Finance (No.

2) Bill 2014:
Amendments In Real Estate
(Part Ii)
The Finance (2) Bill 2014 contains may of
amendments to the Income-tax Act, 1961 specially
with reference to the Real Estate Sector. The
Finance inister has proposed h!ndred new cities
and !r"an de#elopment thro!$h the concept of
%!"lic %ri#ate %artnership. &t is e'pected that this
type of anno!ncement "y the Finance inister will
ma(e a "i$ t!rnaro!nd for the Real Estate Sector
and one can e'pect to see "i$ de#elopment of the
Real Estate Sector all aro!nd in whole of &ndia. The
followin$ are the main amendments relatin$ to real
estate sector )*
Mode of tain!" acce#tin! or re#a$ment of certain %oan and &e#osit
Presently the Income-tax Act provides in section 269SS and section 269P that no
person shall pay or accept from another person any loan or deposit otherwise by
account payee cheque or account payee bank draft !imilarly" it is also provided
that no person shall repay any loan or deposit made with it otherwise than by an
account payee cheque or account payee bank draft drawn in the name of the
person who has made the loan or deposit #his restriction is applicable in payment
exceedin$ %s 2&"&&& or more #he bud$et has amended sli$ht provisions relatin$ to
the above effect and provides that apart from cheque or account payee bank draft
drawn in the name of the person who made the loan or deposit the use of electronic
clearin$ system throu$h a bank account shall also be accepted as a valid activity for
acceptin$ or repayin$ loan and deposit 'ence" use of electronic clearin$ system
throu$h a bank will not result into violation of the above mentioned both sections of
the Income-tax Act (96(
Estimation of t'e (al)e of t'e Assets *$ (al)ation +fficer
)rom (st *ctober 2&(+ the existin$ provisions as contained in section 142A are
proposed to be substituted by a new provision and these provisions relate to the
estimation of the value of the assets by the ,aluation *fficer -nder the existin$
under the existin$ provisions contained in section 142A" the Assessin$ *fficer
may" for the purpose of makin$ an assessment or reassessment" require the
,aluation *fficer to make an estimate of the value of any investment" any bullion"
.ewellery or fair market value of any property *n receipt of the report of the
,aluation *fficer" the Assessin$ *fficer may after $ivin$ the assessee an
opportunity of bein$ heard take into account such report for the purposes of
assessment or reassessment !ection (+2A does not envisa$e re.ection of books of
account as a pre-condition for reference to the ,aluation *fficer for estimation of
the value of any investment or property )urther" section 142A does not provide for
any time limit for furnishin$ of the report by the ,aluation *fficer
Accordin$ly" it is proposed to substitute the said section (+2A so as to provide that
the Assessin$ *fficer may" for the purposes of assessment or reassessment" require
the assistance of a ,aluation *fficer to estimate the value" includin$ fair market
value" of any asset" property or investment and submit the report to him #he
Assessin$ *fficer may make a reference whether or not he is satisfied about the
correctness or completeness of the accounts of the assessee
#he ,aluation *fficer" shall" for the purpose of estimatin$ the value of the asset"
property or investment" have all the powers of section /0A of the Wealth-tax Act"
(912 #he ,aluation *fficer is required to estimate the value of the asset" property
or investment after takin$ into account the evidence produced by the assessee and
any other evidence in his possession $athered" after $ivin$ an opportunity of bein$
heard to the assessee If the assessee does not co-operate or comply with the
directions of the ,aluation *fficer he may" estimate the value of the asset" property
or investment to the best of his .ud$ment
It is also proposed to provide that the ,aluation *fficer shall send a copy of his
estimate to the Assessin$ *fficer and the assessee within a period of six months
from the end of the month in which the reference is made #he Assessin$ *fficer on
receipt of the report from the ,aluation *fficer may" after $ivin$ the assessee an
opportunity of bein$ heard" take into account such report in makin$ the assessment
or reassessment It is also proposed to amend sections (1/ and (1/3 of the Act so
as to provide that the time period be$innin$ with the date on which the reference is
made to the ,aluation *fficer and endin$ with the date on which his report is
received by the Assessin$ *fficer shall be excluded from the time limit provided
under the aforesaid section for completion of assessment or reassessment
&isallo,ance of E-#endit)re d)e to non.ded)ction of /&0
#he existin$ provisions of section 40(a)(i) of the Act provide that certain payments
such as interest" royalty and fee for technical services made to a non-resident shall
not be allowed as deduction for computin$ business income if tax on such payments
was not deducted" or after deduction" was not paid within the time prescribed under
section 200(1) of the Act
#he Act contains similar provisions for disallowance of business expenditure in
respect of certain payments made to the residents -nder section 40(a)(ia) of the
Act" in case of payments made to resident" the deductor is allowed to claim
deduction for payments as expenditure in the previous year of payment" if tax is
deducted durin$ the previous year and the same is paid on or before the due date
specified for filin$ of return of income under section 112(1) of the Act 'owever" in
case of disallowance for non-payment of tax from payments made to non-residents"
this extended time limit of payment up to the date of filin$ of return of income
under section (/94(5 is not available
In order to provide similar extended time limit for payment of tax deducted from
payments made to non-residents" it is proposed that the deductor shall be allowed
to claim deduction for payments made to non-residents in the previous year of
payment" if tax is deducted durin$ the previous year and the same is paid on or
before the due date specified for filin$ of return under section (/94(5 of the Act
As mentioned above" in case of non-deduction or non-payment of tax deducted at
source 4#6!5 from certain payments made to residents" the entire amount of
expenditure on which tax was deductible is disallowed under section +&4a54ia5 for
the purposes of computin$ income under the head 7Profits and $ains of business or
profession8 #he disallowance of whole of the amount of expenditure results into
undue hardship In order to reduce the hardship" it is proposed that in case of
non-deduction or non-payment of #6! on payments made to residents as specified
in section 40(a)(ia) of the Act" the disallowance shall be restricted to /&9 of the
amount of expenditure claimed
)urther" existin$ provisions of section +&4a54ia5 of the Act provides that certain
payments such as interest" commission" brokera$e" rent" royalty fee for technical
services and contract payment made to a resident shall not be allowed as deduction
for computin$ business income if tax on such payments was not deducted" or after
deduction" was not paid within the time specified under the said section :hapter
;,II-3 of the Act mandates deduction of tax from certain other payments such as
salary" directors fee" which are currently not specified under section +&4a54ia5 of the
Act #he payments on which tax is deductible under :hapter ;,II-3 but not specified
under section +&4a54ia5 of the Act may also be claimed as expenditure for the
purposes of computation of income under the head 7Profits and $ains from business
or profession8
!ection +&4a54ia5 has proved to be an effective tool for ensurin$ compliance of #6!
provisions by the payers #herefore" in order to improve the #6! compliance in
respect of payments to residents which are currently not specified in section +&4a5
4ia5"
it is proposed that the disallowance under section +&4a54ia5 of the Act shall extend
to all expenditure on which tax is deductible under :hapter ;,II-3 of the Act
3a#ital4 5ain arisin! from transfer of an asset *$ ,a$ of com#)lsor$
ac6)isition
#he existin$ provisions contained in section +1 provide for char$in$ of any profits or
$ains arisin$ from transfer of a capital asset !ub-section 415 of the said section
provides for dealin$ with capital $ains arisin$ from transfer by way of compulsory
acquisition where the compensation is enhanced or further enhanced by the court"
#ribunal or any other authority :lause 4b5 of the said sub-section provides that
where the amount of compensation is enhanced or further enhanced by the court it
shall
be deemed to be the income char$eable of the previous year in which such amount
is received by the assessee
#here is uncertainty about the year in which the amount of compensation received
in pursuance of an interim order of the court is to be char$ed to tax" due to court
orders
Accordin$ly" it is proposed to provide that the amount of compensation received in
pursuance of an interim order of the court" #ribunal or other authority shall be
deemed to be income char$eable under the head <:apital $ains= in the previous
year in which the final order of such court" #ribunal or other authority is made
Ne, 3once#t of 3ost Inflation Inde-
#he existin$ provisions contained in section +0 prescribe the mode of computation
of income char$eable under the head 7:apital $ains8 :lause 4v5 of the >xplanation
to the said section defines the term 73ost Inflation Inde-8 4:II5 which in relation
to a previous year means such index as may be notified by the ?overnment havin$
re$ard to seventy-five percent of avera$e rise in the 3ons)mer Price Inde- (3PI)
for )r*an non.man)al em#lo$ees 4-@A>5 for the immediately precedin$
previous year to such previous year
#he release of :PI for -@A> has been discontinued Accordin$ly" it is proposed to
amend the said clause 4v5 of the >xplanation to section +0 to provide that 7:ost
Inflation Index8 in relation to a previous year means such index as may be notified
by the :entral ?overnment havin$ re$ard to seventy-five percent of avera$e rise in
the :onsumer Price Index 4-rban5 for the immediately precedin$ previous year to
such previous year
Po,er to call for information *$ #rescri*ed Income.ta- A)t'orit$
A new section (+/: has been proposed in the )inance 3ill which mentions that the
prescribed Income.ta- A)t'orit$ may for the purposes of verification of
information in its possession relatin$ to any person" issue a notice to such person
requirin$ him" on or before a date to be specified therein" to furnish information or
documents verified in the manner specified therein" which may be useful for" or
relevant to" any inquiry or proceedin$ under this Act
0o)rceB :ommon)loorcom
)or Catest -pdates on %eal >state -pdates" Property @ews and :ities
Infrastructure 6evelopments ,isitB httpBDDwwwcommonfloorcomD$uide
:opyri$ht E 2&&2-(+ :ommon)loorcom All ri$hts reserved