sole Trustee, Loka Shikshana Trust v. CIT
(1975) 101 ITR 234 (SC)).
9.2.4. Further investments made up to March 31, 2017 are proposed to be protected from
the applicability of GAAR
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9.3.
SECTION 115 JB: SPECIAL PROVISION FOR PAYMENT OF TAX BY

CERTAIN COMPANIES:
9.3.1. The Existing Section 115JB of the Income-tax Act provides for charge of MAT on
companies at the rate of 18.5 % of book profits, if the tax payable on total income
is computed under the normal provisions of the Act is less than 18.5% of book
profits.
9.3.2. No MAT on share of income received by a Company-member from AOP/ BOI
a.
Section 86 of the Act provides that no income-tax is payable on the share of a

member of an AOP/ BOI, in circumstances when the income of AOP/ BOI is
chargeable to tax at maximum marginal rate. However, under 115JB of the
Act, a company which is member of an AOP is liable to MAT on its share of
income of AOP, since such income is not excluded while computing MAT
liability of the company. Resultantly, the part of income of a company being
share of its income from AOP/ BOI gets taxable in case income of the company
is chargeable to MAT.
b.
FB proposes to amend Sec. 115JB such that the share of member of AOP in
income of AOP which is non-taxable as per section 86 shall be excluded while
computing MAT for member. Expenditure in relation to such income shall be
added back while computing MAT. (FB Cl. 29)
c.
The clause so proposed to be inserted would override the decision of Mumbai

Tribunal in case of Golderg Finance (P.) Ltd v. ACIT (2015) (53 taxmann.com
40) and Hyderabad tribunal in case of ACIT v. B. Seenaiah & Co. Projects
Ltd.(2013) (150 ITD189) wherein it was held that all amounts credited to the
profit and loss account of the company should be considered for the purpose
of computing book profits u/s. 115JB, unless specifically excluded by any of
the Explanations under that section.
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d.
The proposed amendment seeks to provide relief to companies from paying

MAT on their share of income from AOP. This amendment is likely to benefit
the infrastructure sector where the large projects are executed through AOP.
9.3.3.
No MAT on long term capital gains derived by FII

a.
The Finance (No. 2) Act, 2014 amended Section 2(14) of the Act to include
the securities held by FII's as capital asset. Consequently, the income arising
to FII's from transactions in securities would thus be in the nature of capital
gains. Such an amendment was beneficial for FII's as sale of listed securities
is free from levy of Capital Gains Tax. However, FII's which are subjected to
MAT under provisions of the Act have to pay MAT even on capital gains
arising out sale of securities, as such income is not excluded while computing
the MAT liability. (Though arguably, one may contend that as FIIs are not
required to maintain financial statements in accordance with the provisions of
the Companies Act, 2013 as they do not have offices / branches in India, they
are not subject to MAT).
b.
FB proposes to amend Sec. 115JB so that income from transaction in

securities (other than short term capital gains arising on transactions on which
securities transaction tax is not chargeable) arising to an FII shall be excluded
from the chargeability of MAT and the profit corresponding to such income
shall be reduced from the book profits. Related expenditure shall be added
back while computing MAT. (FB Cl. 29)
c.
The proposed amendment seeks to extend benefits to FII's to attract more

investment in India
9.4.
Section 35 (2AB): EXPENDITURE ON SCIENTIFIC RESEARCH:

9.4.1. Weighted deduction of 200% is available u/s. 35(2AB) on any expenditure on
scientific research on in-house approved research and development facility, carried
out by a company engaged in the business of biotechnology or manufacturing or
production of article or thing (other than 11th schedule).
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9.4.2. The research facility is approved by the DSIR and a report is sent to DGIT (E) by
DSIR.
9.4.3. The Company is required to maintain separate books of accounts for approved
R&D facility and is required to get the accounts audited and file the same with
DSIR.
9.4.4. Now, it is proposed that the Company would have to maintain book of account in
the manner as may be prescribed and audit report would also be required to be
furnished. (FB Cl. 12)
9.5.
SECTION 132B: APPLICATION OF SEIZED OR REQUISITIONED ASSETS:

9.5.1. Sec 132B is amended to provide that the asset seized under section 132 or
requisitioned under section 132A may also be adjusted against the amount of
liability arising on an application made before the Settlement Commission u/s.
245C(1). (FB Cl. 33)
9.6.
SANCTION FOR ISSUE OF REOPENING NOTICE [SECTION 151]

9.6.1. Existing Section 151 of the Act states that if the assessment has been made u/s.
143(3) or 147 and the AO is below the rank of Assistant Commissioner / Deputy
Commissioner, notice u/s. 148 can be issued if Joint Commissioner (JC) is
satisfied, on the reasons recorded by the A.O. that it is a fit case for issue of such
notice.
9.6.2. Further, if notice u/s. 148 of the Act is issued after the expiry of the four years,
then, in such case, such notice shall not be issued unless the Principal Chief
Commissioner (PCC) / Chief Commissioner (CC)/ Principal Commissioner
(PC) / Commissioner is satisfied, on the reasons recorded by the AO, that it is a
fit case for issue of such notice.
9.6.3. In any other case, notice of reopening u/s. 148, after expiry of four years, shall be
issued by the AO who is below the rank of JC unless the JC is satisfied, on the
reasons recorded by such AO, that it is a fit case for the issue of such notice.
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9.6.4. To bring simplicity, it is proposed to provide that no notice u/s. 148 shall be issued
by an AO upto four years from the end of relevant assessment year without the
approval of JC and beyond four years from the end of relevant assessment year
without the approval of the PCC or CC or PC or Commissioner (FB Cl. 35).
9.6.5. Now, reopening of an intimation issued u/s. 143(1), within four years, by an AO
who is below the rank of JC, would require satisfaction from JC that it is a fit case
for issue of such notice.
9.6.6. These amendment will be effective from June 1, 2015.
9.7.
ASSESSMENT OF INCOME OF ANY OTHER PERSON [SECTION 153C]

9.7.1. As per Existing Section 153C, notwithstanding anything contained in Section 139
/ 147 / 148 / 149 / 151 / 153, where the AO is satisfied that any money, bullion,
jewellery or other valuable article or thing or books of account or documents seized
or requisitioned belongs or belong to a person other than the person referred to in
Section 153A, then the books of account or documents or assets seized or
requisitioned shall be handed over to the AO having jurisdiction over such other
person.
9.7.2. Now, it has been proposed that notwithstanding anything contained in section 139
/ 147, / 148 / 149 / 151 / 153, where the AO is satisfied that any money, bullion,
jewellery or other valuable article or thing, seized or requisitioned, belongs to, or
any books of account or documents, seized or requisitioned, pertains or pertain to,
or any information contained therein, relates to, any person, other than the person
referred to in section 153A, then the books of account or documents or assets seized
or requisitioned shall be handed over to the AO having jurisdiction over such other
person. (FB Cl. 36)
9.7.3. The above amendment in Section 153C has been proposed to avoid the disputes
that have arisen as to the interpretation of the words belongs to in respect of a
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document as for instance when a given document seized from a person is a copy of
the original document.
9.7.4. In the existing provision of Section 153C, the word belongs or belong to has a
very narrower meaning. This word came up for consideration in the case of CWT
v. Bishwanath Chatterjee and Others (1976) 103 ITR 536 (SC) wherein dealing
with an issue relating to wealth tax, it was held that mere possession, or joint
possession, unaccompanied by the right to, or ownership of property would
therefore not bring the property within the definition of net wealth for it would
not then be an asset belonging to the assessee.
However, now it has been proposed to replace the word belongs or belong to
with pertains or pertains to in case any books of account or documents are seized
or requisitioned, and relates to in case any information contained in such seized
or requisitioned books of accounts or documents. The word pertaining to /
relates to is an expression of expansion. As per Oxford Dictionary, the word
pertain means relate or have reference to, belong as a part, and the word relate
means bring into relation, establish a connection between, have reference to.
Therefore, now it has been proposed to expand the scope of Section 153C with the
insertion of pertains / pertain to / or relates to any person, other than the
searched person.
9.7.5. The proposed amendments will overrule the ruling of the Honble Delhi High Court
in the case of Pepsico India Holdings (P.) Ltd. v. ACIT (2014) 270 CTR 467 (Del.).

9.8.
SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS [SECTION

158AA]
9.8.1. Presently, section 158A provides that during pendency of proceedings in his case
for an A.Y., an assessee can submit a claim before the AO or any appellate
authority that a question of law arising in the instant case for the A.Y. under
consideration is identical with the question of law already pending in his own case
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before the HC or SC for another A.Y. and if the A.O. or any appellate authority
agrees to apply the final decision on the question of law in that earlier year to the
present year, he will not agitate the same question of law once again for the present
year before higher appellate authorities. The A.O. or any appellate authority before
whom his case is pending can admit the claim of the assessee and as and when the
decision on the question of law becomes final, they will apply the ratio of the
decision of the HC or SC for that earlier case to the relevant years cases also.
9.8.2. There is presently no parallel provision for revenue to file appeal for subsequent
years where the Department is in appeal on the same questions of law for an earlier
yeaNow it is proposed that if in the opinion of Commissioner or PC, in case of an
assessee, any question of law arising for any A.Y. is identical with question of law
arising for another A.Y. and the same is pending before SC, then, Commissioner
or PC may direct the AO to apply to the Tribunal in the prescribed form within 60
days from the receipt of the order of CIT(A), provided that acceptance in this regard
has been received from the Assessee. In case no acceptance is received, the
Commissioner or PC shall proceed according to the normal route of litigation. (FB
Cl. 39)
9.9.
REVISION OF ORDERS PREJUDICIAL TO REVENUE [SECTION 263]

9.9.1. Presently, the PC or Commissioner may call for and examine records of any
proceedings under the Act and if he considers that any order passed by the AO is
erroneous in so far as it is prejudicial to the interests of the revenue, he may, after
giving the assessee an opportunity of being heard and after making such enquiry,
pass an order.
9.9.2. Now, Explanation 2 to Section 263 is proposed to be inserted w.e.f. June 01, 2015
according to which an order passed by AO shall be deemed to be erroneous in so
far as it is prejudicial to the interests of the revenue, if, in the opinion of
Commissioner of PC-
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(a) Order is passed without inquiries or verification;

(b) relief is allowed without inquiring into the same;
(c) order passed is contrary to CBDTs order / direction / instruction;
(d) order is not in accordance with the decision of jurisdictional HC and SC.
(FB Cl. 65)
9.9.3. The interpretation of expression erroneous in so far as it is prejudicial to the
interests of the revenue has been a contentious one. In order to provide clarity, it
is proposed to define as to when an order passed by the AO would be deemed to
be erroneous in so far as it is prejudicial to the interests of the revenue.
9.9.4. Under Explanation 2, an order of AO would be deemed to be erroneous in so far
as it is prejudicial to the interests of the revenue, however, such a deeming fiction
would lead to increase in issue of notices & reframing of assessment orders u/s.
263 and consequent increase in litigation.
9.9.5. Earlier, it has been held by the Courts that lack of enquiry cannot be termed as
erroneous u/s. 263 but now in view of the proposed amendment, such cases will
also be subject to section 263.
9.9.6. Whether amendment by way of Explanation 2 in Section 263 would apply to the
orders passed prior to June 01, 2015 or after that date, could be litigative.
9.9.7. Further, in cases where assessee has made a claim on the basis of a favourable
decision of the Jurisdictional HC in spite of there being an unfavourable decision
of the same HC and such claim has been accepted by the AO, then in such cases,
the Commissioner may invoke powers in the garb of Explanation 2(d) to Section
263. This would lead to uncertainty and as a result, it would lead to more litigation.
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9.10.
CHARGEABILITY OF INTEREST ON NON PAYMENT OF TCS DEMAND [Sec.

220]
9.10.1. Presently, as per section 220(2), when the demand as per the notice u/s 156 is not
paid within the specified period, the assessee shall be liable to pay interest at the
rate 1% from the day following the end of the specified period.
9.10.2. It is proposed to insert sub-section (2A) providing that where the interest is charged
u/s 206C (7) on the demand specified on the intimation u/s 206CB(1), then, no
interest shall be charged on the same amount for the same period under sub-section
(2) of this section. (FB Cl. 55)
9.10.3. As per the proposed provisions in sec. 206CB in respect of the processing of TCS
statement and consequent amendment in sec. 156, intimation generated u/s 206CB
shall be deemed as a notice of demand u/s 156. Sec. 220(2) may be invoked to
charge interest on failure to pay the tax in the specified period. However, since such
provisions for charging interest are present in section 206C(7), amendment in this
section is proposed.
9.11. INTEREST ON DEFAULTS IN PAYMENT OF ADVANCE TAX [Sec. 234B]

9.11.1. Interest on tax on re-assessment u/s 147 or 153A [Sub-section (3) of sec. 234B]
a. The existing provisions of section 234B (3) provide that where the total income is
increased on reassessment u/s. 147 or 153A, the assessee shall be liable for interest
at the rate of 1 % on the tax on the increase in total income for the period
commencing from date of determination of total income u/s. 143(1) or on regular
assessment and ending on the date of reassessment u/s. 147 or 153A.
b. It is proposed to amend sub-section (3), w.e.f June 1, 2015, so as to provide that

the period for which the interest is to be computed will begin from the 1st day of
April of the concerned assessment year (earlier, from the date following the date
of Intimation u/s. 143(1) or date of order of regular assessment) and end on the date
of determination of total income u/s. 147 or section 153A. (FB Cl.56)
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c. Tax determined as a result of the completion of re-assessment u/s 147 or 153A is

the final tax liability of the tax payer. Such tax liability is the true liability right
from the beginning on which advance tax should have been paid within the
prescribed due date. Therefore, by amendment, the period for which interest should
have been paid under this section has been prolonged from the 1st day of the
concerned assessment year.
9.11.2. Interest on tax as per Application before Settlement Commission [Sub-section (2A)
of Sec. 234B] (FB Cl.56)
a. Presently, sub-section (4) of this section provides that where as a result of the order
of the Settlement Commission u/s 245D (4), the amount on which interest is
payable is increased or reduced, accordingly, interest shall be increased or reduced.
b. By inserting new sub-section (2A), w.e.f. June 1, 2015, tax on the additional
income declared in the Application made u/s 245C (1) before the Settlement
Commission will be liable to the charge of interest under this section from the 1st
day of the concerned assessment year to the date of Application made. The
provision for charging interest consequent to the order of the Settlement
Commission u/s 245D (4) has been modified inasmuch as the period for charging
the interest shall be from the date of Application made before the Settlement
Commission up to the date of the order u/s 245D (4). (FB Cl. 56)
c. Currently, there is no specific provision in section 234B for charging interest on

the additional amount of income-tax declared in case an application filed before
the Settlement Commission under section 245C. Therefore, with the effect of this
amendment, interest will be chargeable for the period of the date of application to
the date of order of the Settlement Commission.
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9.12. MODE OF TAKING OR ACCEPTING CERTAIN LOANS, DEPOSITS AND

SPECIFIED SUMS AND MODE OF REPAYMENT OF LOANS OR DEPOSITS
AND SPECIFIED ADVANCES [Section 269SS & T]
9.12.1. Presently, Sec. 269SS & Sec. 269T provides that no person shall take or repay from
any person any loan or deposit otherwise than by an account payee cheque or
account payee bank draft or online transfer through a bank account, if the amount
of such loan or deposit is 20,000/-. Certain exceptions have also been provided in
the section.
9.12.2. It is proposed to amend these sections, w.e.f. June 1, 2015, by adding specified
sum to the loan or deposit. The specified sum is defined as any sum of money
receivable/ payable in the nature of advance or otherwise, in relation to transfer of
an immovable property, whether or not the transfer takes place. (FB Cl.66 & 67)
9.12.3. Gujarat High Court, in CIT v. Madhav Enterprise Pvt. Ltd. (356 ITR 588) held that
advances paid for purchase of shop did not fall in the ambit of Sec. 269SS.
9.12.4. The proposed amendment is intended as a measure to curb generation of black
money by way of dealings in cash in immovable property transactions.
9.13. ENABLING THE BOARD TO NOTIFY RULES FOR GIVING FOREIGN TAX
CREDIT [Section 295]
9.13.1. The current provisions u/s 91 (1) of the Act provides that an Indian resident is
entitled to a deduction from the Indian income-tax of a sum calculated on such
doubly taxed income, at the Indian rate of tax or the rate of tax of said country,
whichever is lower. However, the manner of granting credit of such taxes is not
provided.
9.13.2. It is proposed to amend section 295(2) so as to provide that CBDT may make rules
to provide for procedure for granting relief / deduction of any income-tax paid in
any country or specified territory outside India, u/s. 90 / 90A / 91, against the
income-tax payable under the Act. (FB Cl. 78)
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9.13.3. This amendment is effective from June 1, 2015.
9.14. FURNISHING OF INFORMATION OR DOCUMENTS BY AN INDIAN

CONCERN IN CERTAIN CASES
9.14.1. It has been proposed that an Indian Concern who holds or through which a
Company or an entity incorporated outside India, holds, directly or indirectly,
assets in India and the substantial value of share or interest in such overseas
concern, as referred to in Explanation 5 to Section 9(1)(i), is derived, directly or
indirectly, from such assets in India, then, for the purpose of determination of any
income accruing or arising in India u/s. 9(1)(i), the Indian Concern shall furnish
within the prescribed period to the prescribed income-tax authority, such
information or documents as may be prescribed. (FB Cl. 76)
9.16. SETTLEMENT COMMISSION

9.16.1. Scope of cases in respect of which an assessee can file an application to Settlement
Commission is being expanded;
a.
An assessee can file an application u/s. 254C (1) to the Settlement Commission
in relation to any case relating to him. The term case has been defined u/s.
245A (b) to mean any proceeding for assessment under the Act which may be
pending before an Assessing Officer on the date of making application to the
Settlement Commission. The Explanation to the said clause provides for
deemed commencement of proceedings in certain situations.
b.
Presently, the proceeding for assessment or reassessment under section 147 of

the Act is deemed to commence from the date of issue of notice under section
148 of the Act. Thus, an assessee could have filed application to the Settlement
Commission only in respect of the assessment years in respect of which
assessment years for which notice was already issued.
c.
Now, it is proposed to amend the said Explanation to enable the assessees to

whom notice u/s. 148 has been issued in respect of a particular assessment
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year, to file an application to the Settlement Commission in respect of the other

assessment years also, where no notice u/s. 148 has been issued but the time
limit to issue notice u/s. 148 in respect of the said assessment year has not
elapsed as on the date of issuance of aforesaid notice u/s. 148.
d.
Further, the scope for the residuary clause (iv) of the aforesaid Explanation is
proposed to be expanded. Earlier residual proceedings where deemed to have
commenced from the 1st day of the assessment year and concluded on the date
on which the assessment is made. It is proposed that such proceedings shall be
deemed to have commenced from the date on which a return of income is
furnished u/s. 139/142 and concluded on the date on which the assessment is
made and in cases where no assessment is made, on expiry of two years from
the end of relevant assessment year.
9.16.2. It is proposed to amend sub-section (1) of section 245H of the Income-tax Act so
as to provide that the Settlement Commission while granting immunity from
prosecution and penalty to any person shall record the reasons in writing in the
order passed by it.
9.16.3. Section 245HA provides for situations where the proceedings before the Settlement
Commission shall abate. It is now proposed that in cases where an order is passed
by the Settlement Commission without providing the terms of settlement, then such
proceedings shall be considered as abated before the Settlement Commission;
9.16.4. Section 245K provides for certain cases where an assessee has already made an
application to Settlement Commission then the assessee would be barred from
approaching Settlement Commission subsequently. The said restriction is now
proposed to be extended to any person related to the person who has already
approached the Settlement Commission once.
9.16.5. These amendment will be effective from June 01, 2015.
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9.17. ACCOUNTANT
9.17.1. Presently, an accountant could be an authorized representative of the assessee and
audit reports or certificates under the various provisions of the Act are to be given
by an accountant, that is - a chartered accountant who is the member of the
Institute of Chartered Accountants of India (ICAI) and includes, in relation to
any State, any person who is entitled to be appointed under the Companies Act,
1956 to be an auditor of companies in that State.
9.17.2. Effective June 1, 2015, the definition of accountant in Explanation to Section
288(2) is proposed to be substituted with the new definition. Now, an accountant
should not only be the member of ICAI but should also hold the certificate of
practice in terms of the provisions of Section 6 of the Chartered Accountants Act,
1949.
9.17.3. Further, to ensure independence so as to protect the interests of the revenue, for
giving audit report and certificate under the various provisions of the Act,
disqualifications have been proposed. Such disqualifications are given below.
SR.
No.
1.
Type of assessee
Company
Disqualifications of person
Who is not eligible to be appointed as an auditor
of the said company as per Section 141(3) of the
Companies Act, 2013
2.
Individual
Himself
3.
Firm
Any partner
4.
AOP
Any member
5.
HUF
Any member
6.
Trust or institution
o Author or any trustee of the trust

o The founder or manager of the institution
o Any person whose total contribution exceeds
50,000 up to the end of the relevant previous
year
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o Where such author, founder or person is a

HUF, member of the family
7.
Additional for (2) to
o Who is competent u/s. 140 to verify the return
(6) above
of income
o Relative of persons specified in 2 to 7
8.
For any assessee in
o Officer or employee of the assessee
general
o Partner or employee of such officer or

employee
o Any individual or his relative or his partner
Is holding security of the assessee
Is holding interest in the assessee
Relative is disqualified only if the face
value of security or interest exceeds
1,00,000
Is indebted to the assessee
Has given a guarantee or provided any
security in connection with the indebtedness
of any third person to the assessee
Relative is disqualified only if the amount
of indebtedness in the above exceeds
1,00,000
o Having direct or indirect business relationship
of such nature as may be prescribed
o Who is convicted by a court of an offence
involving fraud and a period of 10 years has
not elapsed from the date of such conviction
9.17.4. Relative means as defined under the new Explanation to sub-section 7.
55
a.
Spouse of the individual
b.
Brother or sister of the individual
c.
Brother or sister of the spouse of the individual
d.
Any lineal ascendant or descendant of the individual

BANSI S. MEHTA & CO

e.
Any lineal ascendant or descendant of the spouse of the individual
f.
Spouse of a person referred to in clause (b), clause (c), clause (d) or clause
(e)
g.
Any lineal descendant of a brother or sister of either the individual or of

the spouse of the individual
9.17.5. Every assessee before appointing an accountant for the purpose of submitting any
report or certificate under the Act [such as u/s 44AB, 80IB, 115JB, 142(2A), etc.]
will have to ascertain whether the accountant attracts any disqualification. The
assessee may prepare a checklist and also get a certificate from an accountant for
eligibility of the appointment.
56

BANSI S. MEHTA & CO

CHAPTER 10 - WEALTH-TAX [Section 3 of Wealth-tax Act, 1957]

10.1. Wealth-tax Act, 1957 (the WT Act) was introduced w.e.f. April 1, 1957. Subsequently,
w.e.f. April 1, 1993, levy of wealth-tax was thoroughly revised. Presently, wealth-tax is
levied on individuals, HUFs, companies, at the rate of 1% on the net wealth on the
valuation date exceeding 30 lakh. Collection of wealth-tax over the years has not shown
any significant growth and has only resulted into disproportionate compliance burden on
the assessee and the department.
10.2. The FB, 2015 proposes to terminate the levy of the wealth-tax, w.e.f. April 1, 2016. (FB
Cl. 79)
10.3. As mentioned in the EM, information relating to assets as required to be furnished in the
wealth-tax return will now be required to be furnished in the income-tax return (which will
be consequently modified).
57


Finance Bill 2015 DirectTaxProvisions Analysis Banshi Mehta

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Finance Bill 2015 DirectTaxProvisions Analysis Banshi Mehta

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BUDGET 2015

(FINANCE BILL, 2015)

BANSI S. MEHTA & CO.

DIRECT TAX PROVISIONS ANALYSIS

BANSI S. MEHTA & CO

Residential Status, Taxation of Non-Residents/FIIs

Alternate Investment Funds

Depreciation, Additional Investment Allowance

Deductions Under Chapter VI-A

Deductions / Collection of Tax at Source

Privileged & Confidential

DIRECT TAX PROVISIONS ANALYSIS

BANSI S. MEHTA & CO

Income Tax Act, 1961

Alternate Investment Fund

Arms length Price

Central Board of Direct Taxes

Commissioner of Income-tax (Appeals)

Companies Act, 2013

Dividend Distribution Tax

Double Taxation Avoidance Agreement

Employees Provident Fund

Finance Bill, 2015

Foreign Exchange Management Act, 1999

Foreign Institutional Investment

General Anti Avoidance Rules

Hindu Undivided Family

Infrastructure Investment Trust

Income Tax Appellate Tribunal

Life Insurance Corporation

Minimum Alternate Tax

Privileged & Confidential

DIRECT TAX PROVISIONS ANALYSIS

BANSI S. MEHTA & CO

Specified Domestic Transactions

Securities and Exchange Board of India

Secondary Higher Education Cess

Special Purpose Vehicle

Securities Transaction Tax

Reserve Bank of India

Real Estate Investment Trust

Income Tax Rules, 1962

Tax Collected at Source

Tax Deducted at Source

Privileged & Confidential

DIRECT TAX PROVISIONS ANALYSIS

BANSI S. MEHTA & CO

CHAPTER 1: RATES OF INCOME-TAX

AOP / BOI, whether

incorporated or not, or AJP u/s. 2(31)(vii) of the Act:

c) For resident individual, aged 80 years, during P.Y.:

1 Privileged & Confidential

DIRECT TAX PROVISIONS ANALYSIS

BANSI S. MEHTA & CO

d) For Co-operative society:

e) For Firm, Local Authority and Domestic Company:

f) For Foreign Company:

1.2. Surcharge on Income-tax

1. Persons referred to in (a), (b),

2. Domestic Company having

> 1 Cr., < 10 Cr.

3. Foreign Company having total

> 1 Cr.,< 10 Cr.

1.3. Education Cess