Highlights of Finance Bill 2012

2(14) (from the 1-4-1962)

• Capital asset - Explanation inserted for removal of doubts and 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

Courtesy : Apex Court decision in Vodafone case

2(47) (from the 1-4-1962)• ‘Explanation 2 inserted to clarify that “transfer” includes and shall

be deemed to have always included • disposing of or parting with an asset or any interest therein• 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.

Courtesy : Apex Court decision in Vodafone case

Section 9 (1)(i) (from the 1-4-1962)

• ‘Explanation 4.—For the removal of doubts, it is hereby clarified that the expression “through” shall mean and include and shall be deemed to have always meant and included “by means of”, “in consequence of” or “by reason of”

Courtesy : Apex Court decision in Vodafone case

Section 9 (1)(i) (from the 1-4-1962)

• Explanation 5.— inserted 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.

• Courtesy : Apex Court decision in Vodafone case

Section 9 (1)(vi)-Royalty (from the 1-4-1976)

• Explanation 4 inserted to clarify that the payment transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred, is Royalty.

• Courtesy : Conflicting HC decisions on taxation of Royalty- Favorable Karnataka HC Decision.

Section 9 (1)(vi)-Royalty (from the 1-4-1976)

• Explanation 5.—inserted to clarify that the royalty includes payments 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.

Royalty 9 (1)(vi)-(from the 1-4-1976)

• Explanation 6. inserted to clarify 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.

• Courtesy : Conflicting HC decisions on taxation of Royalty on fee paid for transponders etc

10(10D)

• On any insurance policy issued after 1-4-2003, If premium payable exceeds 20% of actual capital sum assured, the maturity amount from such policy was taxable.

• For policies issued after 1-4-2012, if premium payable exceeds 10% of actual capital sum assured, the maturity amount from such policy would be taxable.

10(23C)

• In case of charitable trust carrying on trade, business etc for advancement of any other object of general public utility

• Tax will be levied on such activity whether of not the approval granted to it is withdrawn or rescinded

• This with retrospective effect from 1-4-2009

10(48)

• Income of a foreign company, received in Indian currency within India, by sale of crude oil to any person in India, is exempted from tax ,subject to Govt approvals and if it doesn’t have any other income in India

Section 13

• 13(8) introduced to say that exemptions u/s 11 & 12 shall not apply to income of a trust from the activity of trade, business etc for advancement of any other object of general public utility.

Section 32

• Additional 20% depreciation allowed for the new plant and machinery is now extended to the assessee engaged in the business of generation or generation and distribution of power.

Section 35(2AB)

• The 200% deduction for Research expenditure incurred by assessee in BT business or in business of manufacture or production of article or thing, which had to end with AY 2012-13 is now extended for another 5 AYs

40(a)(ia)

• Though assessee has not deducted tax , if the resident payee has filed return of income and for that reason the is not deemed to be an assessee in default under 201(1) , it shall be deemed that the assessee has deducted and paid the tax and no disallowance u/s 40(a)(ia) can be made.

40A(2)(a)

• Disallowance cannot be made in respect of specified domestic transaction referred in section 92 BA ( New section introduced for applying TP guidelines for certain domestic transactions)

40A(2)(b)

• The disallowance which was applicable till now, for the payment made to any relative of such director, partner or member is now extended to any other company in which assessee company has substantial interest.

44AB

• Monetary limit raised to 1 crore for business and 25 lakhs for profession

• Instead of present uniform due date for submitting audit report, i.e. 30th September the assessee gets time till due date for filing the return.

44AD

• The section applies to cases with turnover up to 1 crore

• With retrospective effect from AY 2011-12 the section is not applicable for : – Profession referred in section 44AA– Commission or brokerage income– Any agency business

Section 49

• The substitution of Cost to previous owner is made applicable with retrospectively from 1-4-1999 , to the – Cases of conversion of proprietary concern to

company– Cases of conversion of firm to a company– Conversion of Pvt company to LLP Firm

New section 50D

• In cases where sale consideration is not ascertainable or cannot be determined the FMV , shall be deemed to be the full value of the consideration

54B

• The exemption of CG in respect of transfer of agricultural land , which was till now applicable to individual is extended to HUF also

New section 54GB ( only gist)

• Deduction in respect of transfer of house or land • If invested in shares of a new small or medium

company incorporated from 1st April of PY of transfer till date of filing of return

• Shall be exempted if such eligible company purchases new asset for its business within one year from the date of subscription by the assessee.

• There are other conditions also

55A

• In present section reference to VO can be made only if the value determined by the registered valuer is less than FMV.

• From 1-7-2012, the section amended to permit reference to VO in such cases even if value determined by the registered valuer is more than FMV

• This amendment enables referencing of cases to determining cost of acquisition also.

Section 56

• For exempting any sum of money or immovable property received from a relative, the term relative was defined only with reference to individual.

• Now the term “relative” with reference to HUF is also defined to mean any of its member. w.r.t.from 1-10-2009

Section 56(2)

• Extended to Pvt Ltd company, when it receives any consideration for issue of shares, if such consideration is in excess of FMV of such shares.

Section 68

• Shall be applicable for share application money, share capital etc credited in the books of Pvt Ltd companies unless, the said share holder offers satisfactory explanation about the source of that investment

80C

• As regards insurance premium the deduction shall now be restricted to 10% of the Capital Sum assured

80D

• Benefit extended to premium paid, even by cash, for preventive health check-up policy up to Rs 5000

• Person crossing 60 years made as senior citizen even for the purpose of 80D & 80DDB

80G & GGA

• No deduction for donations above Rs 10,000 if they are made by cash

80TTA

• Deduction for SB interest earned up to Rs 10000 from Bank or post office

Section 90

• Sub-section 2A inserted to state that, even where there is DTAA, Chapter X-A (A detailed General Anti Avoidance Rule introduced) shall apply though that chapter is not favorable to him.

• Sub-section 4 introduced to make production of certificate of residence mandatory for claiming any relief under DTAA

Section 92

• Transfer pricing regulations made applicable even for Specified domestic transactions specified in section 92BA

Section 92BA- Specified domestic transactions in excess of 5 crores

• any payment made to a related person u/s 40A(2()(b)• any transaction referred to in section 80A• any transfer of goods or services referred to in 80-IA(8)• any business transacted between the assessee and

other person as referred to in 80-IA(10)• any transaction, referred to in any other section under

Chapter VI-A or section 10AA, to which 80-IA(8) or 80-IA(10) apply

• any other transaction as may be prescribed

92CA

• New sub section (2B)- If assessee has not furnished TP report u/s 92E , if any transaction comes to notice of TPO he shall deem it as international transaction. ( with retrospective effect from 1-6-2002.

• New sub section (2C)- The AO cannot assess or reassess such transaction based on such report of TPO ,if the assessment for any AY is completed before 1-7-2012.

Section 92CC- Advance Pricing Agreement

• New section introduced to provide for Advance Pricing Agreement between the CG and any assessee will be effective for 5 consecutive years.

• On entering of agreement, such person shall furnish modified return within 3 months and that shall be considered for pending or completed assessments

• In that case the time barring date for assessment shall be extended by 12 months

115BBA

• Tax rate increased to 20%• Made applicable even for a NR entertainer

115BBD

• The dividend income of an Indian company from any specified foreign shall be taxed at 15% for AY 2012-13 . Same is extended even for AY 2013-14 .

115 BBE

• Additions made u/s 68,69,69A to D shall be taxed at 30%

• No deductions from any additions made under above sections

115JC

• Alternate Minimum Tax now extended to all other Non –Company entities if adjusted total income exceed 20 lakhs

139

• Return filing made compulsory for a resident if he has any:

• Asset located outside India or • signing authority in any account located

outside India

143

• Processing u/s 143(1) shall not be required once 143(2) notice is issued.

• Third proviso introduced to say that 10(23C) shall not be allowed by an AO to a trust in respect of trading/business income, whether or not approval is withdrawn.

144BA• New section - reference to CIT, when AO notices

impermissible avoidance arrangement in assessment proceedings

• CIT, before invoking chapter XA shall issue notice to asessee and him time up to 60 days to file objections

• If no objections filed, he will issue suitable directions to AO• If objected by assessee and CIT is not satisfied he shall refer

the case to Approving Panel, which after hearing assessee and AO shall issue suitable directions within 6 months

• The AO shall complete the assessment with the approval of CIT

144C

• Extension of TB date in DRP reference cases is now made applicable for search assessments also w.r.e 1-10-2009

• DRP provisions shall not apply to assessments completed with approval of CIT u/s 144BA

147• The restriction in first proviso about reopening of cases

concluded scrutiny shall not apply where any to income in relation to any asset (including financial interest in any entity) located outside India has escaped assessment

• where the assessee has failed to furnish TP report or he is found to have any asset (including financial interest in any entity) located outside India, it is deemed that income has escaped assessment.

• Explanation -4 introduced in section 147 to say that the amendments made by Finance Act 2012 shall be applicable for AY 2012-13 and all earlier AYs

149

• If assessee is found to have any asset (including financial interest in any entity) located outside India, it is deemed that income has escaped assessment the reassessment notice can be issued even up to 16 years.

153

• From AY 2010-11 onwards and reassessment cases, the time barring date extended up to 31st March

• In cases where reference is made calling for information under DTAA, the time is presntly extended by another 6 months, now it is increased to 12 months

153A

• CG empowered to specify the class or classes of cases in which the AO shall not be required to issue notice for search assessment.

154

• 200 A intimation can also be amended

156

• 200A intimation is deemed to be demand notice

193( from 1-7-2012)

• Individual payee is presently exempted from TDS on debenture interest if, it doesn’t exceed 2500/- and payment is by a/c payee cheque

• This benefit is now extended to HUF• Monetary limit hiked to 5000/-

194E ( from 1-7-2012)

• TDS Rate hike to 20% from present 10%

194 J( from 1-7-2012)

• TDS applicable to fee or commission or remuneration to director of a company unless TDS is made u/s 192

194LA( from 1-7-2012)

• TDS on compensation for acquisition of immovable property – monetary limit hiked to 2 lakhs

194LAA ( from 1-10-2012)

• Buyer has to make TDS on sale consideration of land or building except agricultural land ) at 1% if transfer price is 50 lakhs or more in specified cities and 20 lakhs or more in other specified cities and

• If sale value is less than guidance value, it shall be deemed as sale consideration

• No TAN number need be taken

195 ( wref 1-4-1962)

• Explanation 2 inserted to clarify that 195(1) applies and shall be deemed to have always applied all payers , resident or non-resident, whether or not the non-resident person has—

• (i) a residence or place of business or business connection in India; or

• (ii) any other presence in any manner whatsoever in India.

195 ( from 1-7-2012)

• Empowers CBDT to notify class of persons who are paying any sum to NR, whether chargeable to tax or not, shall apply to AO to determine sum chargeable

201(1)

• Deductor shall not be deemed as assessee in default if the, payee who is a Resident, has : – Filed return of income – Offered that income to tax– Paid tax due– Furnishes certificate from CA

201(1A)

• Interest chargeable in cases of failure to deduct shall be levied only up to the date of filing of return by the payee who is a Resident.

201(3) ( wref 1-4-2010)

• In cases where TDS return is not filed, action for treating him in default for failure to deduct tax , can now to taken up to six years from the end of FY. Presently it is 4 years

204

• At present the payers of Central and State Governments are out of definition of “ Person responsible for paying” as far as Salary and Interest on securities.

• Section is now amended to include DDOs in that definition.

206C

• 1% TCS imposed on:– coal or lignite or iron ore – Sale of bullion/jewellery for cash of 2 lakhs

207

• Any person of age 60 years is exempted from payment of Advance Tax if he doesn’t have income from business or profession

209(1)(d)

• Till now, the TDS/TCS could have been reduced from AT liability even if payment has has not actually subjected to TDS/TCS.

• Section is now amended to permit that only if TDS/TCS is actually made.

234D ( wrf 1-6-2003)

• Explanation 2 is inserted to clarify that this section applies to AYs prior to 2003-04 also if the proceedings for those years are completed after 1-6-2003

234E

• Levy of Rs 200 fee for each day of delay in filing TDS/ TCS returns.

• Applicable for returns filed on or after 1-6-2012

253

• Subsection 2A inserted to empower CIT to direct AO to file appeal to ITAT against the Assessment order passed by him in accordance with directions issued by DRP on the basis of objections filed by the assessee after 1-7-2012

• Such appeal shall be filed within 60 days from the date of passing of such Assessment order.

271AAA

• This Penalty in search cases on undisclosed income will not apply for searches initiated on or after 1-7-2012

• Separate section 271AAB is inserted for such cases

271AAB-penalty in search cases

• Search initiated on or after 1-7-2012• Penalty at 10% if assessee admits undisclosed

income in 132(4) statement, substantiates manner it was derived, pays tax with interest and files return.

• Penalty at 20% if assessee DOESN’T admit undisclosed income in 132(4) statement, but derived, pays tax with interest and files return.

• Penalty at 30% to 90% in other cases

271H

• From 1-7-2012 , for not furnishing TDS/TCS returns or furnishing incorrect information. Penalty from 10000 to 1 lakh

• No penalty if such returns are furnished with one year from the prescribed date after payment of tax, interest and FEE

280A

• Setting up special courts for trying offences IT Act

292CC ( wrf 1-4-1976)

• No need to issue separate warrants u/s 132. it can be combined for more than one person.

• Combined notice shall not be deemed as issued against AOP/BOI

• Though warrant is combined one, the assessments can be made separately on each person mentioned in warrant.

WT

• Asset definition u/s 2(ea)- Residential building allotted by a company to employee or director whose annual salary is less than 5 lakhs is exempt. This limit now hiked to 10 lakhs Guest house

• Reassessment for income or asset located outside india –time limits for reopening and other procedures same as in IT Act

WT

• Time barring dates extended to 31st March

• Thanks