FINANCE BILL, 2012 vs.

FINANCE BILL, 2012 AS PASSED BY LOK SABHA

S. No. 2(24)(xvi) Description Issue price in excess of FMV to be treated as income Income of Prasar Bharati to be exempt from tax Original provision as proposed in Revised/new provision of Finance Bill as Applicabl Finance Bill passed by Lok Sabha e From Any consideration received for issue of 01-04-13 shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56 Any income of the Prasar Bharati 01-04-13 (Broadcasting Corporation of India) established under sub section (1) of section 3 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990.

10(23BBH)

Proviso to Issue price in excess Sec. 56(2) of FMV not to be (viib) treated as income if issuer belongs to notified class of person

Provided that this clause shall not Provided that this clause shall not apply 01-04-13 apply where the consideration for where the consideration for issue of shares issue of shares is received by a is received: venture capital undertaking from a venture capital company or a (a) by a venture capital undertaking from venture capital fund a venture capital company or a venture capital fund; or (b) by a company from a class or classes of persons as may be notified by the Central Government in this behalf

80CCG

Deduction for investment made under any equity saving scheme

(1) Where an assessee, being a resident 01-04-13 individual, has, in a previous year, acquired listed equity shares in accordance with a scheme, as may be notified by Central Government in this behalf, he shall, subject to the provisions of sub-section (3), be allowed a deduction, in the computation of his total income of the assessment year relevant to such previous year, of fifty per cent of the amount invested in such equity shares to the extent such deduction does not exceed twenty-five thousand rupees. (2) Where an assessee has claimed and allowed a deduction under this section for any assessment year in respect of any amount, he shall not be allowed any deduction under this section for any subsequent assessment year. (3) The deduction under sub-section (1) shall be subject to the following conditions, namely: (i) the gross total income of the assessee for the relevant assessment year shall not exceed ten lakh rupees; (ii) the assessee is a new retail investor as may be specified under the scheme referred to in sub-section (1); (iii) the investment is made in such listed equity shares as may be specified under the scheme referred to in sub-

section (1); (iv) the investment is locked-in for a period of three years from the date of acquisition in accordance with the scheme referred to in sub section (1); and (v) such other conditions as may be prescribed. (4) If the assessee, in any previous year, fails to comply with any condition specified in sub-section (3), the deduction originally allowed shall be deemed to be the income of the assessee of such previous year and shall be liable to tax for the assessment year relevant to such previous year. Chapter X-A Applicability of After Chapter X of the Income-tax GAAR provisions Act, the following Chapter shall be deferred by one year inserted with effect from the 1st day of April, 2013, namely: 'CHAPTER X-A General AntiAvoidance Rule' 96(2) Onus of proof in GAAR provisions are shifted from assessee to revenue An arrangement which results in any tax benefit (but for the provisions of this Chapter) shall be presumed to have been entered into, or carried out, for the main purpose of obtaining a tax benefit unless the person obtaining the tax benefit proves that obtaining the tax benefit was not the main purpose of the arrangement. After Chapter X of the Income-tax Act, the 01-04-14 following Chapter shall be inserted with effect from the 1st day of April, 2014, namely: 'CHAPTER X-A General Anti-Avoidance Rule' Omitted -

97(1)(c)

Change in the It involves the location of an asset meaning of or of a transaction or of the place of 'Arrangement to lack residence of any party which would commercial not have been so located for any substance" substantial commercial purpose other than obtaining a tax benefit (but for the provisions of this Chapter) for a party. LTCG from unlisted securities in the hands of non-resident and foreign company taxable at 10% without indexation -

It involves the location of an asset or of a 01-04-14 transaction or of the place of residence of any party which is without any substantial commercial purpose other than obtaining a tax benefit (but for the provisions of this Chapter) for a party.

112(1)(c)

In the case of a non-resident (not being a 01-04-13 company) or a foreign company: (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on such long-term capital gains, except where such gain arises from transfer of capital asset referred to in sub clause (iii), at the rate of twenty percent; and

(iii) the amount of income tax on long term capital gains arising from the transfer of a capital asset, being unlisted securities, calculated at the rate of ten per cent on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48. Expln. Sec. 112 to Inclusion of meaning of 'Unlisted Securities' in the definition For the purposes of this sub-section: (a) (aa) (ab) "unlisted securities" means securities other than listed securities Expln. 3 to Option to specified 115JB companies to prepare financial statements as per Regulatory Act or Schedule VI For the removal of doubts, it is hereby 01-04-13 clarified that for the purpose of this section, the assessee, being a company to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 is applicable, has, for an assessment year commencing on or before the 1st day of April, 2012, an option to prepare its profit and loss account for the relevant previous year either in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act, 1956 or in accordance with the provisions of the Act governing such company. The provision of this section shall not 01-04-01 apply to any income accruing or arising to a company from life insurance business referred to in section 115B. After Chapter XII-BA, following chapter 01-04-13 shall be inserted with effect from 01st day of April 2013, namely: "Chapter XII-BB - Special provisions relating to conversion of Indian branch of a foreign bank into a subsidiary company" 115U(4) Provision for exemption from TDS on income paid to VCF/VCC continued (4) The income accruing or arising to or received by the venture capital company or venture capital fund, during a previous year, from investments made in venture capital undertaking if not paid or credited to the person referred to in subsection (1), shall be deemed to have been credited to the account of the said person on the last day of the previous year in the same proportion in which such person would have been entitled to receive the income had it been paid in the previous year (4) The provisions of Chapter XII-D or 01-04-13 Chapter XII-E or Chapter XVII-B shall not apply to the income paid by a venture capital company or venture capital fund under this Chapter. 01-04-13

115JB(5A)

Non-applicability of MAT in case of life insurance business

Ch XII-BB Conversion of Indian sec. 115JG branch of a foreign bank into a subsidiary

115U(5)

Provision for exemption from TDS on income paid to

(5) The income accruing or arising to or 01-04-13 received by the venture capital company or venture capital fund, during a previous

VCF/VCC continued

year, from investments made in venture capital undertaking if not paid or credited to the person referred to in sub-section (1), shall be deemed to have been credited to the account of the said person on the last day of the previous year in the same proportion in which such person would have been entitled to receive the income had it been paid in the previous year Provided also that a person, being a resident, who is not required to furnish a return under this subsection and who during the previous year has any asset (including any financial interest in any entity) located outside India or signing authority in any account located outside India, shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in such form and verified in such manner and setting forth such other particulars as may be prescribed. Provided also that a person, "being a 01-04-12 resident", "other than not ordinarily resident in India within the meaning of clause (6) of section 6" who is not required to furnish a return under this sub-section and who during the previous year has any asset (including any financial interest in any entity) located outside India or signing authority in any account located outside India, shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in such form and verified in such manner and setting forth such other particulars as may be prescribed.

Fourth Provision for proviso to S- mandatory filing of 139(1) ROI, in case any financial interest located outside India, extended to ordinarily resident only

144BA

Provision for making The following section shall be The following section shall be inserted 01-04-14 reference to CIT to inserted with effect from 1st day of with effect from the 1st day of April, 2014, invoke GAAR April, 2013, namely: namely: 144BA.. 144BA The Board shall, for the purposes of this 01-04-14 section constitute an Approving Panel consisting of not less than three members, being: (i) income tax authorities not below the rank of Commissioner, and (ii) an officer of the Indian Legal Service not below the rank of Joint Secretary to the Government of India.

144BA(14)

Constitution approving panel

of The Board shall, for the purposes of this section, constitute an Approving Panel consisting of not less than three members being the income tax authorities of the rank of Commissioner and above.

194LAA

Withdrawal of (1)... provision for TDS from payment of compensation for purchase of immovable property Extending the provision of TDS on 'interest on borrowing' to borrowings made by issue of LTIB (1) Where any income by way of interest referred to in subsection (2) is payable to a non-resident, not being a company or to a foreign company by a specified company, the person responsible for making the payment, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct the income-

Omitted

194LC

(1) Where any income by way of interest 01-07-12 referred to in sub-section (2) is payable to a non-resident, not being a company or to a foreign company by a specified company, the person responsible for making the payment, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct the income-tax thereon at the rate of five per cent. (2) The interest referred to in sub-section (1) shall be the income by way of interest payable by the specified company,

tax thereon at the rate of five per cent. (2) The interest referred to in sub-section (1) shall be the income by way of interest payable by the specified company: (i) in respect of monies borrowed by it at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015 in foreign currency, from a source outside India under a loan agreement approved by the Central Government in this behalf; and (ii) to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.

(i) in respect of monies borrowed by it at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015 in foreign currency, from a source outside India: (a) under a loan agreement; or (b) by way of issue of long-term infrastructure bonds, as approved by the Central Government in this behalf; and (ii) to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan or the bond and its repayment.

Expln. (b) to Meaning of 'specified "Specified company" means an "Specified company" means an Indian 01-07-12 194LC company' changed Indian company engaged in the company business of: (i) generation or distribution or transmission of power; or (ii) operation of aircraft; or (iii) manufacture or production of fertilizers; or (iv) construction of road including toll road or bridge; or

(v) construction of port including inland port; or (vi) construction of ships in a shipyard; or (vii) construction of dam; or (viii) developing and building a

housing project as referred to in sub-clause (vii) of clause (c) of sub-section (8) of section 35AD. 197A(1F) No TDS from specified payment to notified institutions/associatio n Notwithstanding anything contained in this 01-07-12 Chapter, no deduction of tax shall be made from such specified payment to such institution, association or body or class of institutions, associations or both as may be notified by the Central Government in the Official Gazette, in this behalf Notwithstanding anything contained in 01-07-12 sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purpose of generation of power and not for trading purposes. Every person, being a seller, who receives 01-07-12 any amount in cash as consideration for sale of bullion (excluding any coin or any other article weighing ten grams or less) or jewellery, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent, of sale consideration as income-tax, if such consideration: (i) for bullion, exceeds two hundred thousand rupees; or (ii) for jewellery, exceeds five hundred thousand rupees. 220(2B) Amendment to sec. 220 Notwithstanding anything contained in 01-07sub-section (2), where interest is charged 2012 under sub-section (1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) of section 200A for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period. A determination or decision by the 01-04-13 Authority whether an arrangement, which is proposed to be undertaken by any person being a resident or a non-resident, is an impermissible avoidance arrangement as referred to in Chapter X-A or not. "Applicant" means any person who: (i) (ii) ; or 01-04-13

206C(1A)

No collection of TCS from buyer if goods are purchased for generation of power

206C(1D)

Qualifying limit to Every person, being a seller, who trigger collection of receives any amount in cash as tax on purchase of consideration for sale of bullion or jewellery increased jewellery, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if the sale consideration exceeds two hundred thousand rupees;

245N(a)(iv) Change in the meaning of "Advance Ruling"

245N(b)(iii) Change in meaning "Applicant"

the of

(iii) ; or (iiia) is referred to in sub-clause (iv) of clause (a); and

(iv)
Proviso to Change in the Sec. 245R(2) procedure on receipt of application Provided that the Authority shall not allow 01-04-13 the application where the question raised in the application: (i) (ii) (iii) relates to a transaction or issue which is designed prima facie for the avoidance of income-tax except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or in the case of an applicant falling in sub-clause (iii) of clause (b) of section 245N Fourth Schedule, Part A, Rule 3(1) Extension of time limit to process application for recognition of EPF organization Provided that in a case where recognition 01-04-12 has been accorded to any provident fund on or before the 31st day of March, 2006 and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4, the recognition to such fund shall be withdrawn, if such fund does not satisfy, on or before the 31st day of March, 2013, the conditions set out in the said clause and any other condition which the Board may, by rules specify, in this behalf

ANALYSIS OF CHANGES MADE BY LOK SABHA IN FINANCE BILL, 2012 (For detailed analysis see Master Guide to Income-tax Act) (1) SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE TO BE TREATED AS INCOME [SEC. 2(24)(XVI)] Finance Bill, 2012 Finance Bill, 2012 proposed to insert a new clause (viib) in Section 56(2) wef assessment year 2013-14. The proposed clause is applicable, if: (a) Shares (equity shares or preference shares) are issued by a closely held company to a resident person; and (b) Shares are issued at a price which exceeds the fair market value of such shares. In other words, shares are issued at a premium. If above conditions are satisfied, the aggregate consideration received from issue of such shares as exceeds its fair market value shall be chargeable to tax in the hands of issuer-company. However, no consequential amendment was made to Section 2(24) (meaning of "Income"), so as to include the excess of consideration received over the fair market value of shares within the scope of "Income".

Finance Bill, 2012 as passed by Lok Sabha In view of above, a new clause (xvi) shall be inserted in Section 2(24) wef April 1, 2013 to provide that any consideration received for issue of shares, as exceeds the fair-market value of the shares referred to in Section 56(2)(viib), shall be treated as 'Income'. (2) INCOME OF PRASAR BHARATI TO BE EXEMPT FROM TAX [SEC. 10(23BBH)] Finance Bill, 2012 No provision was proposed in Finance Bill, 2012 to exempt the income of Prasar Bharati Finance Bill, 2012 as passed by Lok Sabha A new clause (23BBH) shall be inserted in Section 10 to exempt the income of Prasar Bharati (Broadcasting Corporation of India) wef assessment year 2013-14. (3) SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE NOT TO BE TREATED AS INCOME IF SHARES ARE ISSUED BY A COMPANY FROM NOTIFIED CLASSES OF PERSONS [SEC. 56(2)(viib)] Finance Bill, 2012 Finance Bill, 2012 proposed to insert a new clause (viib) in Section 56(2) wef assessment year 2013-14. The clause is applicable, if: (a) Shares (equity shares or preference shares) are issued by a closely held company to a resident person; and (b) Shares are issued at a price which exceeds the fair value of such shares. In other words, shares are issued at a premium. If above conditions are satisfied, the aggregate consideration received from issue of such shares as exceeds its fair market value shall be chargeable to tax in the hands of issuer-company. However, the said new clause provisions shall not apply where the consideration for issue of shares is received by a Venture Capital Undertaking from a Venture Capital Company or a Venture Capital Fund. The company receiving the consideration for issue of shares shall be provided an opportunity to substantiate its claim regarding the fair market value of the shares. Finance Bill, 2012 as passed by Lok Sabha The exemption from above provision is extended to those issuer-companies as well which belong to a class or classes of persons as may be notified by the Central Government in this behalf. (4) DEDUCTION FOR INVESTMENT MADE UNDER ANY EQUITY SAVING SCHEME [SEC. 80CCG] Finance Bill, 2012 No provision was proposed in Finance Bill, 2012 to provide for deduction in respect of investment made under any equity saving scheme. Finance Bill, 2012 as passed by Lok Sabha

Newly inserted Section 80CCG provides deduction wef assessment year 2013-14 in respect of investment made under notified equity saving scheme. The deduction under this section is available if following conditions are satisfied: (a) The assessee is a resident individual (may be ordinarily resident or not ordinarily resident) (b) His gross total income does not exceed Rs. 10 lakhs; (c) He has acquired listed shares in accordance with a notified scheme; (d) The assessee is a new retail investor as specified in the above notified scheme; (e) The investor is locked-in for a period of 3 years from the date of acquisition in accordance with the above scheme; (f) The assessee satisfies any other condition as may be prescribed. Amount of deduction The amount of deduction is at 50% of amount invested in equity shares. However, the amount of deduction under this provision cannot exceed Rs. 25,000. If any deduction is claimed by a taxpayer under this section in any year, he shall not be entitled to any deduction under this section for any subsequent year. Withdrawal of deduction If the assessee, after claiming the aforesaid deduction, fails to satisfy the above conditions, the deduction originally allowed shall be deemed to be the income of the assessee of the year in which default is committed. (5) APPLICABILITY OF GAAR PROVISIONS DEFERRED BY ONE YEAR [SEC. 95 TO SEC.102] Finance Bill, 2012 The Finance Bill, 2012 proposed insertion of New Chapter X-A consisting of new sections 95, 96, 97, 98, 99, 100, 101 and 102 relating to General Anti-Avoidance Rules. The Finance Bill proposed applicability of provisions of GAAR with effect from April 01, 2013. The provisions of the new section 95 provide that an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and consequences in relation to tax of such a declaration can be determined. Section 96 provides the definition and conditions under which an arrangement can be declared to be an impermissible avoidance agreement. The section also provides for circumstances under which an arrangement shall be presumed to be entered into or carried out for main purpose for obtaining tax benefit. Section 97 provides for circumstances under which an arrangement shall be deemed to lack commercial substance. Section 98 provides for method of determination of consequences in relation to tax of an arrangement after it is declared to be an impermissible avoidance arrangement. It provides for certain illustrative but not exhaustive methods for determination of tax consequences. Section 99 provides that for determining tax benefits for the purpose of the newly inserted Chapter X-A parties who are connected may be treated as one and same person; accommodating party may be disregarded; any arrangement may be treated as one and the same person and an arrangement may be looked through. Section 100 provides that provisions of newly inserted Chapter-XA can be applied in alternative to or in addition to any other basis of determination of tax liability.

Section 101 provides for power to prescribe guidelines for application of provisions of newly inserted ChapterXA. Section 102 provides definition of certain terms relevant for newly inserted Chapter X-A. Finance Bill, 2012 as passed by Lok Sabha The Lok Sabha passed the aforesaid provisions in respect of GAAR (except clause 96), however, with effect from April 01, 2014 (6) ONUS OF PROOF IN GAAR PROVISIONS ARE SHIFTED FROM ASSESSEE TO REVENUE [SEC. 96] Finance Bill, 2012 Finance Bill, 2012 proposed that "An arrangement which results in any tax benefit shall be presumed to have been entered into, or carried out, for the main purpose of obtaining a tax benefit unless the person obtaining the tax benefit proves that obtaining the tax benefit was not the main purpose of the arrangement." In other words, the proposed provisions of GAAR put the entire onus on assessee to prove that the main purpose of present arrangement of transaction is not to obtain the tax benefits. Finance Bill, 2012 as passed by Lok Sabha The Lok Sabha omitted above clause from the provisions of GAAR. Now the onus to prove that the main purpose of present arrangement is to obtain the tax benefits would be on revenue. (7) CHANGE IN THE MEANING OF 'ARRANGEMENT DEEMED TO LACK COMMERCIAL SUBSTANCE" [SEC. 97] Finance Bill, 2012 The Finance Bill, 2012 proposed that "An arrangement shall be deemed to lack commercial substance if: (a) (b) (c) it involves the location of an asset or of a transaction or of the place of residence of any party which would not have been so located for any substantial commercial purpose other than obtaining a tax benefit (but for the provisions of this Chapter) for a party." Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha provides that "An arrangement shall be deemed to lack commercial substance if: (a) (b) (c) it involves the 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 (but for the provisions of this Chapter) for a party."

(8) TAXABILITY OF LTCG FROM UNLISTED SECURITIES IN THE HANDS OF NON-RESIDENT AND FOREIGN COMPANY AT 10% WITHOUT INDEXATION [SEC. 112] Finance Bill, 2012 No provision was proposed in Finance Bill, 2012 to provide for taxability of long-term capital gain ("LTCG") at concessional rate of 10% if such LTCG is arising to a non-resident assessee or a foreign company from transfer of unlisted securities. Finance Bill, 2012 as passed by Lok Sabha The Lok Sabha introduced Sec. 112 wef from the assessment year 2013-14. After the amendment LTCG will be taxable at the rate of 10% if the following conditions are satisfied: (a) Taxpayer is a non-resident (not being a company) or a foreign company; (b) LTCG arises on transfer of unlisted securities (i.e. unlisted shares, unlisted debentures, etc.) (c) LTCG is calculated without giving effect to the first proviso to Sec. 48 (under this proviso capital gain is calculated in foreign currency if few conditions are satisfied) (d) Capital gain is calculated without applying indexation provisions. (9) OPTION TO INSURANCE, BANKING AND ELECTRICITY COMPANIES TO PREPARE FINANCIAL STATEMENTS AS PER REGULATORY ACT OR SCHEDULE VI FOR PURPOSE OF MAT [SEC. 115JB] Finance Bill, 2012 No provision was proposed in Finance Bill, 2012 to provide an option to the insurance, banking or electricity generation companies to prepare financial statements either in accordance with the provisions of Schedule VI to the Companies Act or in accordance with the provisions of Act governing such companies. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by Lok Sabha inserted a new Explanation 3 to Sec. 115JB to provide an option to the insurance or banking company or any company engaged in the generation or supply of electricity (or any other class of company for which a form of profit and loss account has been specified in or under the Act governing such class of company), to prepare profit and loss account either in accordance with the provisions of: (a) Schedule VI to the Companies Act; or (b) In accordance with the provisions of the Act governing such companies. (10) NON-APPLICABILITY OF MAT PROVISIONS TO A COMPANY ENGAGED IN THE BUSINESS OF LIFE INSURANCE [SEC. 115JB] Finance Bill, 2012 No exemption to companies engaged in life insurance business was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha

A new sub-section (5A) is inserted in Section 115JB wef assessment year 2001-02 to provide that provisions of MAT will not be applicable to any income accruing or arising to a company from life insurance business as referred to in section 115B. (11) SPECIAL PROVISION FOR CONVERSION OF INDIAN BRANCH OF A FOREIGN BANK INTO A SUBSIDIARY COMPANY [SEC. 115JG] Finance Bill, 2012 No such provision was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha Newly inserted Section 115JG (wef the assessment year 2013-14) lays down special provisions relation to conversion of Indian branch of a foreign bank into a subsidiary Indian Company. Special provisions are provided under this section: These provisions are given below: (a) The Reserve Bank of India will frame a scheme for the purpose of conversion of an Indian branch of a foreign bank into an Indian subsidiary company of the foreign company. (b) If the conversion takes place in accordance with the scheme framed by RBI and subject to the conditions notified by the Central Government, the capital gain arising on such conversion shall not be chargeable to tax. (c) In the above case, the provisions of the Act relating to treatment of unabsorbed depreciation, set off or carry forward of losses, tax credit in respect of tax paid on deemed income relating to certain companies and the computation of income in the case of the foreign company and the Indian subsidiary company, shall apply with such exceptions, modifications and adaptations as may be specified in that notification. (d) If there is a failure to comply with any condition specified in the RBI schemes or notification of the Government, normal provisions of the Act will apply without giving effect to the aforesaid exemption. (e) Where such default is committed after claiming capital gain exemption, the benefit of exemption will be taken back by re-computing the income of the assessee under section 154 of the previous year in which conversion took place. The time-limit of 4 year under section 154(7) shall be determined from the end of the year in which the default is committed. (12) EXEMPTION FROM APPLICABILITY OF TDS ON INCOME PAID TO VENTURE CAPITAL FUND, ETC., CONTINUED [SEC. 115U] Finance Bill, 2012 The provisions of section 115U currently allow an opportunity of indefinite deferral of taxation in the hands of investor. With a view to rationalize the above position and to align it with the true intent of a pass-through status, sections 10(23FB) and 115U have been proposed to amended from April 1, 2013 (i.e., assessment year 2013-14 onwards) to provide the following: (a) The Venture Capital Undertaking shall have same meaning as provided in relevant SEBI regulations and there would be no sectoral restriction; (b) Income accruing to Venture Capital Fund (VCF) or Venture Capital Company (VCC) shall be taxable in the hands of investor on accrual basis with no deferral;

(c) The exemption from applicability of TDS provisions on income credited or paid by VCF/VCC to investors shall be withdrawn. The Finance Bill, 2012 proposed to withdraw the exemption, from applicability of TDS provisions, in respect of income credited or paid to Venture Capital Fund or Venture Capital Company. Finance Bill, 2012 as passed by Lok Sabha The Lok Sabha continued the exemption, of applicability of TDS provisions, in respect of income credited or paid to Venture Capital Fund or Venture Capital Company. (13) PROVISION FOR MANDATORY FILING OF RETURN OF INCOME, IF FINANCIAL INTEREST LOCATED OUTSIDE INDIA, EXTENDED TO ORDINARILY RESIDENT ONLY [SEC. 139] Finance Bill, 2012 The Finance Bill, 2012 proposed mandatory filing of return of income by every resident person, if he/it is having: (a) any asset (including financial interest in any entity) located outside India; or (b) signing authority in any account located outside India. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha provides that the furnishing of return of income under section 139 would be mandatory if the following conditions are satisfied: (a) the person is resident in India (but other than not ordinarily resident), and (b) he or it has: (i) any asset (including financial interest in any entity) located outside India; or (ii) signing authority in any account located outside India. If the above two conditions are satisfied, furnishing of return by such person has become mandatory irrespective of the fact whether the person has taxable income or not. The above provisions are not applicable if the concerned person is non-resident or if he/it is resident but not ordinarily resident in India for the relevant assessment year. (14) PROVISIONS FOR MAKING REFERENCE TO CIT TO INVOKE GAAR DEFERRED BY ONE YEAR [SEC. 144BA] Finance Bill, 2012 Finance Bill, 2012 proposed to insert a new Section 144BA relating to reference to CIT to invoke provisions of GAAR with effect from April 01, 2013 Finance Bill, 2012 as passed by Lok Sabha The Lok Sabha passed the aforesaid provision, however, with effect from April 01, 2014 (15) CONSTITUTION OF APPROVING PANEL [SEC. 144BA]

Finance Bill, 2012 The Finance Bill, 2012 proposed that the Board shall, for the purposes of this section, constitute an Approving Panel consisting of not less than three members being the Income tax authorities of the rank of Commissioner and above. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha provides that the Board shall, for the purposes of this section constitute an approving panel consisting of not less than three members, being: (a) income tax authorities not below the rank of Commissioner, and (b) an officer of the Indian Legal Service not below the rank of Joint Secretary to the Government of India. (16) WITHDRAWAL OF PROVISION FOR DEDUCTION OF TAX AT SOURCE FROM CONSIDERATION PAID FOR PURCHASE OF AN IMMOVABLE PROPERTY [SEC. 194LAA] Finance Bill, 2012 The Finance Bill proposed insertion of a new Section 194LAA for deduction of tax at source from payment of any consideration for purchase of an immovable property. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha deleted the insertion of aforesaid section. (17) EXTENDING THE PROVISIONS OF TDS ON 'INTEREST ON BORROWING' TO BORROWING MADE BY ISSUE OF LONG-TERM INFRASTRUCTURE BONDS [SEC. 194LC] Finance Bill, 2012 The Finance Bill, 2012 proposed insertion of a new Section 194LC for deduction of tax at source from payment of any interest on money borrowed in foreign currency under a loan agreement. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill as passed by the Lok Sabha provides deduction of tax at source from payment of any interest on money borrowed in foreign currency under a loan agreement as well as by way of long-term infrastructure bonds. (18) EXTENDING THE PROVISIONS OF TDS ON INTEREST ON BORROWING TO EVERY INDIAN COMPANY [SEC. 194LC] Finance Bill, 2012 The Finance Bill, 2012 proposed a new section 194LC for deduction of tax at source by specified companies only from payment of any interest on money borrowed in foreign currency. "Specified company" means an Indian company engaged in the business of: (a) generation or distribution or transmission of power; or (b) operation of aircraft; or (c) manufacture or production of fertilizers; or

(d) construction of road including toll road or bridge; or (e) construction of port including inland port; or (f) construction of ships in a shipyard; or (g) construction of dam; or (h) developing and building a housing project as referred to in sub-clause (vii) of clause (c) of sub-section (8) of section 35AD. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill as passed by the Lok Sabha provides that every Indian company is required to deduct tax at source from payment of any interest on money borrowed in foreign currency under a loan agreement as well as by way of long-term infrastructure bonds. (19) NO TDS FROM SPECIFIED PAYMENT TO NOTIFIED INSTITUTIONS / ASSOCIATIONS [SEC. 197A] Finance Bill, 2012 No such provision was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha inserts a new sub-section (1F) in Section 197A to provide that tax will not be deducted at source from a specified payment to a notified institution, association or body or class of institutions, associations or bodies. (20) NO COLLECTION OF TAX FROM BUYER IF GOODS ARE PURCHASED FOR GENERATION OF POWER [SEC. 206C] Finance Bill, 2012 No such provision was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha amends Section 206C(1A) with effect from July 1, 2012. After the amendment, no tax will be collected at source from a resident buyer who purchases goods for the purpose of generation of power. For this purpose, a declaration will be given in Form No. 27C to the seller. (21) QUALIFYING LIMIT TO TRIGGER COLLECTION OF TAX ON PURCHASE OF JEWELLERY INCREASED [SEC. 206C] Finance Bill, 2012 The Finance Bill, 2012 proposed collection of tax at source if sale consideration of bullion/jewellery exceeds Rs. 2,00,000 and out of total sale consideration any amount is received in cash. Finance Bill, 2012 as passed by Lok Sabha As per the Finance Bill, 2012 as passed by the Lok Sabha, with effect from July 1, 2012, sale of bullion/jewellery will be subject to TCS provisions, if sale consideration of bullion (excluding any coin/article

weighing 10 grams or less) exceeds Rs. 2,00,000 or sale consideration of jewellery exceeds Rs. 5,00,000 and out of sale consideration any amount is received in cash. (22) AMENDMENT TO SECTION 220 [SEC. 220] Finance Bill, 2012 No such provision was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha amends Section 220 (wef July 1, 2012) to provide that when interest is charged under section 201(1A) on the amount specified in the intimation issued under section 200A(1), then no interest will be charged for the same amount for the same period under section 220(2) (23) AMENDMENT TO THE SCHEME OF AUTHORITY FOR ADVANCE RULING IN CASE OF GAAR[SEC. 245N AND 245R] Finance Bill, 2012 No such provision was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha The Finance Bill, 2012 as passed by the Lok Sabha amends Sections 245N and 245R wef April 1, 2013. After the amendment any person (resident or non-resident) may make an application to AAR for determination by it whether an arrangement, which is proposed to be undertaken by him/it, is an impermissible avoidance agreement as referred to in Chapter X-A or not. (24) EXTENSION OF TIME LIMIT TO PROCESS APPLICATION FOR RECOGNITION OF EPF ORGANISATION [RULE 4, SCHEDULE IV] Finance Bill, 2012 No such provision was proposed in Finance Bill, 2012. Finance Bill, 2012 as passed by Lok Sabha Rule 4 in Part A of the Fourth Schedule provides for conditions which are required to be satisfied by a Provident Fund for receiving or retaining the status of "recognized provident fund". One of the requirements of rule 4 [clause (ea)] is that the establishment shall obtain exemption under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act). The first proviso to rule 3(1), inter alia, specifies that in a case where recognition has been accorded to any provident fund on or before March 31, 2006, and such provident fund does not satisfy the conditions set out in clause (ea) of rule 4 on or before March 31, 2012 and any other conditions which the Board may specify by rules in this behalf, the recognition to such fund shall be withdrawn. In order to provide further time to the Employees' Provident Fund Organization (EPFO) to process the applications made by establishments seeking exemption under section 17 of the EPF & MP Act, the time-limit has been extended from March 31, 2012 to March 31, 2013. FINANCE BILL, 2012, AS PASSED BY LOK SABHA & JUDICIAL DECISIONS
A RECKONER OF JUDICIAL DECISIONS OVERCOME/INCORPORATED BY THE FINANCE BILL, 2012 AS PASSED BY LOK SABHA

The Finance Bill, 2012 as passed by the Lok Sabha contains a large number of amendments which are based on judicial decisions. Some of these amendments are for overcoming judicial decisions unfavourable to the Revenue. Some of the amendments are meant to resolve controversy due to conflicting rulings. Some amendments are for incorporating in the statute principles set out in judicial decisions. These are all discussed below: Sr. No. (1) Subject-matter Court Rulings Amendments to overcome/ incorporate Court rulings or to resolve conflicting judicial opinion (4) Explanation is inserted below section 2(14)(definition of 'capital asset') with retrospective effect from the 1-4-1962 which clarifies 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

(2)

(3)

1. Definition of capital Applying the test of enforceability, asset in section influence/ persuasion of parent 2(14) company over its subsidiary cannot be construed as a right in the legal sense since capital asset covers 'property' of any description and a right has to be legally enforceable to be 'property' and 'capital asset'- Vodafone International Holdings B.V. v Union of India [2012] 17 taxmann.com 202/204 Taxman 408 (SC) 2. Definition of On transfer of shares of a foreign transfer in section company to a non-resident offshore, 2(47) there is no transfer of shares of the Indian Company, though held by the foreign company, in such a case it cannot be contended that the transfer of shares of the foreign holding company, results in an extinguishment of the foreign company control of the Indian company and it also does not constitute an extinguishment and transfer of an asset situate in India. Transfer of the foreign holding company's share offshore, cannot result in an extinguishment of the holding company right of control of the Indian company nor can it be stated that the same constitutes extinguishment and transfer of an asset/ management and control of property situated in India- Vodafone International Holdings B.V. (supra) 3. Section 9(1)(i)Income deemed to accrue or arise in India from transfer of capital asset situated in India The Legislature has not used the words "indirect transfer" in section 9(1)(i). If indirect transfer of a capital asset is read into section 9(1)(i) then the words capital asset situated in India would be rendered nugatory. Similarly, the words underlying asset do not find place in section 9(1)(i). Thus, the words directly or indirectly in Section 9(1)(i) go with the income and not with the transfer of a capital asset (property). The Direct

Further, Explanation below section 2(47) (definition of "transfer") renumbered as Explanation 1 and new Explanation 2 inserted with retrospective effect from the 1-4-1962 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 clarifies 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". New Explanation 5 inserted below section 9(1)(i) w.r.e.f.1-4-1962 to provide that capital asset situated in India will also cover Share or interest in

Tax Code (DTC) Bill, 2010 proposes to tax income from transfer of shares of a foreign company by a non-resident, where the fair market value of the assets in India, owned directly or indirectly, by the company, represents at least 50% of the fair market value of all assets owned by the company. This proposal indicates in a way that indirect transfers are not covered by the existing section 9(1)(i) of the Act. [Per CJI S.H. Kapadia]. On a comparison of Section 64 and Section 9(1)(i) what is discernible is that the Legislature has not chosen to extend Section 9(1)(i) to "indirect transfers". - Vodafone International Holdings B.V. (supra) 4. Section 9(1)(vi)- Whether consideration for use of Definition of computer software is royalty or not"royalty"Section 9(1)(vi) provides that any income payable by way of royalty in respect of any right, property or information is deemed to be accruing or arising in India. The term "royalty" has been defined in Explanation 2 which means consideration received or receivable for transfer of all or any right in respect of certain rights, property or information. In DIT v. Ericsson AB[2011]16 taxmann.com 371/[2012] 204 Taxman 192 (Delhi), it was held that supply of software which was an inseparable part of GSM system and incapable of independent use is not taxable as royalty. In order to constitute 'royalty' as defined in Explanation 2 to section 9(1)(vi), what is contemplated is a payment that is dependent upon user of copyright and not a lump sum payment made for acquisition of a copyrighted article. Contrary view was given by Karnataka High Court in CIT v. Samsung Electronics Co. Ltd. [2011] 16 taxmann.com 141/203 Taxman 477

a foreign company/entity(company or entity registered or incorporated outside India if such share/interest derives, directly or indirectly, its value substantially from the assets located in India. Therefore, transfer of such share/interest will attract capital gains even if effected outside India

Amended to resolve controversy consideration for use of computer software is royalty or not -Explanation to section 9(1)(vi) amended with retrospective effect from 1-6-1976 to provide that consideration for use or right to use of computer software is royalty by clarifying that transfer of all or any rights in respect of any right, property or information as mentioned in Explanation 2, includes and has always included 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. Thus, this amendment seeks to resolve controversy regarding whether consideration for use of computer software is royalty or not which has arisen due to contrary decisions of Delhi High Court and Karnataka High Court.

5. Section 9(1)- Whether satellite payments are Explanation to section 9(1)(vi) amended Income accrue or royalty or not - An issue arises with effect from 1-6-1976 to provide that arise in India whether the right, property or information has to be used directly by Royalty u/s 9(1)(vi) includes the payer or is to be located in India or consideration in respect of any control or possession of it has to be right, property or information, with the payer. Also whether satellite whether or not its possession or

payments are royalty or not was an issue. Income received by foreign satellite companies not taxable in India since customers merely given access to broadband available in transponder and Control and constructive possession of transponders could not be handed over by satellite operator to its customers - Asia Satellite Telecommunications Co. Ltd. v. DIT[2011] 197 Taxman 263/9 taxmann.com 168 (Delhi)

control is with the taxpayer, it is used directly by the taxpayer, or its location is in India 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;

Payments for lease of transponder capacity is not royalty nor fees for technical services ISRO Satellite Centre, In re [2008] 175 Taxman 97 (AAR - New Delhi) Payments made to service providers for use of bandwidth provided for downlinking signals in the US not taxable in India as 'royalty' or 'fees for technical services : Infosys Technologies Ltd v. Dy.CIT [2011] 45 SOT 157/10 taxmann.com 1 (Bang.)

(c) the location of such right, property or information is in India. The term "process" includes and shall be deemed to have always included transmission by satellite (including uplinking, amplification, conversion for downlinking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret. The Supreme Court in the case of CIT v. Glaxo SmithKline Asia (P.) Ltd. [2010] 195 Taxman 35 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. Taking a cue from the above decision, the transfer pricing regulations are 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. The concerns of administrative and compliance burden are addressed by restricting its applicability to the transactions, which exceed a monetary

6. Section 40A(2)Disallowance of domestic related party transactions

Section 40A of the Act empowers the Assessing Officer to disallow unreasonable expenditure incurred between related parties. Further, under Chapter VI-A and section 10AA, the Assessing Officer is empowered to recompute the income (based on fair market value) of the undertaking to which profit linked deduction is provided if there are transactions with the related parties or other undertakings of the same entity. However, no specific method to determine reasonableness of expenditure or fair market value to recompute the income in such related transactions is provided under these sections.

threshold of Rs. 5 crores in aggregate during the year. In view of the circumstances which were present in the case before the Supreme Court, there is a need to expand the definition of related parties for purpose of section 40A to cover cases of companies which have the same parent company.Therefore, the Act has been amended to provide applicability of transfer pricing regulations (including procedural and penalty provisions) to transactions between related resident parties for the purposes of computation of income, disallowance of expenses etc. as required under provisions of sections 40A, 80-IA, 10AA, 80A, sections where reference is made to section 80-IA, or to transactions as may be prescribed by the Board, if aggregate amount of all such domestic transactions exceeds Rupees 5 crore in a year. The meaning of related persons as provided in section 40A is amended to include companies having the same holding company. This amendment will take effect from 1st April, 2013 and will, accordingly, apply w.e.f. Assessment Year 2013-14 [Clauses 12, 23, 29, 33, 35, 37, 38, 92, 94, 97] 7. Section 50D Capital gains - Capital gains are calculated on transfer of a capital asset, as sale consideration minus cost of acquisition. In some recent rulings, it has been held that where the consideration in respect of transfer of an asset is not determinable or ascertainable, then, as the machinery provision fails, the gains arising from the transfer of such assets is not taxable and also that fair market value cannot be taken as deemed full value of consideration unless there is a specific provision in this respect. This particularly happens when shares in Indian companies are transferred 'without consideration' by companies as part of restructuring exercise. [See Dana Corporation, In re [2010]186 Taxman 187(AAR-New Delhi),Goodyear Tire & Rubber Co., In re [2011] 199 Taxman 121/11 taxmann.com 43 (AAR - New Delhi), Amiantit International Holding Ltd., In re [2010]189 Taxman 149 (AAR - New Delhi)] Obviously, these transfers are In order to overcome the judicial decisions, new section 50D is inserted with effect from A.Y. 2013-14 to provide that fair market value of asset shall be deemed to be the full value of consideration if actual consideration is not attributable or determinable. This amendment takes a cue from the following observations of ITAT in Dy. CIT v. Summit Securities Ltd. [2012] 19 taxmann.com 102 (Mum.)(SB) ".......the full value of consideration for the purposes of section 48 has to be considered as only the amount actually received or accruing as a result of the transfer of capital asset except where it has been substituted with fair market value or by any other mode. It is only in such specific cases that the actual amount received or accruing shall be replaced with the fair market value or such other mode as specified. In the absence of any specific provision, the general meaning of the amount actually received or accruing is to be considered

not "gifts" but consideration for them is as the full value of consideration general improvement in received or accruing as a result of business/synergies etc. which is not transfer of capital asset. .." "ascertainable" or "quantifiable" In Amiantit International Holding Ltd., In re (supra), the AAR observed. "As stated in the Law and Practice of Income-tax (by Kanga, Palkhivala and Vyas) income, profits and gains may be realized in the form of money's worth as well as money, in kind as well as in cash. Even then, the alleged consideration for which the shares are to be transferred should be capable of being evaluated on commercial and accounting principles. The possibility of applicant-transferor improving its overall business by virtue of reorganization and the mere possibility or chance of the applicant making better returns in the near or distant future as a consequence of reorganization can hardly be regarded as a consideration accruing or arising to the transferor when he has no right to receive a definite or an ascertainable amount or benefit from the transferee. A capital gain cannot arise on the basis of uncertain and indefinite future contingencies or hypothetical and imaginary estimations. There is really no effective answer from the Revenue's side to the question as to what is the valuable consideration that has accrued or arisen to the transferor and how it can be converted into money's worth for the purpose of computing the alleged capital gain. The only endeavour of revenue's counsel was to take a plea that the "benefits and advantages" mentioned by the applicant in para H of page 7 of the application represent the valuable consideration for transfer. . Thus, the full value of consideration for the transfer of shares is sought to be deduced from the overall objectives of reorganization and the resultant changes in investment. It is not explained how they can be evaluated in terms of money" 8. Section 56(2)(vii) - Under the existing provisions of clause Gifts (vii) of sub-section (2) of section 56 any sum or property received by an individual or HUF for inadequate The provisions of section 56 are amended so as to provide that any sum or property received without consideration or inadequate

consideration or without consideration is deemed as income and is taxed under the head "Income from other sources". However, in the case of an individual, receipts from relatives are excluded from the purview of this section and are therefore treated as not taxable. The definition of relative as given in this sub-clause is only in relation to an individual and not in relation to a HUF. Therefore, gifts received by HUF from its members are not exempt from donee-based taxation in the hands of HUF. in Vineetkumar Raghavjibhai Bhalodia v. ITO [2011] 11 taxmann.com 384/46 SOT 197 (Rajkot) wherein ITAT held that in the context of section 56(2)(vi) that an HUF is nothing but 'a group of relatives'. So if an individual receives gifts whether from an individual relative or a group of relatives, he should be exempt from taxation. The ITAT observed "..Actually a Hindu Undivided Family" constitutes all persons lineally descended from a common ancestor and includes their mothers, wives or widows and unmarried daughters. All these persons fall in the definition of "relative" as provided in Explanation to clause ( vi) of section 56(2) of the Act. The observation of the CIT(A) that HUF is as good as 'a body of individuals' and cannot be termed as "relative" is not acceptable. Rather, an HUF is 'a group of relatives'.. It is not expressly defined in the Explanation that the word "relative" represents a single person. And it is not always necessary that singular remains singular. Sometimes a singular can mean more than one, as in the case before us. The word "Hindu Undivided Family", though sounds singular unit in its form and assessed as such for income-tax purposes, finally at the end a "Hindu Undivided Family" is made up of "a group of relatives". Thus, in our opinion, a singular word/words could be read as plural also, according to the circumstance/ situation. ." 9. Section credits

consideration by an HUF from its members would also be excluded from taxation. For this purpose, clause (e) of the Explanation below section 56(2)(vii) is to be substituted to provide that in case of HUF, relative means members of the HUF. This amendment will take effect retrospectively from the 1st day of October, 2009 The amendment as above is inspired by the decision of ITAT in Vineetkumar Raghavjibhai Bhalodia (supra)

68-Cash Section 68 of the Act provides that if section 68 of the Act amended to provide any sum is found credited in the books that the nature and source of any sum of an assessee and such assessee either credited, as share capital, share premium

(i) does not offer any explanation about nature and source of money; or (ii) the explanation offered by the assessee is found to be not satisfactory by the Assessing Officer, then, such amount can be taxed as income of the assessee. The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added to the total income of the person. Certain judicial pronouncements have created doubts about the onus of proof and the requirements of this section, particularly, in cases where the sum which is credited as share capital, share premium etc which are sought to be overcome by amendment to section 68 as under: The onus cast upon the assessee company was discharged upon disclosure of the names and particulars of the alleged bogus shareholders. It was for the Department to conduct its own enquiry thereafter and additions if any may be made in the hands of the shareholders Lovely Exports(P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008] Even if subscribers to the capital are not genuine, the amount received by the company as share capital could not be assessed in the hands of the company itself. Such amounts should be considered for assessment in the hands of persons who are alleged to have really advanced the money. Stellar Investment Ltd [2001] 115 Taxman 99 (SC) Delhi HC held that the amount of share application money received by a Company from alleged bogus shareholders could not be regarded as undisclosed income u/s 68 when the assessee furnished details regarding shareholders. If the names of the alleged bogus shareholders are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law.

etc., in the books of a closely held company shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder. However, even in the case of closely held companies, it is amended that this additional onus of satisfactorily explaining the source in the hands of the shareholder, would not apply if the shareholder is a well regulated entity, i.e. a Venture Capital Fund, Venture Capital Company registered with the Securities Exchange Board of India (SEBI). The above amendment while seeking to overcome judicial precedents in Col (3) takes into account judicial pronouncements such as CIT v. Value Capital Services (P.) Ltd. [2008] 307 ITR 334 (Delhi) and CIT v. Oasis Hospitalities (P.) Ltd. [2011] 333 ITR 119/198 Taxman 247/9 taxmann.com 179 (Delhi) andCreative World Telefilms Ltd. [2011] 203 Taxman 36 (Bom.) (Mag.)/15 taxmann.com 183 (Bom.) which while recognizing that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company. The Courts have drawn a distinction and emphasized that in case of private placement of shares the legal regime should be different from that which is followed in case of a company seeking share capital from the public at large. In the case of closely held companies, investments are made by known persons. Therefore, a higher onus is required to be placed on such companies besides the general onus to establish identity and creditworthiness of creditor and genuineness of transaction. This additional onus, needs to be placed on such companies to also prove the source of money in the hands of such shareholder or persons making payment towards issue of shares before such sum is accepted as genuine credit. If the company fails to discharge the additional onus, the sum shall be treated

The Supreme Court upheld this view. as income of the company and added to CIT v Divine Leasing & Finance Ltd. its income." Bombay HC recently in [2007] 158 Taxman 440(SC) Major Metals Ltd noted that "Significantly, the judgment of the Delhi "It would be asking for a moon if High Court makes a distinction between such companies are asked to find out a case where shares are allotted in the from each and every share course of a large scale subscription to the applicant/subscribers to first satisfy the shares of a public company on the one assessee companies about the source of hand and a case of private placement on their funds before investing." CIT v the other." Relying on subsequent Kamdhenu Steel & Alloys Ltd. [2012] rulings in Value Capital Services (P.) Ltd. (supra) and Oasis Hospitality (P.) 19 taxmann.com 26 (Delhi) Ltd. (supra) and Creative World Where assessee had duly discharged Telefilms Ltd.(supra), HC held that its onus by furnishing names, age, "However, the initial burden on the address, date of filing application of assessee would be some-what heavy in share, number of shares of each case the assessee is a private limited subscriber, the AO was not justified in company where the shareholders are making addition u/s 68. CIT v SIT closely related because in such a case the Extrusion (P.) Ltd. [2011] 333 ITR 269 assessee cannot feign ignorance about the status of the parties". Thus, the (MP) amendment incorporates the law laid It was not for the assessee to place down in above cases. material before the Assessing Officer about creditworthiness of the shareholders. Once the company had given the addresses of the shareholders and their identity was not in dispute, it was for the Assessing Officer to make further inquiry with the investors about their capacity to invest the amount in shares. CIT v Arunananda Textiles(P.)Ltd [2011] 203 Taxman 32 (Kar.) (Mag.)/15 taxmann.com 226 (Kar.) Once the assessee proves the identity of creditors/share applicants, by either furnishing their PAN numbers or income-tax assessment numbers, and shows genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, onus of proof would shift to revenue.- CIT v. Dwarkadhish Investment (P.) Ltd. [2010] 330 ITR 298/194 Taxman 43 (Delhi) Once documents like PAN Card, bank account details or details from the bankers were given by the assessee, onus shifts upon the Assessing Officer and it is on him to reach the shareholders. The Assessing Officer could not burden the assessee merely

on the ground that summons issued to the investors were returned back with the endorsement not traceable Creative World Telefilms Ltd. (supra) 10. GAAR In W.T. Ramsay Ltd. v. IRC [1981] 1 All E.R. 865 the "look at" test was enunciated. According to that test, the task of the Revenue is to ascertain the legal nature of the transaction and, while doing so, it has to look at the entire transaction holistically and not to adopt a dissecting approach. The Revenue cannot start with the question as to whether the impugned transaction is a tax Deferment/saving device but that it should apply the "look at" test to ascertain its true legal nature [See Craven v. White [1988] 3 All ER 495 which further observed that genuine strategic tax planning has not been abandoned by any decision of the English Courts till date]. Applying the above tests, we are of the view that every strategic foreign direct investment coming to India, as an investment destination, should be seen in a holistic manner. While doing so, the Revenue/Courts should keep in mind the following factors: (i) the concept of participation in investment, (ii) the duration of time during which the Holding Structure exists; (iii) the period of business operations in India; (iv) the generation of taxable revenues in India; (v) the timing of the exit; (vi) the continuity of business on such exit. - Vodafone International Holdings B.V. (supra) 115JB- Judicial decisions which exempt nonSchedule VI companies (insurance, banking or electricity company) from MAT-Proviso to section 211(2) of the Companies Act,1956 permits certain companies, e.g. insurance, banking or electricity company to prepare their profit and loss account in accordance with the provisions specified in their regulatory Acts. Also, Courts and ITAT have held in a catena of decisions that since profit and loss account for MAT purposes is required by section 115JB(2) to be prepared as per General Anti-Avoidance Rule [Provisions in New Chapter X-A (sections 95 to 102)] (Applicable from 01-April-2014) Consequences of treating an arrangement as an impermissible tax avoidance arrangement: Treating the place of residence of any party to the arrangement or the situs of an asset or of a transaction, at a place other than the place of residence, location of the asset or location of the transaction as provided under the arrangement. Considering or looking through any arrangement by disregarding any corporate structure. Factors not to be taken into account while determining whether an agreement lacks commercial substance: The period or time for which the arrangement (including operations therein) exists; The fact of payment of taxes, directly or indirectly, under the arrangement The fact that an exit route (including transfer of any activity or business or operations) is provided by the arrangement. Amendments to section 115JB to overcome judicial decisions which exempt non-Schedule VI companies (insurance, banking or electricity company) from MAT-The Finance Bill, 2012 substitutes section 115JB(2) with effect from A.Y.2013-14 to provide that companies which are not required under the proviso to section 211(2) of the Companies Act to prepare their profit and loss account in accordance with the Schedule VI of the Companies Act, 1956, profit and loss account prepared in accordance with the provisions of their

11. Section MAT

Schedule VI, banks, electricity regulatory Acts shall be taken as a basis companies etc. which are exempt from for computing the book profit under Schedule VI are not liable to MAT as section 115JB. under: In Krung Thai Bank PCL v. Jt. DIT(International Taxation)[2011] 16 taxmann.com 239/[2012] 49 SOT 70 (Mum.)(URO), the Tribunal held that the provisions of section 115JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. The starting point of computation of MAT under section 115JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to section 211(2) of the Companies Act. The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. The provisions of section 115JB cannot thus be applied to the case of a banking company. In Kerala State Electricity Board v. Dy. CIT [2011] 196 Taxman 1/[2010] 8 taxmann.com 118, the Kerala High Court held that section 115JB stipulates that the accounting policies, accounting standards, etc., shall be uniform, both for the purpose of income-tax as well as for the information statutorily required to be placed before the annual general meeting conducted, in accordance with section 210 of the Companies Act, 1956. However, the assessee though was by definition a company under the Income-tax Act and deemed to be a company for the purpose of the Income-tax Act, by virtue of the declaration under section 80 of the Electricity Supply Act, it was not a company for the purpose of the Companies Act. Therefore, it was not obliged either to convene an annual general meeting or place its profit and loss account in such general meeting. As a matter of fact, a general meeting contemplated under section 166 of the

Companies Act, 1956 was not possible in the case of the assessee, as there were no shareholders for the assesseeboard. On the other hand, under section 69 of the Electricity Supply Act, the assessee was obliged to keep proper accounts, including the profit and loss account, and to prepare an annual statement of accounts, balance sheet, etc., in such form as had been prescribed by the Central Government and notified in the Official Gazette. Thus, it could be seen that coming to the maintenance of the accounts, the assessee, though was deemed to be a 'company' - both by virtue of operation of section 80 of the Electricity Supply Act for the purpose of Income-tax Act and by virtue of the definition of the expression 'company' under the Income-tax Act, yet it was required to keep and maintain its accounts in a manner specified by the Central Government, but not in the manner specified in the Companies Act. Therefore, MAT would not apply to electricity companies. In Union Bank of India v. Asstt. CIT [2011] 16 taxmann.com 304/[2012] 49 SOT 32 (Mum.), the ITAT upheld the contention of the assessee-bank that it was not a company under Companies Act but is only deemed to be a company as per the provisions of section 11 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. Therefore as held by the Jurisdictional ITAT in the case of Maharashtra State Electricity Board v. Jt. CIT[2002] 82 ITD 422 (Mum.) the provisions of section 115JB cannot be made applicable to it. 12. Explanation 1 to section 115JB(2)Book Profit definition Judicial decision on revaluation reserve balance pertaining to revalued asset disposed off- The above amendment has been made to overcome the decision in ITO v. Galaxy Saws (P.) Ltd. [2011] 13 taxmann.com 179/132 ITD 236 (Mum.) wherein it was held that no addition could be made to the net profit on account of revaluation reserve directly taken to the balance sheet while Explanation 1 to section 115JB has been amended with effect from A.Y.2013-14 to substitute the words ""if any amount referred to in clauses (a) to (i) is debited to the profit and loss account, and as reduced by,"with the words" "(j) the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, if any amount referred to in clauses (a) to (i) is debited to the profit and loss

computing the book profit. In that case, the assessee, company had sold its premises for Rs. 96 lakhs. Book value of property was Rs. 3,29,143 and, therefore, there was a gain of Rs. 92,72,858. Assessee got property revalued and as per report of registered valuer, value of property was Rs. 97.44 lakhs. Gain in book value of property was taken by assessee to balance sheet as revaluation reserve. However, loss arising on sale, i.e., Rs. 1.44 lakhs (Rs. 97.44 lakhs minus Rs. 96 lakhs) was debited by assessee to profit and loss account. Assessing Officer rejected computation of book profit made by assessee based on revalued cost and added gain of Rs. 92.70 lakhs computed on basis of book value of asset originally shown. The ITAT held that since revaluation reserve had been directly taken to balance sheet and not debited to profit and loss account, it could not be added under clause (b) of Explanation 1 to section 115JB(2). The provisions of Explanation 1 to section 115JB(2) that amount carried to any reserve by whatever name called has to be added to the net profit if the amount had been debited to the profit and loss account. In this case the revaluation reserve had been directly taken to the balance sheet and not debited to the profit and loss account and, therefore, the amount could not be added under clause (b) of Explanation 1 to section 115JB(2). 13. Sec. 144C Power In GE India Technology Centre (P.) of DRP Ltd. v. Dispute Resolution Panel [2011] 201 Taxman 191 (Kar.), the Court held that the power of DRP is restricted only to the issues raised in the draft assessment order and, therefore, it cannot enhance the variation proposed in the order as a result of any new issue which comes to the notice of the panel during the course of proceedings before it. 14. Section 195Application to AO to determine appropriate proportion of sum In GE India Technology Cen. (P.) Ltd. v CIT [2010] 193 Taxman 234 (SC), it was held that the application of section 195(2) pre-supposes that the person responsible for making the payment to

account or if any amount referred to in clause (j) is not credited to the profit and loss account, and as reduced by,". The above amendment intends to overcome the judicial decision in Col (3). Further, Since (AS) 10 permits companies to transfer "revaluation reserve relating to revalued asset on the retirement or disposal of such asset", to general reserve, companies follow this treatment. The Explanatory Memorandum to the Finance Bill, 2012 explains that as a result of this treatment permitted by (AS) 10 "the gains attributable to revaluation of the asset is not subject to MAT liability. Therefore, section 115JB amended to provide that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account."

144C has been amended (with effect from the assessment year 2009-10) to clarify that the power of the DRP to enhance the variation shall include and shall always be deemed to have included the power to consider any matter arising out of the assessment proceedings relating to the draft assessment order. This power to consider any issue would be irrespective of the fact whether such matter was raised by the eligible assessee or not. The Supreme Court ruling in Col. (3) sought to be overcome by amending section 195 to provide that class of persons or cases (to be notified by CBDT) responsible for making payment

chargeable even when payment not chargeable under the Act

the non-resident is in no doubt that tax is payable in respect of some part of the amount to be remitted to a non-resident but is not sure as to what should be the portion so taxable or is not sure as to the amount of tax to be deducted. In such a situation, he is required to make an application to the ITO(TDS) for determining the amount

to a non-resident, whether or not such payment is chargeable under the Act, shall make an application to the AO to determine the appropriate proportion of sum chargeable.

15. Section 195(1) - Section 195 would apply only if Withholding Tax payments made from a resident to another non-resident and not between two non-residents situated outside India- Vodafone International Holdings B.V. (supra)

Section 195 amended w.r.e.f. 1-4-1962 to provide that Obligation to deduct tax u/s 195(1) applicable to all persons, whether resident or non-resident, whether or not the non-resident has a residence, place of business or business connection in India; or any other presence in any manner whatsoever The ruling has been confirmed by amending the definition of Assessee in default from 1-07-2012 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident payee shall not be deemed to be an assessee-in-default in respect of such tax, if certain conditions are fulfilled

16. Section 201 In the case of Hindustan Coca Cola Assessee in default Beverage (P.) Ltd. v. CIT [2007] 163 Taxman 355 gave the ruling that where the payer has failed to deduct tax but the deductee (i.e., recipient of income) has paid tax on the amount received from the deductor, the department once again cannot recover tax from the deductor on same income by treating the deductor to be an assessee-indefault for non-deduction/short deduction of tax. Moreover, the Gujarat High Court in the case of CIT v. Rishikesh Apartments Co-op. Housing Society Ltd. [2001] 119 Taxman 239 held that in such a situation interest cannot be recovered from the deductor for short-deduction/non-deduction of tax. 17. Section Computation Advance Tax 209- In Dy.CIT v. Pride Foramer SAS of [2008] 24 SOT 59 (Delhi), it was held by ITAT that tax deductible at source has to be excluded while computing the advance tax liability as provided in section 209(1)(d), even if the tax had not actually been deducted. If entire income of assessee is income on which tax deductible at source, no advance tax could be payable by assessee and, therefore, no interest under section 234B could be charged-

To overcome the ITAT ruling in Col (3), section 209 is amended w.r.e.f.1-4-2012 to provide that that where a person has received any income without deduction or collection of tax, he shall be liable to pay advance tax in respect of such income. The rationale is to make an assessee liable for payment of advance tax in respect of income which has been received or paid without deduction or collection of tax. To overcome the ITAT ruling in Col. (3), section 234D is amended to provide that the provisions of section 234D would be applicable to any proceeding,

18. Section 234D- In DIT v. Jacabs Civil Interest on excess Incorporated/Mitsubishi Corporation refund [2010] 194 Taxman 495 (Delhi), CIT v. Kerala Chemicals & Proteins Ltd.

[2011] 9 taxmann.com 295 (Ker.), ITO v. Ekta Promoters (P) Ltd. [2008] 113 ITD 719 (Delhi) (SB) a Special Bench of Delhi ITAT held that the provision for levy of interest on excess refund u/s 234D was prospective and applicable from AY 2004-05 since the provisions of section 234D were substantive and hence could not be held as retrospective in nature, unless specifically provided in the statute 19. Section 292CCAuthorization or requisition and subsequent assessment in search cases In CIT v. Vandana Verma [2010] 186 Taxman 88 (All.), Siksha 'O' Anusandhan v. CIT [2011] 336 ITR 112 (Ori.), it was held that if the authorization was issued jointly, the assessment will have to be made collectively in the name of all the persons in the status of association of persons/body of individuals. It was also held in Dr. Mansukh Kanjibhai Shah v. ACIT [2011] 129 ITD 376/5 taxmann.com 59 (Ahd. - ITAT) that warrant of authorization must be issued individually and if it is not issued individually, assessment cannot be made in an individual capacity.

which is completed on or after 1st June, 2003, irrespective of the assessment year to which it pertains. Section 234D provides for levy of interest on excess refund granted to the assessee.

Sec. 292CC has been introduced w.r.e.f. 01-Apr-1976, which provides that it shall not be necessary to issue an authorization under section 132 or make a requisition under section 132A separately in the name of each person also where name of more than a person is mentioned in notice under sec. 132 the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorization or requisition.

LIST OF PROSPECTIVE AMENDMENTS BY FINANCE BILL, 2012 AS PASSED BY LOK SABHA Amendment in Section Description of the amendment Income tax Act, 1961 2(19AA) 2(24)(xvi) Amendment in the conditions for demerger New sub-clause (xvi) inserted in the definition of Income to include the excess of issue price over the fair market value of shares Amendment in provisions for claiming exemption in respect of sum received under life insurance policy A new clause in section 10 is introduced to exempt the income of Prasar Bharati Change in definition of 'Venture Capital Undertaking' New exemption for income arising from sale of crude oil to a foreign company Amendment in additional depreciation allowed to power 01-Apr-13 01-Apr-13 Effective date of amendment

10(10D) 10(23BBH) 10(23FB) 10(48) 32(1)(iia)

01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-12 01-Apr-13

generation undertakings 35(2AB)(5) 35AD(1A) 35AD(5) 35AD(8)( c) (ix), (x) & (xi) 35CCC 35CCD 40 (a)(ia) 40A(2) 44AB(a) &(b) 44AB,Explanation (ii) 47(vii)(a) 50D 54B 54GB 55A(a) 56(2)(viib) 68 Extension of sunset clause for deduction in respect of expenditure on scientific research till March 31, 2017 Deduction upto 150% of capital expenditure if incurred by assessee engaged in specified business Additions in the list of specified businesses New Insertion : Additions in the list of specified businesses New Insertion : Allowability of expenditure incurred on agriculture extension project New Insertion : Allowability of expenditure incurred on skill development project Allowability of expenditure if TDS is not deducted therefrom provided assessee is not deemed to be in default No disallowance if transaction is at ALP and change in the meaning of prescribed persons Increase in threshold limit for Audit Change in the meaning of 'specified date' Amendment in the conditions for exemption available in case of amalgamation New insertion - FMV deemed to be full value of consideration in certain cases Deduction available to HUF also in case of rolling over the capital gain arising from transfer of agriculture land New insertion - Capital gain on transfer of residential property not to be charged in certain cases Amendment proposed in the condition for making a reference to Valuation officer Taxability as gift if shares are issued at a price which exceeds the face value of the shares Insertion of new proviso to explain when share application money shall not be deemed to be unexplained money Allowability of deduction if premium in respect of policies taken after April 1, 2012 does not exceed 10% of sum assured New Insertion - Deduction in respect of investment made under notified equity scheme 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-12 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Jul-12 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13

44AD, Explanation (b)(ii) Increase in threshold limit for applicability of the provisions

80A(6), Explanation (iii) Insertion in explanation for the meaning of 'market value' 80C(3),(3A) 80CCG

80D(1),(2),(2A),(2B),(4) Allowability of deduction in respect of payment made for preventive health check-up and reduction of age of senior citizens to 60 years 80DDB 80G (5D) Reduction of age of senior citizens to 60 years for deduction in respect of medical treatment No deduction in respect of donation if it is paid in excess of Rs. 10,000 in cash

01-Apr-13 01-Apr-13

80GGA(2A) 80-IA(4),(8),(10) 80TTA 90(2A) 90(4) 90A(2A) 90A(4) 92(2), (2A) &(3) 92BA 92C(2),IInd pro. 92C(2B) 92C,92D & 92E 92CA(1),(2) & (3) 92CA(2C) 92CC & 92CD 112(1)(c) 115A 115BBA 115BBD (1) 115BBE Explanation to Sec. 115JB(2) 115JC 115JD(1) 115JE 115JEE 115JF

No deduction in respect of donation for scientific research or rural development if it is paid in excess of Rs. 10,000 in cash Extension of sunset clause for deduction under section 80-IA by one year and insertion of meaning of 'market value' New insertion - Deduction in respect of interest on deposits in savings account Treaty benefit not available if provisions of GAAR are invoked TRC is mandatory to get treaty benefit Treaty benefit not available if provisions of GAAR are invoked TRC is mandatory to get treaty benefit Applicability of provisions for transfer pricing to specified domestic transactions New insertion - Meaning of 'specified domestic transaction' The threshold limit of 3% variation re-inserted Restriction on power of Assessing officer to increase the taxable income if assessment completed before 1 October, 2009 Insertion of word 'specified domestic transaction' Insertion of word 'specified domestic transaction' Restriction on power of Assessing officer to increase the taxable income if assessment commenced on or before 1 July, 2012 New insertion - Introduction of 'Advance Pricing Agreement' LTCG to be taxed at 10% if certain conditions are satisfied New insertion - Taxability of interest income accruing from an Indian Company engaged in specified business Taxability of non-resident entertainer under this provision and increase the taxability from '10%' to '20%' Dividend received from foreign company continues to be taxable at the rate of 15% Taxability of income as referred in secs. 68 to 69D at flat rate of 30% Applicability of MAT in case of companies exempted from preparing financial statements in accordance with Schedule VI Applicability of AMT in case of every tax payer other than a company Applicability of AMT in case of every tax payer other than a company Applicability of AMT in case of every tax payer other than a company Immunity from AMT to an individual and HUF if adjusted total income is less than Rs. 25 lakhs Applicability of AMT in case of every tax payer other than a

01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Jul-12 01-Apr-13 01-Apr-13 01-Jul-12 01-Jul-12 01-Apr-14 01-Apr-13 01-Apr-13 01-Jul-12 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13

Ch.X-A (Secs. 95 to 102) New insertion - Introduction of 'General Anti-Avoidance Rules' Explanation to Sec. 112 Inclusion of meaning of 'Unlisted Securities' in the definition

company Chapter XIIBB - Sec. 115JG 115-O(1A)(i) 115U 115U, Explanation 2 115VG(3), Table 139(1) 140A 143(1D) 144BA 144C(14A) 147 New Insertion : Provision relating to conversion of Indian Branch of a Foreign Bank into a subsidiary Indian Company Reducing the cascading effect of dividend distribution tax Change in the provision for taxability of income received from venture capital companies and funds Change in the provision for taxability of income received from venture capital companies and funds Increase in the presumptive rate for daily tonnage income The provision for mandatorily filing of return of income if assessee has any asset which is located outside India Allowability of AMT tax credit in computing the selfassessment tax Processing of return is not necessary if notice for scrutiny assessment is issued under sec. 143(2) New insertion - Reference to Commissioner to invoke provisions of GAAR New insertion - No reference can be made to DRP if assessment is completed with prior approval of CIT under sec. 144BA The limit of 4 years for re-opening of assessment is not applicable in relation to asset located outside India. Further, addition in the circumstances when an income is deemed to have escaped assessment Increase in the time limit to 16 years when a notice can be issued for re-assessment in respect of asset located outside India Increase in time limit for completion of assessment 01-Apr-13 01-Jul-12 01-Apr-13 01-Jul-12 01-Apr-13 01-Apr-12 01-Apr-13 01-Jul-12 01-Apr-14 01-Apr-13 01-Jul-12

149 153

01-Jul-12 01-Jul-12 01-Apr-13

153, Explanation 1 Cl.(ix) The period to be excluded, in respect of the period specified for exchange of information, is increased from 'six months' to 'one year' 153A 153B(1) 153B(1),Explanation Cl(ix) 153C Insertion of a proviso to authorise the assessing officer so as not to issue the notice for re-assessing the income in certain cases Increase in time limit for completion of assessment in case of search The period to be excluded, in respect of the period specified for exchange of information, is increased from 'six months' to 'one year' Insertion of a proviso to authorise the Assessing Officer so as not to issue the notice for re-assessing the income of a person, other than the person searched, in certain cases Rectification of mistake identified in processing of statement of the TDS The sum determined in the intimation issued at the time of processing of statement of TDS shall be deemed to be notice of demand Increase in threshold limit to Rs. 5,000 for deduction of TDS from payment of interest on debentures

01-Jul-12 01-Jul-12 01-Apr-13

01-Jul-12

154 156, Proviso

01-Jul-12 01-Jul-12

193(v)

01-Jul-12

194E 194J(1)(ba) 194LA 194LC 195(1) 195(7)

Any amount payable to an entertainer shall be subject to TDS and the rate of TDS is increased from '10%' to '20%' Any remuneration payable to a director shall be subject to TDS if no tax deducted under Sec. 192 from such payment The threshold limit for deduction of tax at source is increased from Rs. 1,00,000 to Rs. 2,00,000 New insertion - Deduction of tax from payment of interest by Indian companies engaged in certain companies Exclusion of interest as referred under secs. 194LB and 194LC from the ambit The Board may specify a class of person in respect of whom an application to be filed for determination of income from which tax to be deducted at source The age limit to seek exemption from deduction of tax at source reduced from 65 years to 60 years The payer is not deemed to be in default if payee declares the amount received from such payer in the return of income and pays the taxes due on such income. Insertion of explanation to provide the meaning of an 'accountant' Addition in the meaning of 'person responsible for paying' Insertion of provision for collection of tax at source in case of sale of bullion, jewellery and specified minerals. Further, consequent changes in the provisions when an assessee is not deemed to be in default and change in meaning of buyer An assessee, whose age is 60 years and above, shall not be liable to pay advance tax if he does not any business income While computing the advance tax the amount of TDS or TCS shall not be deducted if it has not been deducted or collected by the person responsible therefor. New Insertion : If interest under Sec. 201(1A) is charged then interest under Sec. 220(2B) not to be charged for the same period In computing the interest the AMT credit shall be reduced.

01-Jul-12 01-Jul-12 01-Jul-12 01-Jul-12 01-Apr-12 01-Jul-12

197A(1C) 201

01-Jul-12 01-Jul-12

201, Explanation 204(iv) 206C

01-Jul-12 01-Jul-12 01-Jul-12

207(2) 209(1)(d), Proviso

01-Apr-12 01-Apr-12

220(2B)

01-Jul-12

234A(1)(vi)

01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Apr-13 01-Jul-12 01-Jul-12 01-Jul-12

234B(1),Explanation 1,Cl. In computing the interest the AMT credit shall be reduced. (v) 234C(1) In computing the interest the AMT credit shall be reduced. 245N(a)(iv), 245N(b)(iiia) New Insertion : Change in the meaning of 'Applicant' and "Advance Ruling' 245R(2) 234E 245C(1) 245Q(2) New Insertion : Change in the list of persons who can make an application to AAR in specified case New insertion - Fees for default in furnishing statement of TDS/TCS Change in the provision for application for settlement of cases Increase in the fees for advance ruling from Rs. 2,500 to Rs. 10,000

246A(1) 246A(1)(a) 246A(1)(b) 246A(1)(ba) 246A(1)(bb) 246A(1)(c) 246A(1)(j)(B) 253(1)(e) 253(2A) 253(3A) 253(4) 254(2A) 271(1), Explanation 7 271AA

Change in the provision so that a deductor can appeal against the intimation u/s 200A(1) before CIT(A) Change in the provision of 'appealable orders' before CIT(A) Change in the provision of 'appealable orders' before CIT(A) Change in the provision of 'appealable orders' before CIT(A) Change in the provision of 'appealable orders' before CIT(A) Change in the provision of 'appealable orders' before CIT(A) Change in the provision of 'appealable orders' before CIT(A) Change in the provisions for 'appeal to the Appellate Tribunal' Change in the provisions for 'appeal to the Appellate Tribunal' Change in the provisions for 'appeal to the Appellate Tribunal' Change in the provisions for 'appeal to the Appellate Tribunal' Change in the provisions for 'order of Appellate Tribunal' Insertion of expression 'specified domestic transaction' Substitution of new section - Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions. Insertion of expression 'specified domestic transaction' Amendment in provision for 'penalty where search has been initiated' New inserting - Penalty where search has been initiated Insertion of expression 'specified domestic transaction' New insertion - Penalty for failure to furnish statements, etc. No penalty under this provision in case of failure to deliver the statement of TDS and TCS. Reference of Sec. 271H in the provisions when penalty shall not be imposed The threshold limit of amount sought to be evaded so as to prosecute the taxpayer has been increased from Rs. 1,00,000 to Rs. 25,00,000. Further, change in the number of years of prosecution The threshold limit of amount sought to be evaded so as to prosecute the taxpayer has been increased from Rs. 1,00,000 to Rs. 25,00,000. Further, change in the number of years of prosecution The threshold limit of amount sought to be evaded so as to prosecute the taxpayer has been increased from Rs. 1,00,000 to Rs. 25,00,000. Further, change in the number of years of prosecution Change in the number of years of prosecution The threshold limit of amount sought to be evaded so as to prosecute the taxpayer has been increased from Rs. 1,00,000 to Rs. 25,00,000. Further, change in the number of years of prosecution

01-Jul-12 01-Apr-13 01-Apr-13 01-Apr-13 01-Jul-12 01-Apr-13 01-Jul-12 01-Apr-13 01-Jul-12 01-Jul-12 01-Jul-12 01-Jul-12 01-Apr-13 01-Jul-12

271AA 271AAA(1) 271AAB 271G 271H 272A(2) 273B 276C(1)

01-Apr-13 01-Apr-12 01-Jul-12 01-Apr-13 01-Jul-12 01-Jul-12 01-Jul-12 01-Jul-12

276CC

01-Jul-12

277

01-Jul-12

277A 278

01-Jul-12 01-Jul-12

280A, 280B, 280C & 280D 296

New insertion - New provisions for 'Special courts for trial of offences' Change in the provisions for 'Rules and certain notification to be placed before Parliament'

01-Jul-12 01-Jul-12 01-Apr-12

Fourth Schedule, Part A, Extension of time allowed to EPFO to process the applications Rule 3(1) Wealth-tax Act, 1957 2(ea)(i)(1) A residential house, allotted by the company to its employee or director, is not subject to wealth tax if gross annual salary of such employee or director does not exceed Rs. 5,00,000. Such threshold limit is increased to Rs. 10,00,000 The limit of 4 years for re-opening of assessment is not applicable in relation to asset located outside India. Further, Increase in the time limit to 16 years when a notice can be issued for re-assessment in respect of asset located outside India

01-Apr-13

17(1), (1A)

01-Jul-12

Amendment in the provisions for 'time limit for completion of 01-Jul-12 assessment or re-assessment' LIST OF RETROSPECTIVE AMENDMENTS BY FINANCE BILL, 2012 AS PASSED BY LOK SABHA Amendment in section 2(14) 2(16) 2(47) 9(1)(i) 9(1)(vi) 10(23C) 13(8) 35AD(6A) 44AD(6) 49(1)(iii)(e) 56(2)(vii), Explanation (e) 90, Explanation 3 Description of the amendment Income-tax Act, 1961 Insertion of Explanation in the definition of the 'Capital asset' Inclusion of 'Director' in the definition of 'Commissioner' Insertion of Explanation in the definition of the 'Transfer' Insertion of Explanations in the provisions for 'Income deemed to accrue or arise in India' Insertion of Explanations in the provisions for taxability of royalty income Insertion of a proviso to make applicable the provisions of sec. 2(15) New insertion to restrict benefit of secs. 11 & 12 if provisions of sec. 2(15) are attracted Allowability of deduction even if operation of the hotel business is transferred to another person while continuing to own the hotel Exclusion of certain persons from the applicability of the presumptive taxation scheme Additions in the list for determination of cost with reference to certain modes of acquisition Insertion of HUF in the meaning of 'relative' Determination of meaning with reference to the notification 01-Apr-62 01-Apr-88 01-Apr-62 01-Apr-62 01-Jun-76 01-Apr-09 01-Apr-09 01-Apr-11 01-Apr-11 01-Apr-99 01-Oct-09 01-Oct-09 01-Jun-06 01-Apr-02 Effective date of amendment

17A(1),(2) & (3)

90A -Explanation 3 Determination of meaning used in treaty with reference to the notification 92B - Explanation Explanation inserted to clarify meaning of 'International Transaction'

& 'Intangible Property' 92C(2) 92C(2A) Insertion of explanation for applicability of threshold limit of 3% The option to take the benefit of first proviso of section 92C(2) (as stood before amendment by Finance Act, 2009) is not available if price at which international transaction took place exceeds 5% If report under sec. 92E is not furnished in respect of international transaction, such transaction shall be automatically referred to TPO Tax rates for taxability of short term capital gain from transfer of shares, on which STT has been paid, increased from '10%' to '15%' New insertion: Exemption from MAT to companies engaged in life insurance business In case of reference to DRP, the assessment shall be completed within the specified period and the period specified for assessment in case of search shall have an overriding effect Authorisation of DRP to increase the assessment Amended to give the reference of sec. 153B 01-Oct-09 01-Apr-02

92CA(2B) 111A(1) 115JB(5A)

01-Jun-02 01-Apr-09 01-Apr-01 01-Apr-09 01-Oct-09

143(3), IIIrd Proviso Insertion of a proviso to make applicable the provisions of sec. 2(15) 144C(4)

144C(8), Explanation 144C(13)

01-Apr-09 01-Oct-09 01-Apr-62 01-Apr-10 01-Jun-03 01-Oct-09 01-Oct-09 01-Apr-76

195(1), Explanations The provisions of this section shall be applicable to a non-resident 1&2 also 201(3)(ii) The specified period for deeming the payer as assessee in default is increased from 4 years to 6 years

234D,Explanation Change in the provision for interest on excess refund 1,2 246A(1)(ba) 253(1)(d) 292CC Change in the provision of 'appealable orders, before CIT(A) Change in the provisions for 'appeal to the Appellate Tribunal' New insertion - New provisions for 'Authorisation and assessment in case of search or requisition.' Wealth-tax Act, 1957 45(k) New insertion : Exemption to RBI from payment of wealth tax

01-Apr-57