Slide 1 - Jaipur Branch of CIRC of ICAI_ Jaipur

Document Sample
Slide 1 - Jaipur Branch of CIRC of ICAI_ Jaipur Powered By Docstoc
					         Presented By
      P.C. Parwal ,FCA
Email :
     Cell : 98298-88804
          THE FINANCE ACT, 2012

    “The Finance Bill received the assent of Hon’ble President
                           on 28.05.2012

Finance Act contains amendments in 92 sections, substitution of 2
       sections, insertion of 16 new sections & 2 chapters
                  (112 AMENDMENTS IN ALL)
The DISH most talked in the Finance Act, 2012 THALI is Tax
                   Rates (Section 2) :-

Basic exemption limit increased from Rs. 1.80 lacs to Rs. 2 lacs

Tax slab of general tax payers & women category assessee’s is
now same

20% tax bracket for income between 5 lacs to 8 lacs increased
from Rs. 5 lacs to Rs. 10 lacs

             NEW CHAPTER XA
             SECTIONS 95 to 102
     SHALL BE INSERTED W.E.F. 01.04.2014

         (General Anti Avoidance Rule)

                   Applicability of GAAR &
           Impermissible Avoidance Arrangement (IAA)
 GAAR triggered only if there is an IAA
 There is an IAA, if following conditions are satisfied:- (Section 96)
   - arrangement entered into by an assessee as defined in section
   102(1) [encompasses all types of arrangements, including genuine &
   legal arrangements, & whether enforceable or not, covers not only a
   transaction or a scheme but also any step in or any part of such
   transaction etc.] and
   - main purpose or one of the main purposes of arrangement or any
   step in it, or a part of it is to obtain a tax benefit as defined in sec. 102
   (11) and
   - arrangement satisfies any one of the following conditions:-
     (a) creates rights or obligations which are not ordinarily created
         between persons dealing at arm’s length or
     (b)results directly or indirectly in the misuse or abuse of provisions
         of this Act or
     (c) lacks commercial substance or is deemed to lack commercial
         substance u/s 97 in whole or in part or
     (d) Not in a bonafide manner or purpose
 Creation of rights/obligations which are not ordinarily created
Supply of goods :- disproportionately high discounts or credit terms
Loan transactions:- repayment terms, security, guarantees, interest rates etc.
Lease of an immovable property:- obligation for payment of taxes, period of
lease etc.
Misuse or abuse of the provisions of the Act
Taking advantage of a provision in Act cannot be considered as misuse/abuse
e.g. insuring oneself or investing in permissible bonds for CG exemption
Lack of commercial substance
An assessee sells shares of a listed company to take benefit of STCL & on the
next day repurchases the same qty. of shares.
Deemed lack of commercial substance [Section 97(1)]
 the substance or effect of the arrangement as a whole is inconsistent with or
  differs significantly from the form of its individual steps or a part
 it involves or includes-
  - round trip financing
  - an accommodating party
  - elements that have an effect of offsetting or cancelling each other, or
  - a transaction which is conducted through one or more persons & disguises
    the value, location, source, ownership or control of funds which is the
     subject matter of such transaction or
it involves a location of an asset or of a transaction or of the place of residence
of any party which is without any substantial commercial purpose other than
obtaining a tax benefit for a party

Round trip financing [sec. 97(2)] :- Any arrangement in which through a series
of transaction, funds are transferred among the parties to the arrangement &
such transaction do not have any substantial commercial purpose other than
obtaining the tax benefit (E.g. ‘A’ wishes to give an interest free loan to a
related party ‘B’. A direct loan could trigger a disallowance of interest paid in
the hands of ‘A’. He, therefore, gives a loan to a non related party ‘C’ which is a
business associate. ‘C’ in turn gives identical loan on the same day to ‘B’ with a
small rate of interest or no interest)
An accommodating party [sec. 97(3)] :- A party to an arrangement shall be an
accommodating party, if the main purpose of the participation of that party in
the arrangement is to obtain, a tax benefit for the assessee (E.g. In the previous
illustration ‘ C’ could be regarded as an accommodating party)

Consequence of applicability of IAA (Sec. 98)
If an arrangement is declared to be an IAA [such declaration required to made
by Commissioner u/s 144BA(3) or by approving Panel u/s 144BA(6)], then
consequence in relation to tax of the arrangement including denial of tax
benefit or a benefit under a tax treaty shall be determined
 New section 144BA introduced to the effect that where A O at any stage
    of proceedings before him consider a transaction to be IAA, he may
    make reference to commissioner.
   CIT, if satisfied to grant opportunity of hearing of maximum 60 days.
   If no objection received, CIT to issue directions.
   If assessee objects but CIT not satisfied, he shall make reference to
    approving penal (AP). If CIT is satisfied he shall pass order.
   The A P shall grant opportunity of hearing to assessee and A O.
   Direction will be passed by AP within 6 months.
   AP before issuing directions may direct CIT to make further enquiry or
    examine the records or require assessee to furnish further documents
    The direction of AP / CIT will be binding on A O
   A P to be constituted of not less than three members of rank of CIT /
    Joint Secretary and above
   Order passed by AO u/s 144BA appealable to ITAT and not CIT (A)
   The Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia
    (P) Ltd., in its order has, after examining the complications
    which arise in cases where fair market value is to be assigned to
    transactions between domestic related parties, suggested that
    Ministry of Finance should consider appropriate provisions in
    law to make transfer pricing regulations applicable to such
    related party domestic transactions.

   Therefore the transfer pricing regulations is extended to the
    transactions entered into by domestic related parties or by an
    undertaking with other undertakings of the same entity for the
    purposes of section 40A, Chapter VI-A and section 10AA.

   Any expenditure for which payment is made or to be made to persons
    referred u/s 40A(2)(b)
   Any transaction referred in sec. 80A
   Any transfer of goods or services referred in sec. 80IA(8)
   Any business transacted between assessee & other persons referred in
    sec. 80IA(10)
   Any transactions referred in any other sec. under Chapter VIA to
    which sec. 80IA(8)/(10) are applicable
   Any transactions referred in sec. 10AA
   Any other transaction as may be prescribed
   The transaction is not an international transaction
   Aggregate of such transaction entered by the assessee in the P.Y.
    exceeds Rs. 5 crores
   This amendment will take effect from 1st April, 2013.
   Amendment made by inserting sec.92(2A) to provide
    clarity with retrospective effect in respect of first proviso to
    section 92C(2) as it stood before its substitution by
    Finance Act (No.2), 2009 so that the tolerance band of 5%
    is not taken to be a standard deduction while computing
    Arm’s Length Price and to ensure that due to such
    retrospective amendment already completed assessments
    or proceedings are not reopened only on this ground. The
    amendments shall be w.r.e.f. 01.04.2002.

   It is clarified that second proviso to section 92C shall also
    be applicable to all proceedings which were pending as on
    01.10.2009.      The    amendments      will    take   effect
    retrospectively from 01.10.2009.
   Section 139 of the Act amended, to provide that in case of all
    assesses who are required to obtain and file Transfer Pricing
    report as per Section 92E of the Act, the due date would be 30th
    November of the assessment year. This amendment will be
    effective from A.Y.2012-13

   Section 92B of the Act amended, to provide for the explanation
    to clarify meaning of international transaction and to clarify
    the term intangible property used in the definition of
    international transaction and to clarify that the ‘international
    transaction’ shall include a transaction of business
    restructuring or reorganisation, entered into by an enterprise
    with an associated enterprise, irrespective of the fact that it has
    bearing on the profit, income, losses or assets or such
    enterprises at the time of the transaction or at any future date.
    This amendment will be effective from A.Y. 2002-03.
   Section 92C(2) of the Act amended, so as to provide an upper
    ceiling of 3% in respect of power of Central Government to
    notify the tolerance range for determination of arms length
    price. This amendment will be effective from 01-04-2013.

   Section 271AA amended to provide levy of a penalty at the rate
    of 2% of the value of the international transaction, if the
       (i) fails to maintain prescribed documents or information or;
       (ii) fails to report any international transaction which is required to
        be reported, or;
       (iii) maintains or furnishes any incorrect information or documents.

   This penalty would be in addition to penalties in section 271BA
    and 271G. This amendment will take effect from 1st July, 2012.
Section 147 of the Act amended, to provide that in
all cases where it is found that an international
transaction has not been reported either by non-
filing of report or otherwise by not including such
transaction in the report mentioned in section 92E
then such non-reporting would be considered as a
case of deemed escapement of income and such a
case can be reopened under section 147 of the Act.
This amendment will take effect from 1st July, 2012.
 Section 92CA amended retrospectively to empower
 Transfer Pricing Officer (TPO) to determine the
 Arm’s Length Price of an international transaction
 noticed by him in the course of proceedings before
 him, even if the said transaction was not referred to
 him by the Assessing Officer, provided that such
 international transaction was not reported by the
 taxpayer as per the requirement cast upon him under
 section 92E of the Act.

 This amendment will take effect retrospectively from
 1st June, 2002.
        Advance Pricing Agreement (APA)
              (Sec.92CC & 92DD)
 Advance   Pricing Agreement is an agreement
 between a taxpayer and a taxing authority on an
 appropriate transfer pricing methodology for a set
 of transactions over a fixed period of time in
 future. The APAs offer better assurance on transfer
 pricing methods and are conducive in providing
 certainty and unanimity of approach.

 New  section 92CC and 92CD introduced to
 provide a framework for advance pricing
 agreement under the Act. The sections provide the
 following. –
 It empowers Board, to enter into an advance pricing
  agreement with any person undertaking an international
 Such APAs shall include determination of the arm’s length
  price or specify the manner in which arm’s length price
  shall be determined, in relation to an international
  transaction which the person undertake.
 The manner of determination of arm’s length price in
  such cases shall be any method including those provided
  in subsection (1) of section 92C, with necessary
  adjustments or variations.
 The arm’s length price of any international transaction,
  which is covered under such APA, shall be determined in
  accordance with the APA so entered and the provisions of
  section 92C or section 92CA which normally apply for
  determination of arm’s length price would be modified to
  this extent and arm’s length price shall be determined in
  accordance with APA.
   The APA shall be valid for such previous years as specified in the
    agreement which in no case shall exceed five consecutive previous

   The APA shall be binding only on the person and the Commissioner
    (including income-tax authorities subordinate to him) in respect of
    the transaction in relation to which the agreement has been entered
    into. The APA shall not be binding if there is any change in law or
    facts having bearing on such APA.

   The Board is empowered to declare, with the approval of Central
    Government, any such agreement to be void ab initio, if it finds that
    the agreement has been obtained by the person by fraud or
    misrepresentation of facts. Once an agreement is declared void ab-
    initio, all the provisions of the Act shall apply to the person as if such
    APA had never been entered into.

   For the purpose of computing any period of limitation under the Act,
    the period beginning with the date of such APA and ending on the
    date of order declaring the agreement void ab-initio shall be
    excluded. However if after the exclusion of the aforesaid period, the
    period of limitation referred to in any provision of the Act is less than
    sixty days, such remaining period shall be extended to sixty days.
   The Board is empowered to prescribe a Scheme providing for
    the manner, form, procedure and any other matter generally in
    respect of the advance pricing agreement
   Where an application is made by a person for entering into such
    an APA, proceedings shall be deemed to be pending in the case
    of the person for the purposes of the Act like for making
    enquiries under section 133(6) of the Act.
   The person entering in to such APA shall necessarily have to
    furnish a modified return within a period of three months from
    the end of the month in which the said APA was entered in
    respect of the return of income already filed for a previous year
    to which the APA applies. The modified return has to reflect
    modification to the income only in respect of the issues arising
    from the APA and in accordance with it.
   Where the assessment or reassessment proceedings for an
    assessment year relevant to the previous year to which the
    agreement applies are pending on the date of filing of modified
    return, the Assessing Officer shall proceed to complete the
    assessment or reassessment proceedings in accordance with the
    agreement taking into consideration the modified return so
    filed and normal period of limitation of completion of
    proceedings shall be extended by one year.
   If the assessment or reassessment proceedings for an
    assessment year relevant to a previous year to which the
    agreement applies has been completed before the expiry of
    period allowed for furnishing of modified return ,the
    Assessing Officer shall, in a case where modified return is
    filed, proceed to assess or reassess or recompute the total
    income of the relevant assessment year having regard to
    and in accordance with the APA and to such assessment,
    all the provisions relating to assessment shall apply as if
    the modified return is a return furnished under section 139
    of the Act. The period of limitation for completion of such
    assessment or reassessment is one year from the end of the
    financial year in which the modified return is furnished.

   All the other provisions of this Act shall apply accordingly
    as if the modified return is a return furnished under
    section 139.

   These amendments will take effect from 1st July, 2012.
 Section                    Existing                      Amendment/Insertion
10(10D)(d)      Clause (c)- Maturity proceeds of      Sub clause (d) inserted to reduce
                LIC policy exempt except sum          the threshold of premium payable to
                received under an insurance           10% from 20% of actual sum assured,
                policy for which premium              where policies are issued on or after
                amount exceeds 20% of actual          01.04.2012 w.e.f. A.Y. 13-14
                sum assured
10(23BBH)                        -                    Any income of the Prasar Bharati
                                                      (Broadcasting Corporation of India)
                                                      exempt w.e.f. 01.04.2013
10(23C), 17th   1st proviso to sec. 2(15) lays down    Applicability of 1st proviso will
   proviso,     that if any trust etc. is engaged     have to be examined each year
 13(8) & 143    in pursuing objects of general         If the said proviso applies in any
 3rd proviso    public utility & carries on any       P.Y., it would be implied that for that
                activity in the nature of trade,      P.Y. alone, eligible trust does not
                business or commerce &                exist for charitable purpose & thus
                aggregate receipts therefrom          would not be eligible for exemption
                exceeds Rs. 25 lacs, it shall be      u/s 11 or 10(23C)(iv)/(v)
                considered that other objects is       If in subsequent P.Y., the said
                not a charitable purpose              proviso doesn’t apply, eligible trust
                [ICAI Vs. DGIT(Exemption)             would be entitled to exemption
                202 Taxman 1 (Del.)(HC)]
 Sec.                   Existing                         Amendment/Insertion
10(23FB) Any income of venture capital co.         Definition of VCU amended w.e.f.
         (VCC) or venture capital fund (VCF)       A.Y. 13-14 to define a VCU as referred in
         from investment in venture capital        SEBI Regulations 1996. The said
         undertaking (VCU) shall not form          definition      covers    all   domestic
         part of its TI. VCU as defined in Expl.   companies which are engaged in the
         1(c) of said sec. to mean such            business      of    providing    services,
         domestic co. whose shares were not        production or manufacture or articles
         listed in a recognized stock exchange     or things except those specified in the
         in India & which is engaged in certain    negative list
         businesses or industries specified
 10(48)                     -                      Any income of a foreign co. on account
                                                   of sale of crude oil will not be included
                                                   in its TI (in the national interest)
                                                   provided following conditions fulfilled:-
                                                   -crude oil sold to any person in India
                                                   - income received in India in Indian
                                                   -Receipt        is      pursuant       to
                                                   agreement/arrangement with CG &
                                                   notified by it
                                                   - Foreign co. not engaged in any
                                                    activity other than receipt of income
                                                     in India
Section                 Existing                      Amendment/Insertion
32(1)(iia)   Additional depreciation of 20%     -Benefit of such additional depreciation
             allowed in respect of new P&M      extended to business of generation or
             acquired & installed by an         generation & distribution of power
             assessee engaged in the business   - includes all types of powers whether
             of manufacture or production of    solar or wind or hydel
             any article or thing               - also apply to a captive power plant
             Electricity is ‘goods’ [CST V.
             MPEB (25STC 188)]
35(2AB)      Weighted deduction of 200% Benefit extended for another 5 years i.e.
             allowed to a company engaged in till 31.03.2017
             business specified therein on any
             expenditure on scientific research
             in an approved in-house research
             & development facility till 31.3.12
 35CCC                      -                   Weighted deduction of 150% allowed to
                                                any assessee for expenditure incurred on
                                                notified agricultural extension project
                                                w.e.f. 01.04.2013
                                                -Expenditure could be capital or revenue
                                                expenditure subject to conditions
                                                contained in guidelines
                                                - Unlike other provisions, it doesn’t
                               Section 35AD
 Presently there are 8 specified business where whole of capital expenditure
  (Other than land/goodwill/financial instruments) is allowed as deduction
 Sub section (1A) inserted w.e.f. A.Y. 13-14 to provide weighted deduction equal
  to 150% of the expenditure to following specified businesses which
  commences its operation on or after 01.04.2012
  - setting up & operating a cold chain facility
  - setting up & operating warehousing facility for storage of agricultural produce
  - building & operating, anywhere in India, a hospital with at least 100 beds for
  - developing & building housing project under scheme for affordable housing
  - production of fertilizer in India
 Sub Section (6A) inserted w.r.e.f. A.Y. 11-12 to provide eligibility of deduction
  even when operations of a hotel (2 star or above category) is transferred to
  another person
 Deduction extended to 3 new specified businesses described in sub clauses
  (ix) to (xi) inserted in sub section (8)(c) of section w.e.f. A.Y. 13-14
  - setting up & operating an inland container depot or container freight station
    notified or approved under the Customs Act, 1962
  -Bee-keeping and production of honey and beeswax
  -Setting up & operating a warehousing facility for storage of sugar.
Section               Existing                         Amendment/Insertion
35CCD                      -                  Weighted deduction equal to 150% of the
                                              expenditure incurred on skill development
                                              w.e.f. 01.04.2013. Guidelines to be issued
40(a)(ia)   - Provides for disallowance of    -2nd proviso inserted w.e.f A.Y. 13-14
            certain expenses in case of       - Provides for allowance of exp. where person
            failure to deduct tax or after    responsible for deducting tax is not treated as
            deduction, non payment            assessee in default u/s 201(1)
            thereof                           -It shall be deemed that assessee has deducted
            -If tax is deducted & is paid     & paid tax on such sum on the date of
            before due date specified in      furnishing of ROI by the resident payee
            139(1), expenditure from          - Conditions for sec. 201(1)
            which tax is deducted is           if such resident has furnished his ROI
            considered as allowable             u/s 139
            - As per 1st proviso, where tax    has taken into account such sum for
            is     deducted       in   any      computing income in such ROI and
            subsequent year or paid after      has paid tax due on the income
            due date specified in 139(1),      declared by him in such returned
            expenditure is allowed as           income
            deduction       in    year   of   and the person furnishes a certificate to this
            payment of tax deducted           effect from an accountant in such form as may
                                              be prescribed
                                              - Not applicable to 40(a)(i) & 40(a)(iii)
                                              -Amendment whether retrospective??
Section              Existing                       Amendment/Insertion
40A(2)    -So much of expenditure incurred  -A proviso has been inserted w.e.f.
          by an assessee on persons         A.Y. 13-14 to provide that no disallowance
          referred in clause (b) as         under this section shall be made in
          considered by AO to be excessive  respect of a specified domestic
          or unreasonable having regard to  transaction (SDC) referred in sec. 92BA,
          the FMV not allowed as            if such transaction is at ALP as defined in
          deduction                         sec. 92F(ii)
                                            - Amendment made consequent to
                                            introduction of applicability of TP
                                            provisions to SDC
          -Persons referred includes a co. - This list has been amended w.e.f. A.Y.
          having a substantial interest in 13-14 to include in it any other co.
          the business or profession of the carrying on a business or profession in
          assessee.                         which the first mentioned co. has
                                            substantial interest
                                            E.g. Co. C has substantial interest in Co.
                                            A & Co. B. Hitherto, so far as Co. A was
                                            concerned, only Co. C was covered by sec.
                                            40A(2). Now, after amendment even B
                                            would be covered as a ‘specified person’
Section               Existing                         Amendment/Insertion
 44AB     -A person carrying on business or     - The said limits increased w.e.f. A.Y. 13-14
          profession required to have its       In case of business Rs. 1 crores
          accounts audited if total sales,      In case of profession Rs. 25 lacs
          turnover or gross receipts exceed
          Rs. 60 lacs in case of business &     -Definition amended w.e.f. 01.04.2012 to
          exceeds Rs. 15 lacs in case of        provide that the ‘specified date’ shall be
          profession                            due date of furnishing ROI u/s 139(1) .
          - Explanation (ii) below sec. 44AB    -As a result of this amendment, the
          defines ‘specified date’ for          deadline for furnishing tax audit report
          furnishing tax audit report as 30th   before 30th Sep. by assessee’s obliged to
          Sept. of A.Y.                         furnish transfer pricing report in Form
                                                3CEB coincides with due date of filing of
                                                return by them i.e. 30th Nov of A.Y
 44AD     Section provides for computing        -Sub section (6) inserted w.r.e.f A.Y. 11-12
          profits & gains on presumptive        to provide that section will not apply to
          basis @8% of turnover & gross         certain specified profession or business
          receipts of small or eligible          a person carrying on profession referred
          businesses (any business except       in sec. 44A(i)
          transport business & whose             a person earning income in the nature
          turnover or gross receipts does       of commission or brokerage
          not exceed Rs. 60 lacs).               a person carrying on an agency business
                                                - Threshold limit in respect of eligible
                                                business raised to Rs. 1 crores w.e.f 13-14

        (10 AMENDMENTS)
Section                 Existing                          Amendment/Insertion
2(19AA)   Sub clause (iv) stipulates that pursuant   Sub clause (iv) amended w.e.f.
          to demerger, the resulting co., in         01.04.2013 by adding the words
          consideration of the demerger, issues      ‘except where the resulting co. itself is
          its shares to the shareholders of the      a shareholder of the demerged co.’ at
          demerged co. on a proportionate basis      the end
  47      Sub clause (vii) provides that transfer    Sub clause (vii) amended w.e.f.
          by a shareholder, in a scheme of           01.04.2013 by adding the words
          amalgamation of shares held by him in      ‘except where the shareholder itself is
          the amalgamated co. would not be           the amalgamated co’ at the end
          subject to tax, if transfer is made in
          consideration of the allotment of any
          share or shares in the amalgamated co.
  49      Sub sec. (1), clause (iii)(e) includes     FA 2012 w.r.e.f. 01.04.1999, includes a
          within its ambit, transfers referred in    reference to the provisions of clause
          various clauses in sec. 47, whereof the    (xiiii) & clause (xiv) also [transfer of
          COA of previous owner is deemed as         capital asset, pursuant to succession
          cost of succeeding owner                   in business, by a firm to a co. & by a
                                                     sole proprietary concern to a co.
  54B     Exemption of CG tax provided on Sec. amended w.e.f. A.Y. 13-14 to
          transfer of land used for agricultural include an HUF also within its ambit
          purposes by ‘assessee or a parent of his’
                                  Sec. 50D

New section inserted w.e.f. A.Y. 13-14 to provide that where consideration
received or accruing as a result of transfer of a capital asset by an assessee, is not
ascertainable or cannot be determined, then, for the purpose of computing
income chargeable to tax as CG, FMV of the said asset on the date of transfer shall
be deemed to be the FVOC received or accruing as a result of such transfer.

                                   Sec. 54GB

 New section inserted w.e.f. A.Y. 13-14 to provide relief from LTCG arising from
  transfer of a residential property owned by an individual or HUF(eligible
  assessee),(could be resident or non resident), if invested in MSME
  - residential property means a residential house or plot of land [sub sec. (1)]
  - tenancy rights of house not to qualify as residential property
 Assessee to utilize the net consideration (before due date of filing the return)
  for subscribing equity shares of an eligible co. [defined in sub sec. 6(b)]
  - Incorporated in India during 1st Apr. of P.Y. relevant to A.Y. in which CG
    arises till due date
  - Engaged in the business of manufacture of an article or thing
  - Assessee after subscription to shares of eligible co. must have more than 50%
    share capital or more than 50% voting right (joint ownership)
  - Co. qualifies to be small or medium enterprise under MSME Act, 2006
 Eligible Co. to utilize the subscription amt. (within 1 yr. from the date of
  subscription in equity shares by the assessee) for purchase of new asset
  - Amt. to the extent not utilized before due date of eligible assessee, shall be
    deposited in bank a/c & be utilized in accordance with scheme notified by CG
   & assessee shall furnish a proof of such deposit along with return
  - If subscription money for whatever reasons not utilized for purchase of new
    asset, eligible assessee, to that extent, would not be entitled to exemption
  - New asset defined in sub sec. 6(d) to mean new P&M but doesn’t include P&M
    earlier used by any other person, office appliances, computers, vehicles, P&M
    used in office, residential premises or whole cost of which is allowed as
  - The definition doesn’t restrict the applicability of the provision only to P&M
    directly required for manufacturing purposes
  - It appears that following asset would qualify as new asset
     Air conditioning system for factory, computers installed in factory premises,
     generators for factory, internal telephone systems in factory, power
     transformers for proper working of P&M
 Quantum of CG exemption
  - Net consideration Rs. 50 lacs, cost of new asset Rs. 50 lacs or 60 lacs – Entire
    CG exempt
  - Net consideration Rs. 50 lacs, CG Rs. 25 lacs & cost of new asset Rs. 40 lacs
     Amt. exempt = 25/50*40 = 20 lacs
 Exemption can be withdrawn in the following 2 cases [sub sec. (4)]
  - Eligible assessee sells or otherwise transfers the equity shares of eligible co.
  - Eligible co. sells or otherwise transfers the new asset acquired
  within a period of 5 yrs from the date of their acquisition
   * Entire or part
   * Circumstances under which it may be said that equity shares sold or
     otherwise transferred by eligible assessee – sale, gift, settlement on trust,
     acquisition under any law, barter or exchange
   * When acquisition is during a period & not at one time, it appears, that date of
     acquisition should be ascertained from respective dates on which shares are
     subscribed or assets are purchased
   * Circumstances under which it may be said that assets sold or otherwise
    transferred by eligible co. – on liquidation of co., to discharge the liabilities of
    co. raised on security of new asset, distribution of assets by co., amalgamation,
    demerger of an undertaking, sale of business on a going concern basis
   * Effect of sale or otherwise transferred
     - gain arising from transfer of residential property not charged shall be
       deemed to be income of eligible assessee
     - it would be deemed to be income of P.Y. in which equity shares or new asset
       are sold or otherwise transferred
     - It would be in addition to gain, if any, arising on transfer of shares or new
Section                 Existing                        Amendment/Insertion
 55A(a)   A reference to valuation officer by an   Sec. amended w.e.f. 01.07.2012 to
          AO for valuation of a capital asset to   substitute the condition for making
          determine its FMV could be made,         reference, namely ‘is less than its
          where an assessee claims value of an     FMV’ by the condition ‘is at variance
          asset, as per estimate made by a         with its FMV’. Thus, AO will be able
          registered valuer & in opinion of AO,    to make reference, if the value
          value so claimed is less than its FMV    claimed is at variance (i.e. higher or
                                                   lower) with its FMV
 111A     Special rate of 15% provided on STCG Since rate of 10% in proviso was an
          on transfer of equity shares on which inadvertent omission, it is amended
          STT paid. Proviso provides in case of to 15% w.r.e.f. A.Y. 09-10
          ind./HUF for levying tax @10% on the
          amt. in excess of maximum amt. not
          chargeable to tax
  112     Rate of tax on LTCG in case of non Rate of tax on LTCG on transfer of
          resident/foreign co. is 20%        unlisted     securities  (without
                                             indexation & currency conversion)
                                             will be 10%
                                 Chapter XII-BB
                                   Sec. 115JG

 New chapter introduced w.e.f. A.Y. 13-14 to facilitate conversion of Indian
branch of a foreign bank into a subsidiary co.
 Conversion is in accordance with scheme framed by RBI
 CG arising from conversion shall not be chargeable to tax in A.Y. relevant to P.Y.
in which such conversion takes place.
 Exemption shall be subject to the conditions in notification issued by CG in this
behalf & laid before Parliament
 In case of initial failure to comply with any conditions specified in Scheme or in
Notification, all provisions of this Act shall apply to foreign co. & said subsidiary
co. without any benefit, exemption or relief
 In case of subsequent failure, benefit, exemption or relief shall be deemed to
have been wrongly allowed & AO may recompute the TI of assessee & make
necessary amendments & provisions of sec. 154 shall apply thereto
      (2 AMENDMENTS)
                           Section 56(2)

                 Presently, sum or property received by Ind./HUF without or
                 inadequate consideration in excess of Rs. 50,000/- is
                 chargeable to tax. However, in case of individual,
                 sum/property received from relative is not liable to tax.
                 Relative is defined in Expln. below sec. 56(2)(vii). No
                 relative of HUF defined. Rajkot Bench in case of
                 Vineetkumar Raghavjibhai Bhalodia V. ITO 46 SOT 97 held
                 that definition of relative as given would apply to HUF also

 Clause (e) of Explanation to clause (vii) substituted w.r.e.f
 01.10.2009 so as to provide that the definition of ‘relative’ shall also
 include any sum or property received by a HUF from its members.
 Thus, when an HUF receives any sum or property from any of its
 members, it would be considered as a receipt from a relative &
 therefore not liable to tax

Issue – Now this would override sec. 64(2)
                                 Section 56(2)
  Clause (viib) inserted w.e.f. A.Y. 13-14 to include ‘share premium’ received by
  a company in excess of its FMV as its income chargeable under the head
  ‘income from other sources’. Simultaneously definition of income in sec.
  2(24) amended by inserting clause (xvi) to include such consideration
  exceeding FMV as income
FMV is defined by Explanation (a) below
the clause to mean higher of:-
                                                                        Market Value
- value as may be determined in accordance
with prescribed method
- value as may be substantiated by the co., to
                                                              +            >
AO’s satisfaction, based on value, on date of      Face Value
issue of shares, of its assets

E.g. A closely held co. issues 1000 equity shares of face value of Rs. 10 each at a
premium of Rs. 990. In aggregate, it receives Rs. 10 lacs. The FMV of a share is Rs.
600. Accordingly, aggregate FMV of 1000 shares is Rs. 6 lacs. The consideration
received for issue of shares is in excess of FMV by Rs. 4 lacs. Thus, Rs. 4 lacs would
be considered as income

Since the clause taxes the excess received as income from other sources, can it be
contended that the share issue expenses are for the purpose of earning the
income sought to be taxed as deemed income & therefore allowable?

Is section 55A applicable for determining the FMV of the shares

Does section 68 & section 56(2)(viib) can be applied simultaneously
                                Sec 2(16)
Clause (16) amended w.r.e.f. 01.04.1988 so as to include the Director of Income
Tax in the definition of the Commissioner
                                  Sec 68
Two provisos inserted w.e.f. A.Y. 13-14.

1st proviso enlarges the onus of closely held co. (co. in which public is not
substantially interested) & provides that if a closely held co. receives share
application money, share capital, share premium or any such amt. by whatever
name called, any explanation offered by such company shall be deemed to be not
satisfactory, unless-
(a) The person, being a resident in whose name such credit is recorded in books
     of such co., also offers an explanation about the nature & source of such sum
     so credited and
(b) Such explanation in the opinion of AO has been found to be satisfactory

2nd proviso provides that 1st proviso shall not apply if the person, in whose name
sum is recorded, is a VCF or a VCC referred in sec. 10(23FB)
                                Sec 115BBE
A new section inserted w.e.f. A.Y. 13-14 to provide that where TI of an assessee
includes any income referred in sections 68,69,69A,69B,69C or 69D, income tax
payable shall be aggregate of :-
(a) amt. of income tax calculated on income referred in above sections @30% &
(b) amt. of income tax with which assessee would have been chargeable had his
    TI being reduced by amt. of income referred in (a) above
Sub sec. (2) provides that no deduction in respect of any expenditure or allowance
shall be allowed to assessee in computing his income referred in above sec. 68
                                Sec 115O
Sub sec. (1A) amended w.e.f. 01.07.2012 to omit the restriction that the company
should not be a subsidiary of any other co. & also amends the condition about
payment of tax by subsidiary to the effect that subsidiary has paid tax which is
payable under the sec. on such dividend
E.g.          subsidiary                             subsidiary
C Ltd.                                  B Ltd.                            A Ltd.
Rs. 2 lacs                          Rs. 1.50 lacs                       Rs. 1 lacs

Pre-amendment DDT(18%) A Ltd. Rs. 18,000, B Ltd. Rs. 27,000, C Ltd. Rs. 9,000
Post-amendment DDT A Ltd. Rs. 18,000, B Ltd. Rs. 9,000, C Ltd. Rs. 9,000
                                 Sec 115BBD
Sec. relates to tax on certain dividends received from foreign co. It was applicable
in respect of dividends received in P.Y. relevant to A.Y. 12-13. This has been
amended to extend its applicability by way of dividends received during A.Y. 13-14
also . relates
                                 Sec 115BBD
Table in sub sec. (3) provides for amt. of daily tonnage income of qualifying ship.
Said table substituted w.e.f. A.Y. 13-14 to increase the amt. of daily tonnage
income of qualifying ship
                               Sec 245C(1) proviso
Expl. (b) defines ‘a person shall be deemed to have substantial interest in a
business or a profession’ for the purpose of determining related person. Said
Explanation amended w.e.f. 01.07.2012 to provide that such beneficial interest
should be held on the date of search
                                      Sec 245Q
Sec. provides a fee of Rs. 2,500/- for an application of Advance Ruling. Sub sec. (2)
amended w.e.f. 01.07.2012 to increase the fees for application to Rs. 10,000 or fees
as may be prescribed (whichever is higher)
                                 Sec 292CC
A new section inserted w.r.e.f. 01.04.1976, to provide as under:-
-It shall not be necessary to issue an authorization u/s 132 or requisition u/s 132A
 separately in the name of each person
-Where such authorization or requisition is made mentioning names of more
 than one persons
 * it shall not be deemed or constructed that it was issued in the name of AOP or
    BOI consisting of the persons named
 * assessment or reassessment shall be made separately in the name of each of the
    persons named in the authorization or requisition

Section                Existing                          Amendment/Insertion
80A(6)/   -Deduction u/s 10A,10AA where any       Explanation amended w.e.f. A.Y. 13-14
80IA(8)   goods or services held for purpose      to provide that ‘market value’ in relation
          of    eligible   undertaking    are     to any goods or services sold, supplied or
          transferred to any other business       acquired in case of transaction being a
          carried on by the assessee or vice      specified domestic transaction referred
          versa shall be computed as if such      in sec. 92BA shall be the ALP as defined
          transfer has been made at market        in sec. 92F(ii)
          value of such goods or services         Similar amendment made in sec. 80IA(8)
          - Explanation to section provides       E.g. Recorded value of internal transfer
          definition of ‘market value’            of goods is Rs. 7 crores & SDT is Rs. 5
                                                  crores. For the purpose of computation of
                                                  income, SDT of Rs. 5 crores will be
                                                  substituted for recorded consideration of
                                                  Rs. 7 crores
 80C      - Deduction in respect of payments      -Sub section (3) amended w.e.f.
          for life insurance premium provided     01.04.2013 to restricts its applicability to
          in computing the TI of an               policies issued on or before 01.04.2012
          individual or HUF. Sub section (3)      - New sub section (3A) inserted to
          restricts such deduction if in excess   restrict deduction of life insurance
          of 20% of actual capital sum            premium paid towards policies issued on
          assured                                 or after 01.04.2012, as is not in excess of
                                                  10% of actual capital sum assured
Section                  Existing                          Amendment/Insertion
 80D      - Deduction of health insurance             -Sub section (2A) inserted w.e.f.
          premium paid (by a mode other than          A.Y. 13-14 to provide for allowance of
          cash) allowed in computing the TI of an     deduction for any payment made on
          individual as follows:-                     account of preventive health check
           upto Rs. 15,000 – on health insurance     up of assessee or his family or his
          of assessee or his family                   parents not exceeding in aggregate
           upto Rs. 15,000 – on health insurance     Rs. 5,000 (payment to be within
          of parents                                  specified limits of Rs. 15,000/20000)
          - If any of the above persons is a senior   - Sub section       (2B) inserted to
          citizen above the age of 65 yrs., limit     provide that payment shall be made
          applicable is Rs. 20,000/-                  by any mode including cash on
                                                      account of preventive health check
                                                      up, any mode other than cash in all
                                                      other cases
                                                      - Senior citizen age reduced from 65
                                                      yrs. to 60 yrs
80DDB     - Deduction of expenditure incurred on Senior citizen age w.e.f. A.Y. 13-14
          medical treatment of certain diseases reduced from 65 yrs. to 60 yrs
          including in case of senior citizen (age
          of 65 yrs or above) upto Rs. 60,000
Section                 Existing                          Amendment/Insertion
80G &      Said sections provide for deduction,     New sub section (5D) inserted w.e.f.
80GGA      in computing TI of an assessee, of       A.Y. 13-14 to provide for mode of
           sums paid by way of donations made,      payment
           by whatever mode                          Donation paid by cash shall be
                                                    allowed as deduction only if sum does
                                                    not exceed Rs. 10,000
                                                     To avail deduction for donation of Rs.
                                                    10,000 or more, mode of payment
                                                    should be by any mode other than cash
80IA(4)    Deduction of profits & gains of an -Provision amended w.e.f. 01.04.2013
  (iv)     undertaking set up for generation & to extend the terminal date for a further
           distribution of power or transmission period of 1 yr upto 31.03.2013
           if such undertaking commenced
           operations before 31.03.2012
80IA(10)   Where it appears to AO that owing to     New proviso inserted w.e.f. A.Y. 13-14
           close connection between assessee        to provide that if it involves SDT,
           carrying eligible business & any other   amount of profits derived from such
           person or for any reason, eligible       transaction would be determined at
           business produces more than              ALP
           ordinary profits, AO may take the
           amt. of profit for deduction at such
           amt. as can be reasonably deemed to
           be derived therefrom
                               Sec. 80TTA

 New section inserted w.e.f. A.Y. 13-14 to provide for deduction of interest
  earned (upto Rs. 10,000) on deposits in savings accounts (other than time
  deposit), in case of individual & HUF
 Saving account must be with – a banking co., a co-operative society carrying
  on business of business of banking, a post office
 Where interest income arises on saving account held by or on behalf of firm
   or AOP or BOI, deduction shall not be allowed in computing TI of any
   partner of firm or members of AOP/BOI

                                Sec. 80CCG
 New section inserted w.e.f. A.Y. 13-14 to provide for one time deduction to a
  resident individual (who is a new retail investor) in respect of acquisition of
  listed securities, in accordance with a scheme to be notified by CG
 GTI of relevant A.Y. not to exceed Rs. 10 lacs
 Investment is locked for a period of 3 yrs from acquisition date
 Quantum of deduction is 50% of amt. invested in equity shares. The amt. of
  deduction can’t be more than Rs. 25,000
 If any of the conditions not complied in any P.Y., deduction would be
  withdrawn & includible in income of individual of P.Y. of non compliance
                             SECTION 115JB
 Sub sec. (2) provides for preparation of P&L a/c in accordance with
  Schedule VI of Companies Act, 1956, by every co. to which this sec. applies.
 It is substituted w.e.f. 01.04.2013 to provide as follows:-
 (a) Every assessee being a co. [other than an electricity or a banking co. etc.]
      shall for the purpose of this sec., prepare its P&L a/c in accordance with
      Schedule VI and
 (b) Every assessee, being an electricity or a banking co. etc., shall for the
      purpose of this sec., prepare its P&L a/c, for the relevant P.Y. in
      accordance with the provisions of Act governing such co.
 Explanation (3) inserted w.e.f. 01.04.2013 to clarify that assessee being
  an electricity or a banking co. etc., for A.Y. 12-13 or before has an option
  to prepare its P&L a/c for the purpose of this sec., either in accordance with
  Schedule VI or in accordance with provisions governing such co.
 Sub sec. (5A) inserted w.r.e.f. 01.04.2001 to provide that provision
  obliging MAT payment shall not apply to any income accruing or arising to
   a co. from life insurance business referred in sec. 115B of the Act
 In Explanation (1), clause (j) inserted w.e.f. 01.04.2013 to stipulate that
  on retirement or disposal of a revalued asset, amt. standing in revaluation
  reserve relating to it shall be added to the book profit, if it is not credited
  to P&L a/c
 AMT was levied on LLP’s, by insertion of Chapter XIIBA (consisting of
  sections 115JC to 115JF) in Act, through FA, 2011. It is 18.5% of Adjusted Total
  Income. Adj. TI means TI as reduced by deduction claimed under Part C of
  Chapter VIA & u/s 10AA
 FA, 2012, extends the levy of AMT to all non corporate assessees w.e.f.
 01.04.2013 by carrying out following amendments:-
 - Chapter title changed to ‘Special provisions relating to certain persons
    other than a company’
 - New section 115JEE inserted w.e.f. 01.04.2013 to provide for applicability
   of Chapter on a person who has claimed any deduction under
   * any section (other than sec. 80P) included in Chapter VIA
   * sec. 10AA
    In case of non-corporate assessees, other than a firm (including LLP),
    provisions of Chapter not to apply if adjusted TI of such assessee doesn’t
    exceed Rs. 20 lacs [sec. 115JEE(2)]
 Sec. 115JC substituted, consequent to extension of levy to all non
  corporate assessees
 Consequential amendments carried out in sec. 115JD, 115JE, 115JF to
  substitute ‘LLP’ by ‘a person’ & omit definition of LLP

Section              Existing                          Amendment/Insertion
 139(1)   Person obliged to file ROI in the 3rd proviso inserted w.e.f. 01.04.2012 to
          circumstances specified therein provide that a resident other than NOR, not
                                            required to file his return has to file ROI on
                                            or before the due date, if he has any asset
                                            located or signing authority in any account,
                                            outside India, giving such other particulars
                                            as may be prescribed
                                            Non filing of return results in penalty u/s
                                            271F & prosecution u/s 276CC
 143(1)   It provides for processing of       Sub sec. (1D) inserted w.e.f. 01.07.2012 to
          return & sending an intimation      provide that processing of return would not
          to assessee specifying amt.         be necessary where a notice is issued to
          payable or amt. of refund due       assessee u/s 143(2) for making assessment
                                              u/s 143(3)
 143(3)   1st proviso provides that in case   3rd proviso inserted w.r.e.f. 01.04.2009
          of trust referred in sec.           empowering the denial of exemption u/s
          10(23C)(iv)/(v), while making       10(23C) in the P.Y. in which 1st proviso to sec.
          an assessment of total income       2(15) becomes applicable, irrespective of the
          or loss, effect to exemption u/s    fact that approval is withdrawn or not or
          10 shall be given                   notification is rescinded or not
Sec.                    Existing                            Amendment/Insertion
144C -Sub sec. (4) provides that AO shall             Sub sec. (4) has been amended
     notwithstanding anything contained in sec.       w.r.e.f. 01.10.2009 to give reference
     153, pass order u/s 144C(3) within 1 mth. from   of sec. 153B also. Thus, limitation
     end of mth. in which assessee intimates to       period is notwithstanding anything
     AO acceptance of variation or no objection       contained in sec. 153 or 153B
     received within specified period
     -Sub sec. (8) provides that DRP may confirm,     An Explanation has been inserted
     reduce or enhance the variations proposed in     w.r.e.f. 01.04.2009 to clarify that
     the draft order                                  power of DRP to enhance the
                                                      variation shall include & shall be
                                                      deemed always to have included
                                                      power to consider any matter arising
                                                      out of assessment proceedings
                                                      relating      to      draft     order,
                                                      notwithstanding that such matter
                                                      was raised or not by the assessee
                                                      New sub sec. (14A) inserted w.e.f.
                                                      01.04.2013 to provide that provisions
                                                      of sec. 144C shall not apply to an
                                                      assessment or reassessment order
                                                      passed by AO with approval of
                                                      Commissioner in accordance with
                                                      sec. 144BA(12) [ass. In respect of an
Section               Existing                          Amendment/Insertion
  147     -1st proviso provides that if an      -2nd proviso has been inserted to provide
          assessment has been made for          that nothing contained in 1st proviso shall
          relevant A.Y. u/s 143(3)/147, no      apply in a case where any income in relation
          action shall be taken u/s 147 after   to any asset located outside India,
          expiry of 4 yrs from end of           chargeable to tax, has escaped assessment
          relevant A.Y. unless……                for any A.Y.
          -Explanation 2 to sec. 147 lists      -Expl. 2(ba) & 2(d) inserted to provide that
          down the cases where income           income shall be deemed to have escaped
          chargeable to tax is deemed to        assessment where
          have escaped assessment                assessee fails to furnish a report in respect
                                                of any international transaction which he
                                                was required u/s 92E
                                                 a person is found to have any asset located
                                                outside India
                                                - Explanation 4 inserted to provide that
                                                above amendments           also applicable to
                                                proceedings initiated u/s 147 for any A.Y.
                                                beginning on or before 01.04.2012
Sec.                 Existing                            Amendment/Insertion
149    -Sub sec. (1) - Time limit for            -Clause (c) inserted in sub sec. (1) to
       reopening an assessment where             provide that time limit for reopening an
       income chargeable to tax which has        assessment in respect of income in relation
       escaped assessment amounts to Rs. 1       to any asset located outside India – 16 yrs
       lacs or more – 6yrs
       -Sub sec (3) provides that in respect     -Sub sec. (3) amended to increase the
       of person treated as agent of NR,         time limit from ‘2 yrs’ to ‘6 yrs’
       notice shall not be issued after expiry   --Explanation inserted to provide that
       of 2 yrs. from end of relevant A.Y.       above amendments shall also be applicable
                                                 to proceedings initiated for any A.Y.
                                                 beginning on or before 01.04.2012
153A   Issue of mandatory notice for filing      3rd proviso in sec. 153A(1) & 2nd proviso
  &    ITR for 6 A.Y.’s immediately              in sec. 153C inserted w.e.f. 01.07.2012 to
153C   preceding the A.Y. relevant to P.Y. in    provide that CG may by rule in specified
       which search is conducted or              class or classes of cases, provide that AO is
       requisition is made                       not required to issue notice for assessing or
                                                 reassessing TI of 6 A.Y.’s immediately
                                                 preceding the A.Y. relevant to P.Y. in which
                                                 search is conducted or requisition is made
156    Intimation sent to assessee under Proviso amended w.e.f. 01.07.2012 to
       certain provisions of Act deemed to include intimation sent to assessee u/s
       be a Notice of Demand               200A(1) [processing of TDS statement] also
                                  Sec. 154
 Provides for rectification of any mistake apparent from records of any order
 passed by IT authority, intimation u/s 143(1).
Sec. amended w.e.f. 01.07.2012 enabling rectification of intimation given u/s
 200A(1) [sub sec. 1(c)]. Accordingly, deductor can
 - also apply for rectification of intimation [sub sec. 2(b)]
 - authority will have to give an opportunity to deductor for rectifying intimation
   if it has effect of enhancing the liability or reducing the refund [sub sec. (3)]
 - where amendment has the effect of reducing assessment or liability of
   deductor, AO shall make refund due to deductor [sub sec. (5)]
 - passing the order within 6mthsfrom end of mth. in which application is
   received also applicable in case of deductor
                               Sec. 246A

Appeal by a deductor         Sub sec. (1) & clause (a) amended w.e.f. 01.07.2012
                             to provide that deductor aggrieved by order u/s
                             200A(1) may appeal to CIT(A)
Appeal against orders passed Where an order is passed u/s 143(3) of Act by AO
pursuant to directions by u/s 144BA(12), an appeal against such assessment
Commissioner u/s 144BA       order would not lie to CIT(A). Appeal would lie
                             against such order to ITAT as per amendment in
                             sec. 253
Penalty orders               In search cases, in certain circumstances, penalty
                             is leviable u/s 271AAB inserted by FA 2012 w.e.f.
                             01.07.2012. Consequent thereto, sec. 246A(1)(j)
                             providing for appeal to CIT(A) amended w.e.f.
                             01.07.2012 to include an order u/s 271AAB

Sec.                   Existing                           Amendment/Insertion
193    -Person responsible for paying interest on    Proviso (v) is amended w.e.f.
       security to a resident, obliged to deduct     01.07.2012 to extend the exemption to
       tax - Clause (v) of 1st proviso exempts the   HUF as well as debentures not listed &
       person from deducting tax from interest       raising the limit to Rs. 5,000
       payable to a resident individual on
       debentures issued by a widely held co.
       being debentures listed on a recognized
       stock exchange if interest is paid by
       account payee cheque & the amt. doesn’t
       exceed Rs. 2,500
194E   Obligation to deduct tax at source from       -Sec. amended w.e.f. 01.07.2012
       income referred in sec. 115BBA payable to     consequent to amendment in sec.
       a non resident sportsmen or non resident      115BBA to extend the obligation to
       sports association or institution @10%        deduct tax at source on income
                                                     payable to an entertainer.
                                                     -Rate of deduction increased to 20%
194J   Sub sec (1) provides for deduction of tax Clause (ba) in sub sec. (1) inserted
       at source from certain fees etc. payable to w.e.f. 01.07.2012 to include ‘any
       resident                                    remuneration or fees or commission
                                                   by whatever name called, other than
                                                   those covered on which tax is
                                                   deductible u/s 192, paid to director of
Section                    Existing                        Amendment/Insertion
  194LA     Deduction of tax @10% from payment Proviso amended w.e.f. 01.07.2012
            to a resident of any amt. in nature of to increase the limit to Rs. 2 lacs
            compensation         or      enhanced
            compensation       for     compulsory
            acquisition of immovable property to
            be made if aggregate amt. of such
            payment exceed Rs. 1 lacs
New sec. inserted w.e.f. 01.07.2012 to provide for deduction of tax at source @5% from
interest paid or payable (at the time of credit or payment whichever is earlier) on certain
foreign currency borrowing by specified Indian company
Salient features
 Applies to interest income payable by a specified Indian co. to a non resident, not being a
co. or to a foreign co.
 Amt. of interest should not exceed the amt. of interest calculated at the rate approved by
CG, having regard to terms of loan or bond & its repayment
E.g. ROI approved by gov. is 5%. Amt. borrowed say Rs. 1 crores. Actual ROI paid is 6%
Extent of int. on which tax can be deducted @5% would be Rs. 5 lacs. On balance amt. tax
to be deducted at rates applicable & u/s 195
 Interest must be payable on monies borrowed by specified India Co. between 01.07.2012
& 01.07.2015
 Borrowing must be under a loan agreement or by way of issue of long term infrastructure
bonds as approved by CG
                                Sec. 195

Sec. 195(1) amended w.r.e.f. 01.04.2012 to provide that the rate of deduction in
 respect of interest payment shall not apply to interest referred in sec. 194LB &
 194LC for which separate rate of deduction is provided
 A new Explanation 2 in sec. 195(1) inserted w.r.e.f. 01.04.1962 to clarify that
  the obligation to comply with section 195(1) & make deduction thereunder
  applies shall be deemed to have always been applied & extends & shall be
  deemed to have always extended to all persons
  - whether resident or non resident
  - whether or not NR has a residence or place of business or business connection
    in India or any other presence in any manner whatsoever in India
Sec. 195(7) inserted w.e.f. 01.07.2012 to provide that notwithstanding anything
 contained in sec. 195(1)/(2), CBDT may, by notification in the Official Gazette,
 specify a class of persons or cases, where the person responsible for paying to a
 non resident, any sum, whether or not chargeable under the provisions of the
 Act, shall make an application to the AO to determine by general or special
 order, appropriate proportion of sum chargeable & upon such determination tax
 shall be deducted u/s 195(1) on that proportion of the sum which is so chargeable
                                Sec. 197A
 Sec. 197A(1C) provides that no deduction of tax be made if assessee fulfils
  certain prescribed conditions. One of the condition is age of assessee i.e. 65 yrs
  or more. This age limit has been reduced from 65 yrs. to 60 yrs. w.e.f. 01.07.2012
 A new sub sec. (1F) inserted w.e.f. 01.07.2012 to provide that no tax shall be
  deducted from certain payments to such institution, association or body or class
  thereof, as may be notified by CG
                                  Sec. 201
 Sec. provides that where any person required to deduct any tax, doesn’t deduct
 or doesn’t pay or after deducting fails to pay, whole or any part of tax, he is
 deemed to be ‘an assessee in default in respect of such tax’
 1st proviso in sub sec. (1) inserted w.e.f. 01.07.2012 to provide that person
  responsible (who fails to deduct whole or any part of tax in accordance with
  provisions of Chapter XVII-B from the amt. credited or paid to a resident) shall
  not be deemed to be assessee in default if:-
  - payee is resident - it has furnished his ROI u/s 139 - has taken into account
   such sum for computing income in such ROI and has paid tax due on the
   income declared by him in such returned income and the person furnishes a
    certificate to this effect from an accountant in such form as may be prescribed
                                 Sec. 201(1A)
Proviso in sub sec. (1A) inserted w.e.f. 01.07.2012 to provide that a person who
has failed to deduct whole or any part of tax on any amt. paid to resident but not
deemed to be an assessee in default under proviso to sec. 201(1), would be liable to
pay interest from date on which tax was deductible to date of furnishing ROI by
such resident payee
                                 Sec. 201(3)
Limitation period to pass an order deeming a person to be an assessee in default
enlarged to 6 yrs from 4 yrs w.r.e.f. 01.04.2012. If limitation period already expired,
it can’t be revived by amendment
                                 Sec. 220(2)
Sub sec. (2B) inserted w.e.f. 01.07.2012 to provide that where interest is charged
u/s 201(1A) on amt. of tax specified in intimation issue u/s 200A(1) , then no
interest shall be charged u/s 220(2) [charge of interest for failure to pay any amt.
pursuant to notice of demand u/s 156] on same amt. for same period
                                   Sec. 204
Clause (iv) inserted w.e.f. 01.07.2012 to provide clarity that for credit or payment
of sum chargeable under the Act made by on or behalf of CG or SG, the person
responsible for paying would be – a drawing & disbursing officer or – any other
person, by whatever name called, responsible for crediting or paying such sum
Sec. 206 requires collection of tax at source at the time of debiting amt. to buyer or
receipt of such amt. Sub sec. (6A) provides that if person responsible for
collecting tax doesn’t collect or after collecting fails to pay, he is, deemed to be an
assessee in default
1st proviso in sub sec. (6A) inserted w.e.f. 01.04.2012 on same lines as 1st proviso
inserted in sec. 201(1) except that it does not apply to seller of bullion or jewellery
Proviso inserted in sub sec. (7) on similar lines as proviso inserted in sec.
201(1A) to provide for charge of interest in case of assessee not deemed to be in

Sub section (1A) of sec. 206C amended w.e.f. 01.07.2012 to provide that no tax
will be collected at source form a resident buyer who purchases goods for the
purpose of generation of power. A declaration will be given in form No. 27C to the
 In table below sub section (1) of sec. 206C(1), ‘entry’
(vii) is inserted w.e.f. 01.07.2012 obliging the seller of
minerals, being coal, lignite or iron ore to collect tax from
buyer @1%.
If such minerals are used for manufacturing, processing
or producing articles or thing & for trading purpose, sec.
would not apply
New sub sec. (1D) in sec. 206C inserted w.e.f. 01.07.2012 to provide that sale of
bullion/jewellery will be subject to TCS provisions @1% of sales consideration, if
following conditions satisfied:-

                                   Out of sales
                                consideration, any
                              amount received in cash

   Sales consideration of bullion                       Sales consideration of jewellery
(excluding any coin/article weighing                           exceeds Rs. 5 lacs
  10 gms or less) exceeds Rs. 2 lacs
    Tax will be collected at the time of receipt of any amt. in cash. Rule will be applicable
 irrespective of the fact whether buyer is a manufacturer, trader or purchase is for personal
  use. However, purchaser can obtain lower TCS certificate by submitting Form o. 13 to AO
Sec.                 Existing                           Amendment/Insertion
140A Sub sec. (1) provides for payment of Said         sub sections amended w.e.f.
       self assessment tax & sub sec. (1A) &    01.04.2013 to provide that credit of AMT
       (1B) provides for computation of         paid (by LLP, firm, individuals etc.) shall be
       amt. on which interest is payable u/s    taken into account to determine SA tax
       234A & 234B after taking into            payable & amt. on which interest is payable
       account amt. already paid like TDS,
       TCS, MAT, advance tax etc.
 207   Sec. provides for liability to pay Senior citizens (60 yrs or above) who does
       advance tax in respect of TI not have business income exempted from
       chargeable to tax                  payment of advance tax w.e.f. 01.04.2012
 209   Sub sec. (1)(d) provides that in order   Proviso inserted w.e.f. 01.04.2012 that
       to calculate amt. payable by way of      TDS/TCS shalln’t be reduced from amt. of
       advance      tax,   TDS     or    TCS    tax calculated to determine adv tax payable,
       deductible/collectable     shall    be   if payer has paid or credited income
       reduced & balance shall be advance       without deduction or is received or debited
       tax payable                              by recipient without collection of tax
234A/ In computing interest, credit for Sections amended w.e.f. 01.04.2013 to
 B/C advance tax paid, TDS/TCS, MAT allow deduction of AMT paid u/s 115JD in
       credit etc. are allowed                  calculating amt. on which int. is payable
234D Amt. refunded u/s 143(1) exceeds Expl. 2 inserted w.r.e.f. 01.6.03 to provide
       amt. refundable u/s 143(3), assessee that charge of int. on excess refund would
       liable to pay int. on excess refund also be applicable to A.Y. 03-04 & earlier
       (w.e.f. 1.6.03)                      A.Y.’s if assessment completed after 1.6.03
                Penalty for concealment of income in respect of
                    ‘Specified Domestic Transaction’ (SDT)
FA 2012 applies ‘transfer pricing’ provisions to specified domestic transactions. Consequent
thereto, Expln. 7 of sec. 271(1)(c) amended w.e.f. 01.04.2013, to include specified
domestic transactions wherein if an assessee has SDT & any addition or disallowance is
made on account of same, it would be deemed that he has furnished inaccurate particulars
of income or concealed income, entitling penalty u/s 271(1)(c)
      Penalty for failure to keep & maintain documentation in respect of
                     ‘Specified Domestic Transaction’ (SDT)
 Sec. 271AA relating to penalty for failure to keep & maintain information &
  document in respect of international transaction substituted by a new sec.
  w.e.f. 01.07.2012
 It provides for levy of penalty @2% of value of international transaction, if
  - fails to maintain prescribed documents/information
  - fails to report any international transaction which is required to be reported
  - maintains or furnishes any incorrect information or documents
 It has been further amended w.e.f. A.Y. 13-14 to include therein reference of
  ‘SDT’ to provide levy of penalty of 2% of value of SDT in above circumstances

Sec. 271G amended w.e.f. 01.04.2013 to provide that if assessee having SDT doesn’t furnish
information or documents u/s 92D(3), penalty @2% of value of int. transaction leviable
                          Penalty in search cases
 Provisions of sec. 271AAA amended to provide that the same will not be
  applicable to searches conducted on or after 01.07.2012.
 A new section 271AAB inserted for levy of penalty at different rates on
  undisclosed income of the specified previous years, in a case where search has
  been initiated on or after 01.07.2012
  - 10% (of UDI) if admitted in statement, specified & substantiated the manner
    in which income was derived, returned & taxes with interest paid
  - 20% (of UDI), if returned & taxes with interest paid
  - 30% to 90% (of UDI), in other cases
 Specified P.Y’s means
  - P.Y. in which search is conducted &
  - P.Y. ended before the date of search but the due date for filing return has not
    expired & assessee has not filed a return of such P.Y. before the date of search
   (In respect of other P.Y.’s for which UDI may be returned or assessed, penalty
    would be leviable u/s 271(1)(c) read with Explanation 5A thereof)
 UDI means any income of specified P.Y represented by [Expl. (c) below sec.]
  - any money, bullion, jewellery, other valuable article/thing or any entry in
    books of accounts or other documents found in course of search u/s 132 which
    hasn’t been recorded in books or other documents on or before date of search
  - any entry for expenses recorded in books or other documents found to be false
    & would not have been found, if search had not been conducted
      Fees & penalty for default in furnishing statements in respect of
                        tax deductible or collectible

 Presently, sec. 272A(2)(k) provides for penalty for late filing of TDS & TCS
  statements, respectively u/s 200(3) & proviso to sec. 206C(3)
 FA, 2012 has made the said provisions inoperative from 01.07.2012 &
  substituted the same by 2 new provisions w.e.f. 01.07.2012
  - Sec. 234E providing for payment of fees for late filing of TDS/TCS
 Rs. 200/day till default continues
 Amt. not to exceed amt. of tax deductible or collectible
 Fees shall be paid before delivering TDS/TCS Statements
 Fees would be automatic, it is mandatory
 No issue can be raised about payment of fees, which may be on account of
     various circumstances including difficulties in uploading the statements
  - Section 271H providing for larger penalty for said default
 Failure to furnish TDS/TCS statements within the prescribed time or
    furnishing incorrect information in TDS/TCS statements
 Amt. of penalty for said defaults could be between Rs. 10,000 to Rs. 1 lacs
 No penalty for failure to furnish TDS/TCS statements, if person proves that
     TDS or TCS along with fees & interest is paid & TDS/TCS statements are
     furnished within a period of 1 yr from the time prescribed for furnishing
     the said statement
Sections 280A to 280D inserted w.e.f. 01.07.2012 to provide for designation of one or
more special Court & procedural matters relating thereto including trial of an offence
  The threshold & period of punishment provided in sec. 276C, 276CC, 277,
             277A & 278 are revised as follows w.e.f. 01.07.2012:-
          Section                Pre-amendment            Post- amendment
                                   punishment                punishment
Willful attempt to evade any tax,       If amt. > Rs. 1 lacs, RI of   If amt. > Rs. 25 lacs, RI of
penalty or interest [sec. 276C(1)]      6mths to 7 yrs & fine         6mths to 7 yrs & fine
                                        If amt. < Rs. 1 lacs, RI of   If amt. < Rs. 25 lacs, RI of
Willful failure to furnish ROI [sec.    3mths to 3 yrs & fine         3mths to 2 yrs & fine

Making false statement or
delivering false accounts [sec. 277]

Abetment of false return etc.
[sec. 278]
Willful attempt to evade payment        RI of 3mths. to 3 yrs &       RI of 3mths. to 2 yrs & fine
of any tax, penalty or interest [sec.   fine

Falsification of books of accounts,
documents etc. to enable other
person to evade tax, int. or penalty
[sec. 277A]
                  Vodafone Shattered

    HTIL Cayman                             Vodafone,
      Islands                              Netherlands
holding                                        HTIL transfers its
                                            shareholding in CGP to
   CGP Investment                                 Vodafone
   Cayman Islands

                 67% direct & indirect holding

          Hutchison Essar Ltd., India

      Supreme Court in Vodafone International
      Holdings B. V. v. Union of India laid down
              following proposition:-

                         income is to be construed
 Source in relation to an
 where the transaction of sale takes place and not
 where the item of value, which was subject to the
 transaction, was acquired or derived from.

 HTIL and   Vodafone are offshore companies and since
 the sale took place outside India, applying the source
 test, the source is also outside India, unless legislation
 ropes in such transactions.
 Section  9 has no “look through provision” and such a
  provision cannot be brought through construction or
  interpretation of a word “through” in section 9. In any
  view, “look through provision” will not shift the situs
  of an asset from one country to another. Shifting of
  situs can be done only by express legislation.

 Itis difficult to agree with the conclusions arrived at
  by the High Court that the sale of CGP share by HTIL
  to Vodafone would amount to transfer of a capital
  asset within the meaning of section 2(14) of the
  Indian Income Tax Act.
     In order to over come the finding of this judgment
         following amendments are made by FA 2012

   Explanation introduced in the definition of the capital
    assets u/s 2(14) to clarify that, “property” includes and
    shall be deemed to have always included any rights in or
    in relation to an Indian company, including rights of
    management or control or any other rights whatsoever;’

   New explanation introduced in the definition of
    transfer u/s 2(47) to clarify that ‘transfer’ includes and
    shall be deemed to have always included disposing of or
    parting with an asset or any interest therein, or creating
    any interest in any asset in any manner whatsoever,
    directly or indirectly, absolutely or conditionally,
    voluntarily or involuntarily by way of an agreement
    (whether entered into in India or outside India) or
    otherwise, notwithstanding that such transfer of rights
    has been characterized as being effected or dependent
    upon or flowing from the transfer of a share or shares of a
    company registered or incorporated outside India
 New  explanation 4 introduced u/s 9(1)(i) to the
 effect that the expression “through” used in context
 of defining income deemed to accrues or arise in
 India through the transfer of capital assets situated
 in India, shall mean and include and shall be
 deemed to have always meant and included “by
 means of”, “in consequence of” or “by reason of.

 New  explanation 5 is introduced to clarify that an
 asset or a capital asset being any share or interest in
 a company or entity registered or incorporated
 outside India shall be deemed to be and shall always
 be deemed to have been situated in India, if the
 share or interest derives, directly or indirectly, its
 value substantially from the assets located in India.
   New explanation introduced u/s 195 to the effect that
    obligation to deduct tax from the payments made to the
    non residents/foreign companies applies and shall be
    deemed to have always applied and extended to all
    persons resident or non resident whether or not non
    resident persons has

     A residence or place of business or business connection in India
     Any other presence in any manner what so ever in India.

   All these amendments are made w.r.e.f. 01-04-1962

   Section 119 of Finance Act introduced to provide that
    not withstanding any thing contained in any judgment,
    decree or order of any court or tribunal or any authority,
    all notices sent or taxes levied shall be valid and not be
    called in question.
     Amendment in section 9(1)(vi) w.r.e.f. 01.06.76
              Income from Royalty
   Explanation 4 – It is clarified that transfer of all or any right in respect of any
    right, property or information includes transfer of all or any right for use or
    right to use a computer software (including granting of a license) irrespective
    of the medium through which such right is transferred.

    Effect of the amendment is that sale/supply of software is now covered by
    the term ‘Royalty’ & various judgments on this issue are neutralized

   Explanation 5- It is clarified that royalty includes and has always included
    consideration in respect of any right, property or information, whether or not
      (a) the possession or control of such right, property or information is with
      the payer;
      (b) such right, property or information is used directly by the payer;
      (c) the location of such right, property or information is in India.

   Explanation 6- It is clarified that the expression “process” includes and shall
    be deemed to have always included transmission by satellite (including up-
    linking, amplification, conversion for down-linking of any signal), cable, optic
    fibre or by any other similar technology, whether or not such process is secret.
   Section 115BBA amended to provide that income arising to a
    non-citizen, non-resident entertainer (such as theatre, radio or
    television artists and musicians) from performance in India
    shall be taxable at the rate of 20% of gross receipts.

   Taxation rate, in case of non-citizen, non-resident sportsmen
    and non-resident sports association, increased from 10% to
    20% of the gross receipts.

   Amendment will take effect from 1st April, 2013.

   Consequential amendment in section 194E to provide for
    withholding of tax at the rate of 20% from income payable to
    non-resident, non-citizen, entertainer, or sportsmen or sports
    association or institution. This amendment will take effect from
    1st July, 2012.
 Sec. 90(2A) - GAAR provision to have overriding effect
  over DTAA
 Any term used in DTAA but defined later on through
  notification shall be applicable from the date of
  coming into force of the agreement.
 Sec. 90(4) - For availing benefit of DTAA, NR to
  produce Tax Residency Certificate (TRC) from the
  government of that country containing prescribed
       THANK YOU
                  Presented by
                P.C. Parwal ,FCA
5th Floor, Milestone Building, Tonk Road, Jaipur
               Cell : 98298-88804

Shared By: