DIRECT TAXES

INCOME TAX

· All amendments proposed in the Finance Bill, 2008 would be effective from A.Y. 2009-10 unless specifically mentioned otherwise.

· In this booklet all proposals of the finance bill, 2008 are referred to as if the amendments have actually made.


1. TAX RATES : -
a. Rates of individuals, HUFs, AOPs and BOIs - Substantial relief has been granted by raising the threshold limit of basic exemption as well as by scaling up the slabs of income liable to tax. For Individuals, HUFs, AOPs and BOIs the slab rates of tax on total income are as under:

 

Total Income slab	Tax rates for resident senior citizens	Tax rates for resident women below 65 years of age	Tax rate for others
Up to Rs. 150,000	Nil	Nil	Nil
Rs.150,001 to Rs. 180,000	Nil	Nil	10%
Rs.180,001 to Rs. 225,000	Nil	10%	10%
Rs. 225,001 to Rs. 300,000	10%	10%	10%
Rs. 300,001 to Rs. 500,000	20%	20%	20%
Above Rs. 500,000	30%	30%	30%

The provisions relating to surcharge of 10 % of tax where income exceeds Rs. 10,00,000 and education cess aggregating to 3% on tax and surcharge continue as in the preceding year.

An illustrative chart showing tax saving at various levels of total income in case of Mr. X who is not a senior citizen and who has no income by way of short term capital gains (STCG) is as under :-

Total Income Rs.	Tax including applicable surcharge and cess for AY 2008-09 Rs.	Tax including applicable surcharge and cess for AY 2009-10 Rs.	Tax saving Rs.
150,000	4,120	0	4,120
200,000	14,420	5,150	9,270
250,000	24,720	10,300	14,420
300,000	40,170	15,450	24,720
400,000	71,070	36,050	35,020
500,000	101,970	56,650	45,320
10,00,000	256,470	211,150	45,320
15,00,000	452,067	402,215	49,852

b. Rates for firms, companies and co-operative societies - There is no change in the rates of tax for firms, companies and co-operative societies.

2. INCREASE IN RATE OF TAX ON STCG: SECTIONS 111A & 115AD : -
The rate of tax on STCG arising from transfer of equity shares or units of equity oriented funds where Securities Transaction Tax (STT) is chargeable, has been increased from 10% to 15% [ plus applicable surcharge & cess ].

Individuals, HUFs, AOPs and BOIs having only STCG are at a disadvantage, as compared to their counterparts having normal income, since they would have to pay tax on the entire incime above the basic exemption limit @ 15% without the advantage of the first slab rate of 10% . For example, in respect of Mr.X (not being a senior citizen) having only STCG of Rs. 300,000, as per normal tax provisions, tax liability would be Rs. 15,450, whereas, now, as pe Section 111A the liability will be Rs. 23,175/= .

3. DEFINITION OF ‘ CHARITABLE PURPOSE’ –SECTION 2 (15) : -
Under Section 11 and clauses (iv) and (v) of section 10 (23C) income of charitable trusts, funds or institutions is exempt from income tax. Definition of ‘charitable purpose’ includes ‘advancement of any other object of general public utility’. This part of the definition of ‘charitable purpose’ in Section 2(15) has been amended to provide that ‘advancement of any other object of any other object of general public utility’ will not be considered as ‘ charitable purpose’ if it involves carrying on of any activity of rendering any service in relation to any trade, commerce or business for any fee, cess or other consideration. If any such activity is carried on by a trust, fund or institution , then such an organization will not be entitled to any exemption under Section 11 and its income will be chargeable to tax even if utilised for charity unless such trust is carrying on other charitable activities and the trust is created prior to 1st April, 1962.

This amendment changes the law settled for many years and may adversely affect many organisations. The amendment also lacks clarity and will lead to a spate of litigation. However, the amendment will not affect trusts, etc. Engaged exclusively in relief of the poor, medical relief and education.

4. DEFINITION OF AGRICULTURAL INCOME – SECTION 2 (1A) : -
It is provided that any income derived from saplings or seedling grown in a nursery shall be deemed to be agricultural income qualifying for tax exemption regardless of whether a nursery does or does not carry out any basic operation on land .

5. WEIGHTED DEDUTION FOR PAYMENT TO A COMPANY FOR SCIENTIFIC RESEARCH- SECTION 35(1)(iia) : -
A weighted deduction of 125% will now be allowed in respect of expenditure by way of payment for scientific research, made to a company registered in India, whose main object is scientific research and development, which is approved by the prescribed authority and fulfils specified conditions. Earlier, such deduction was available only for payments made to scientific research associations or to universities, colleges or other institutions.

The weighted deduction of 150% available under Section 35(2AB) to a biotechnology company, or manufacturer of drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals or other notified articles, for expenditure incurred on scientific research or in-house research and development facility approved by the prescribed authority, would not be available to a company approved under Section 35 (1)(iia).

6. AMORTISATION OF CERTAIN EXPENSES FOR NON- INDUSTRIAL ENTITES- SECTION 35D : -
So far, certain types of expenditure such as expenditure on increase of capital, public issue expenses, feasibility/project reports, etc. were in the context of extension of existing bussiness allowed to be amortised over a period of five years only if such expenses were in connection with the extension of an industrial undertaking or in connection with setting up a new industrial unit. The benefit of such amortisation was therefore available only to industrial entities. The benefit of such amortisation is now being extended to cases of extension of any undertaking, or setting up of any new unit. Therefore, all entities including service companies, would now be entitled to avail of the benefit of such amortisation.

7. SECURITIES TRANSACTION TAX (STT) AND COMMODITIES TRANSACTION TAX (CTT) – SECTION 36(1)(xv) & (xvi)
STT paid in respect of securities transactions entered into in the course of business will now be allowable as a business deduction, instead of being allowed as a rebate under Section 88E against the tax payable, if the income from such securities transactions forms part of income computed under the head ‘Profits or Gains of Business or Profession’. Consequently the provision for disallowance of such STT under Section 40(a)(ib) has been deleted. Even if the securities transaction have resulted in a loss, STT paid on such transactions will be deductible in computing the taxable income. Further , the restriction under Section 88E that the amount of STT rebate should not exceed the tax on the income arising out of the securities transactions, would no longer apply. Effectively, the tax benefit in respect of STT paid would result in a maximum saving in income tax of only 33.99% of the STT, as against the whole of the STT being a saving of the income tax payable so far.

Similarly, the new CTT would also be allowable as a business deduction if the income arising from such taxable commodities transactions entered into in the course of business is included in the computation of business profits.

8. DISALLOWANCE OF CASH PAYMENTS EXCEEDING Rs. 20,000- SECTION 40A(3) & (3A) : -
So far, the judicial view has been hat the disallowance under Section 40A(3) in respect of payments exceeding Rs. 20,000 made otherwise than by an account payee cheque or account payee bank draft applied only if any single payment exceeded Rs. 20,000. The limit of Rs. 20,000 applied to each payment, and not to the aggregate of all the payments made in a single day to the same person. The scope of such disallowance is now extended to cases where the aggregate of such payments made otherwise than by an account payee cheque or account payee bank draft in a single day to the same person exceeds Rs. 20,000. The disallowance will extends to all the payments, each of which may be below Rs. 20,000, if the aggregate of the payment made to the same person during a single day exceeds Rs. 20,000. Similarly, the deeming fiction of Section 40A(3A), where such payment is made in a year subsequent to the year in which the expenditure is incurred, is also being extended to situations where the aggregate of such payments otherwise than by an account payee cheque or account payee bank draft made to a single person in the same day exceeds Rs. 20,000.

9. WRITTEN DOWN VALUE – SECTION 43 (6) : -
Where an assessee was not required to compute the total income if any of the earlier years, the written down value of assets for the purpose of depreciation would be computed after deducting the depreciation provided in the books of account in those earlier years, as if such depreciation was actually allowed to the assessee. Further, any Revaluation made in those years and depreciation provided in relation to such revaluation would be ignored. Therefore, an assessee who was so far not required to compute his total income and becomes liable to income tax for the first time, and who has been maintaining books of account, would not be able to claim depreciation on the actual cost of the assets, but on the reduced figure after deducting depreciation provided in the books of account. This provision would have no impact on an assessee who did not maintain books of accounts in such earlier years. This provision could have consequences on the amount of capital gains taxable under Section 50, which deals with computation of capital gains on sale of depreciable assets, since the written down value is to be deducted in computing the capital gains. This amendment takes effect retrospectively from assessment year 2003-04.

10. REVERSE MORTGAGE – SECTIONS 10(43) & 47 (xvi) : -
Under the Reverse Mortgage Scheme made and notified by the Central Government, senior citizens can avail of a loan against mortgage of their residential property . The loan can be availed either in lump sum or in installments. The loan being a capital receipt is not liable to tax.

The transaction of reverse mortgage have been granted exemption from the definition of “transfer ”thus not being liable to capital gains at the time of mortgage. Capital gains, if any, would therefore arise if and when the property is sold to repay the loan under the reverse mortgage.

11. CAPITAL GAINS ON CONVERSION OF FOREIGN CURRENCY EXCHANGEABLE BONDS – SECTIONS 47(xa) & 49(2A) : -
A specific provision has been inserted in section 47 with effect from assessment year 2008-09 to exempt transfer by way of conversion of foreign currency exchangeable bonds into shares or debentures of any company . This would cover conversion of bonds of one company into shares of another company, has envisaged under the foreign currency exchangeable bonds scheme. The cost of the shares acquired on such conversion would be the cost at which the bonds were acquired. This amendment deals only with the implications relating to the bond holder and the silent as regards implications in the hands of the bonds issuer.

12. EXPANSION OF AMBIT OF SECTION 80C : -
Section 80C provides for deduction in respect of life insurance premia, deferred annuity and various other payments/investments. The benefit of this deduction is extended to investment in an account under the Senior Citizen savings Scheme Rules,2004 and in a five year time deposit under the Post Office Time Deposit Rules, 1981. Principle amount withdrawn out of the above accounts before the expiry of five years from the date of deposit shall be liable to tax unless it is received by a legal heir/nominee on the death of the investor.

13. DEDUCTION IN RESPECT OF MEDICLAIM PREMIUM – SECTION 80D : -
Medical insurance premia paid by an assessee is deductible subject to certain conditions and limits. The changes made in this provisions are : -

· The payment can be made in respect of parents even where they are not dependent on the assessee
· Payment of premium can be made by any mode other than cash instead of only by cheque as per present provisions
· Additional deduction up to Rs. 15,000 will noe be separately available for premium paid for parent(s) (Rs.20,000 if the parent (s) is /are senior citizens) .

14. REBATE UNDER SECTION 88E : -
Rebate under section 88E in respect of STT has been withdrawn in view of deduction allowed as business expenditure.

15. TAX HOLIDAY TO CERTAIN HOSPITALS – SECTION 80-IB (11C) : -
A new section has been introduced to provide for 100% tax holiday for five years to eligible undertakings deriving profits from the business of operating and maintaining hospitals anywhere in India except in certain specified urban areas. The should start functioning during the period from 1st April, 2008 to 31st march, 2013 and should have at least 100 beds for patients.

16. TAX HOLIDAY FOR HOTELS – SECTION 80 –ID : -
Section 80-ID provides for a five year tax holiday in respect of profits and gains from business of 2 star, 3 star or 4 star hotels and convention centers in specified areas. The scope of this section is extended to undertakings engaged in the business of hotel located in specified districts having a world Heritage Site if such hotel is constructed and starts functioning at any time during the period beginning 1st April 2008 and ending on 31st March 2013. The section specifies 22 different districts as specified districts spread in various states across the country.


17. MINIMUM ALTERNATE TAX (MAT) –SECTION 115JB : -
Section 115JB provides for tax on book profit in case of a company. The profit as per the profit and loss account is adjusted by certain items. In doing so, the amount of income tax debited to the profit and loss account is added to arrive at the book profit subjected to MAT. A new explanation provides that income tax will include Dividend Distribution tax, interest under the Income tax Act, Surcharge under the Central acts, Education Cess as well as Secondary and Higher Education Cess on income tax.

Further, in the existing explanation (renumbered as Explanation 1) it is specifically provided that any deferred tax or provision for the same shall also be added back to arrive at taxable book profit. The amendment reverses the ratio of the decision in the case of ACIT vs. Balarampur Chini Mills Ltd. (2007) 111 TTJ (Kol) and 230 / 14 SOT 372 (Kol) and similar other decision.

Both these amendments take effect retrospectively from assessment year 2001-02.

18. DIVIDEND DISTRIBUTION TAX (DDT) – SECTION 115-O : -
Under section 115-O when a company distributes dividend to shareholders it is required to pay DDT. When a company (which is a shareholder) receiving the dividend, further distributes the dividend, it again pays DDT resulting in cascading effect. To avoid this to a limited extent, section 115-O has been amended to provide that if a holding company receiving dividend from its subsidiary company, declares/ distributes / pays dividend in the same financial year, the amount of dividend received from the subsidiary company will be reduced from the distribution of dividend by the holding company for the levy of the DTT. However, this benefit will not be available if the holding company itself is a subsidiary of any other company which is not a subsidiary.

The amended section defines a subsidiary as a company in which the other company holds more than half in nominal value of the equity share capital of the company.

The amendment will apply to dividends declared / distributed / paid on or after 1st April 2008 .

19. FRINGE BENEFIT TAX (FBT)- SECTIONS 115WB, 115WC, 115WD, 115WE,AND 115WKB : -

a. The following expenses have been excluded from the charge of FBT:-

· Expenditure on or payment through non-transferable pre-paid electronic meal card
  usable only at eating joints or outlets and fulfilling other conditions as may be prescribed.

· Expenditure on providing crèche facilities for the children of the employees.

· Expenditure on sponsorship of sportsman employed with the assessee .
· Expenditure on organising sports event for employees.

· Expenditure on maintenance of any accommodation in the nature of guest house.

b. the value of Fringe benefits on account of expenditure on festival celebration is reduced to 20% from the existing rate of 50%.

c. The due date for furnishing the return of fringe benefits is advanced from 31st October to 30th September with effect from assessment year 2008-09 for the companies and other assessees whose accounts are required to be audited. For other employers, the due date for furnishing the return continues to be 31 st July.

d. Amendments have been made to the procedure for assessment. These are similar to amendments made to assessment procedure for income tax. These are considered in Para 23 below.

e. Where an employer has paid any FBT with respect to allotment or transfer of specified security or sweat equity shares and the employer has recovered such tax subsequently from an employee, it shall be deemed that the FBT so recovered is the tax paid by such employee in relation to the value of the fringe benefit provided to him. Such deeming provision shall apply only to the extent to which the amount of tax recovery relates to the value of this fringe benefit taken into account for charge of FBT.

f. It is also clarified that the employee shall not be entitled to any refund out of such deemed payment of tax and shall also not be entitled to claim any credit of such payment of tax against tax liability in India on other income or against any other tax liability.

g. This amendment has been made with effect from assessment year 2008-09 to enable an employee to claim tax credit for this deemed payment of FBT in a foreign country, subject to the DTAA, if any, between India and that country and the domestic tax laws of that country.

20. DUE DATE FOR FILING OF INCOME-TAX RETURN – SECTION 139 : -
The due date for furnishing the return of income is advanced from 31st October to 30th September for companies, assessees whose accounts are required to be audited and working partners of firms whose accounts are required to be audited.

This due date is applicable from assessment year 2008-09.

For other assessees, the due date for furnishing the return of income continues to be 31st July. The above due dates also apply to wealth tax returns.

21. DEFECTIVE RETURN- SECTION 139(9) : -
Evidence of payment of advance tax/self assessment tax, certificates of TDS/TCS will have to be attatched along with the return of income unless the requirement is dispensed with under the Rules prescribed under Section 139C.

This amendment applies from assessment year 2008-09 onwards.

22. AUDIT DURING ASSESSMENT PROCEEDING- SECTIN 142 (2A) : -
The Assessing Officer can direct the assessee to get his accounts audited within a stipulated time having regard to the complexity of the accounts. Presently, he is authorised to extend the date of submitting the audit report under Section 42 2(a) only if he receives an application from he assessee. The amendment now allows him to extend the time for submitting the audit report Suo Moto .

23. ASSESSMENT-SECTION 143 & 156 : -
A two stage procedure for assessment is introduced with effect from assessment year 2008-09. In the first stage, while processing the return following adjustments will be made without grant of an opportunity of hearing.
a. arithmetical errors in the return or ;
b. in correct claim as it apparent from any information in the return.

It is clarified that the following claims will be considered as incorrect claims: -
a. an item which is inconsistent with another entry of the same or some other item in the return ;
b. A claim in respect which the information required to be furnished to substantiate such claim has not been furnished;
c. Deduction exceeding specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction.

An intimation will be issued if any tax or interest is payable by or refundable to the assesses. This intimation will be treated as notice of demand under section 156.

Where no sum is payable or refundable to the assessee on processing of the return and no adjustments have been made to the return acknowledgement of the return shall be treated as intimation.

A scheme for centrailised processing of returns without human intervention will be formulated by CBDT for the above purpose.

At the second stage, selected cases will be subjected to detailed scrutiny.

Similar provisions have been made for the assessment of FBT.

24. SERVICE OF NOTICE FOR SCRUTINY ASSESSMENT- SECTION 143(2) : -
Presently, the assessing officer is entitled to proceed for scrutiny of return of income only if he has served the notice before the expiry of twelve months from the end of the month in which the return is submitted.


Now, with effect from 1st April, 2008, the Assessing officer has to serve the notice before the expire of six months from the end of the financial year in which the return is submitted.

25. REASSESSMENT – SECTION 147 : -
Now, with effect from 1st April, 2008, the assessing officer will have the power to assess / reassess income which has escaped assessment if it involves or relates to a matter which is not the subject matter of any appeal, reference or revision.

Similar amendment has also been made in the Wealth Tax Act.

26. ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT – SECTION 151 : -
Presently, an Assessing Officer can issue notice under Section 148 after obtaining from the Joint Commissioner, Commissioner or the Chief Commissioner. To overcome the difficulty caused by the judgement of the Allahabad High Court in the caused of Dr. Shahikant Garg vs. CIT (285ITR 158), it is now provided retrospectively from 1 st October, 1998 that such notice need not be issued by the sanctioning authority.

Similar amendment has also been made in the Wealth Tax Act.

27. PROVISION FOR ASSESSMENT IN CASE OF ANNULMENT OF – SECTIONS OF ANNULMENT OF PROCEEDING – SECTION 153A TO 153D : -
When a search is conducted of books of account or other documents or any assets are requisitioned, assessment or re-assessment of total income in respect of six assessment years preceding the assessment year relevant to the previous year in which the search is conducted or books of account, etc. are requisitioned has to be completed within the time limit provided in Section 153B. It is presently provided that the assessment for these six assessment years pending at the time of search/requisition shall abate.

It is now provided that if any proceeding initiated or any order of assessment or reassessment made under Section 153A(1) has been annulled in any appeal or other legal proceeding, the abated assessment or reassessment relating to any assessment year shall stand revived. If subsequently such order of annulment is set aside, such revival shall cease to have effect.
It is also provided that the time limit for completion of revived assessment(s) shall be one year from the end of the month in which the abated assessment revives or within the time specified in Section 153 of Section 153B(1), whichever is later.

If the order of assessment or reassessment which is annulled is subsequently set aside, the period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in Section 153A(2) till the date of receipt of order setting aside the order of such annulments by the Commissioner, shall be excluded in computing the period of limitation for the purpose of time limit for completing assessment under Section 153B.

The above amendments take effect retrospectively from 1st June, 2003.

28. SETTLEMENT OF CASES – SECTION 153 : -
The amendment now allows a minimum time period of one year after excluding the period mentioned in Section 245HA(4) for making an assessment / reassessment / re-computation of income if the proceeding before the settlement commission abates.

This amendment takes effect retrospectively from 1st June,2003.

29. ASSESSEE IN DEFAULT – SECTIONS 191 & 201 : -
It has been clarified that a person who was required to deduct/collect or pay tax at source but has not done so will also be considered as an assessee in default under section 201 of the Act. This amendment takes effect retrospectively from 1st June, 2002. An amendment has also been ,made in Section 191 of the Act to cover case with effect from 1st June, 2003 .

30. INTEREST ON SECURITIES – SECTION 193 : -
No tax is required to be deducted at source from interest on securities issued in dematerialized format by companies and which are listed on a recognized stock exchange in India. This amendment is effective from 1st June , 2008 .

31. PAYMENTS TO CONTRACTORS – SECTION 194C : -
Any Association of Person or Body Of Individuals whether registered or not, would now be required to deduct tax at source under the provisions of section 194C on payments to contractors.
This amendment is effective from 1st June , 2008.

32. CREDIT FOR TDS/TCS – SECTIONS 199 & 206C : -
Currently, credit for TDS/TCS is granted in the year in which the relevant income is assessable. Now , credit will be available only to the person and in the assessment year as may be determined in a accordance with the rules to be framed by the CBDT .

33. DEMATERIALISATION OF TDS CERTIFICATES – SECTION 203 : -
The dematerialization scheme for TDS/TCS has been defered further till 1st. 2010.Consequently certificates need to be issued in the specified format and within the specified dates to the persons concerned.

34. REMITTANCE TO NON-RESIDENTS – SUBMISSION OF DETAILS BY THE REMITTER – SECTION 195 : -
Any person who makes a payment of any sum chargeable to tax under the Act to a non-resident, is required to deduct tax at source. /the remittance can be made after obtaining a certificate from the Income-tax department for non deduction or lower deduction of tax. Alternatively, the payer may comply with the provision by furnishing an undertaking along with a certificate from a Chartered Accountant to the bank through which the remittance is made. The bank forwards the certificate and undertaking to the Income-tax department. Now, the remitter is required to furnish the prescribed form to the tax department.

35. RATES IN FORCE FOR TDS FROM STCG IN CASE OF NON RESIDENTS – SECTION 195 : -
The rate at which tax is to be deducted from income earned by non residents by way of STCG on transfer of listed shares and units of equity oriented mutual funds on which STT is chargeable is increased from 10% to 15% in view of the increase in the tax rate on STCG.

36. STAY BY TRIBUNAL – SECTION 254(2A) : -

Currently, in case of stay granted matters before the Appellate Tribunal, if appeals are not dispose of within a period of 180 days from the date of the stay order, the stay order is automatically vacated after the expiry of 180 days, unless the stay is further by the Tribunal for a period not exceeding 180 days at a time. It is provided that the total stay period shall not exceed 365 days cumulatively from the date on which the stay was first granted. In such cases, the judicial view was that the stay can be extended even beyond the period of 365 days if the delay in disposal of appeal is not attributable to the assessee. It is now the provided that the Tibunal shall dispose of the appeal within the period of such stay (not exceeding 365 days in aggregate), failing which the order of stay shall stand vacated at the expiry of the stay period, even if the delay in disposing of the appeal is not attributable to the assessee. The said amendment takes effect from 1st October, 2008.

37. CONSEQUENCES OF NON-FILING OF APPEAL BY DEPARTMENT – SECTION 268A : -
Presently, as per the limits laid down by the CBDT, the Department is not to file appeals if the tax effect involved is less than the following : -
 

Appeal to	Tax Effect (Rs. )
Appellate Tribunal	2,00,000
High Court	4,00,000
Supreme Court	10,00,000

A new Section 268A provides that in case the Department has not filed an appeal or reference on a particular issue due to the above limits, it shall not be precluded from filling an appeal or application for reference on the same issue in the case of the same assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year.

It further provides that in such cases, it shall not be lawful for an assessee to contend that the Department has acquiesced in the decision on the said issue since it has not filed an appeal. The amendment takes effect retrospectively from 1st April , 1999 and reverses the ratio of the decision of the Supreme Court in the case of Berger Paints India Ltd. vs. CIT (266 ITR 99).

38. INITIATION OF PENALTY PROCEEDINGS – SECTION 271 : -
The section provides for penalty for concealment or failing to comply with notices. The Delhi High Court in the case of CIT vs Ram Commercial Enterprises Ltd. (246 ITR 568) as approved by the Supreme Court in the case of Dilip Shroff (291 ITR 519) held that before Penalty proceedings are initiated , the Assessing Officer must record his satisfaction about the default committed . Sub-section 1B has been inserted in section 271 to provided that when there

Is any addition or disallowance in the assessment order contains a direction to initiate penalty proceedings , it will be deemed to constitute satisfaction of the Assessing Officer. No separate recording to of satisfaction would be required.

The amendment takes effect retrospective from assessment year 1989-90.

Similar amendment has been made to Section 18 of the Wealth Tax Act.

39. AUTHENTICATION OF NOTICE – SECTION 282A :-
To facilitate the use of information technology, it is now provided that every notice or other document to be issued, served or given by any Income Tax authority shall be deemed to be authenticated if the name and office of the designated income tax authority is printed, stamped or written thereon. However, a notice or other document required to be issued under the Act by any income tax authority is to be signed in Manuscript by that authority. This amendment takes effects from 1st June, 2008.

40. CHALLENGE TO VALIDITY OF NOTICE – SECTION 292BB :-
A new section 292BB provides that in case an assessee has appeared in any assessment proceeding on co-operated in any inquiry it shall be deemed that any notice required to be served under the act has been duly served upon him in time and such assessee shall be precluded from taking any objection that the notice was not served in time or was served in an improper manner.

Similar amendment has also been made to Section 42 of the wealth Tax Act.

41. PRESUMPTION IN RESPECT OF SEIZED BOOKS OF ACCOUNT, DOCUMENTS ETC. – SECTION 292C :-
Where any books of accounts, other documents, money, bullion, Jewellery or other valuable article or thing is found in possession of any person during a search, it is presumed under Section 132(4A) that (a) such books of account etc. belong to such person (b) the contents of such books of accounts are true (c) the documents stamped, executed or attested that it has been properly stamped, executed or attested. However, Such Presumption is rebuttable.

It is now provided that the said presumption will also apply in respect of books of account, documents, etc. found in the possession or control of any person in the coarse of a survey operation. This amendment takes effect retrospectively from 1st June, 2002.

The above presumption has also been extended to books of account, documents, etc. delivered to the requisition officer under Section 132A. This amendment takes effect retrospectively from 1st October , 1975.

Similar amendment has also been made to section 42D of the Wealth Tax Act.

42. SETTLEMENT OF CASES – SECTIONS 153, 273AA, 278AB:-
Where an application for settlement made before the Settlement Commission has been rejected or has not been allowed to be proceeded with or has been declared as invalid or the order has not been passed within the specified time, then the proceedings before the commission abate and the proceedings pending at the time of making the application get revived. The Assessing officer then to dispose of the cases as if no application for the settlement was made. In such a case, if the period of Limitation available to the Assessing officer for making an order of assessment or re-assessment is less than one year, after excluding the period referred to in Section 245HA(4), it shall stand extended to one year.

Two New sections Viz., 273AA and 278AB provide that a person can make an application to the commissioner for granting immunity from penalty in respect of penalty proceedings initiated and from prosecution where he had made an application for settlement and the proceedings for settlement have abated.
The said application cannot be made after the imposition of penalty after abatement or institution of prosecution proceedings after abatement.

The commissioner may grant immunity from imposition of any penalty and from prosecution for any offence if he is satisfied that the person has co-operated with the department in the proceedings after abatement and has been made true and full disclosure of his income and the manner in which such income has been derived. The said immunity may be subject to such conditions as the commissioner may think to impose.

The immunity granted to a person shall stand withdrawn if he fails to comply with any of the prescribed conditions. The immunity may also be withdrawn by the commissioner if he is satisfied that such person has, after abatement, concealed any particular material to his assessment or given false evidence. On such withdrawal, the provisions of the Act shall apply as if such immunity had not been granted.

Similar amendments have also been made to sections to 17A, 18BA, 35GA of the Wealth Tax Act.

43. RECOGNISED PROVIDENT FUND – SCHEDULE IV : -
The Finance Act, 2006 had provided that for provident funds to continue to enjoy recognition and for assesses to continue to get deduction in respect of contribution to such funds, the provident funds had to comply with certain conditions by 31sr March, 2008. This Deadline has now been further extended on 31st March, 2009 .

 

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