IQ IPCC May 2013

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Finance Act 2012: Amendments
Some important points(clarification of some points)

1.
u/s 194J Directors remuneration (other than salary received by a director), TDS will now be deductible @10%
u/s 194J. there is NO limit of 30,000 on such directors remuneration
Examples commission to director for standing guarantor to the bank Directors remuneration Directors sitting fees for attending board meetings etc
i.e where directors gets sitting fees of 7,000 TDS @ 10% will be deductible even if the ayment is less than 30,000
2. Charitable Trust: a. b. Is a trust registered with the commissioner of Income Tax u/s 12AA If it uses 85% of its income for the purpose it is formed (i.e charity or religious) then 100% deduction is allowed. For example if a trust formed for proviing free education to poor earns `10 lacs from trust property( House property, Other sources, capital gains, voluntary donations) and uses ` 8.50 lacs for providing education , then its entire income is exempt c. It is either wholly for a religious purpose or wholly for charitable purpose Chaitable prupose is defined u/s 2(15) to include
Education(schools colleges universities etc) ,Medical(Hospitals, dispensaries etc) ,Promotion of sports(e.g BCCI), Relief to poor, preservation of forest /wildlife, preservation of monuments - such entities can earn profit by charging for their services, however the income must be applied 85% for charitable purposes for it to be entitled for the exemption Any other object of general public utility Apart from the other specific charitable object defined there is a residuary clause giving the CIT power to grant registration to a trust if it is doing any other charity. However such trust must not collect money for providing services in excess of ` 25 lacs per year Thus a trust engaged in providing financing for treatment for cancer patients must not collect fees for the same in excess of ` 25 lacs
d. e.
Such a trust is compulsarily required to file its ROI if the total income before exemption u/s 11 is more than ` 2 Lacs Such a trust is compalsorily required to get its audit done from a CA it its total income before exemption u/s 11 is more than ` 2 Lacs
3. Circular No. 5/2012 dated 1-8-2012 : under the head Business & Profession -Inadmissibility of expenses incurred in providing freebees to medical practitioner by pharmaceutical and allied health sector industry Section 37(1) provides for deduction of any revenue expenditure (other than those falling under sections 30 to 36) from the business income if such expense is laid out or expended wholly or exclusively for the purpose of business or profession. However, the Explanation below section 37(1) denies claim of any such expenses, if the same has been incurred for a purpose which is either an offence or prohibited by law. The Central Board of Direct Taxes, has clarified that considering the fact that the claim of any expense incurred in providing freebees to medical practitioner is in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, the expenditure so incurred shall be inadmissible under section 37(1) of the Income-tax Act, 1961, being an expense prohibited by the law.
The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
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The disallowance shall be made in the hands of such pharmaceutical or allied health sector industry or other assessee which has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income. This circular has also clarified that a sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources, as the case may be, depending on the facts of each case.
Example: a pharmaceutical company gives commission to doctors in a private or government hospital fro recommending its medicines to its patients and claims a deduction of ` 5 lacs in its P&L a/c. Discuss In such a case the deduction of 5 lacs will be disallowed Such amount will be taxable in the hands of the doctors to whom it has been given 4. Read amendments given in the following pages 5. No service tax on remittances from abroad CBEC has clarified that service tax is not leviable on the amount of foreign currency remitted to India from overseas as definition of service under section 65B(44) specifically excludes transactions in money. Further, service tax would also not be leviable on the fee or conversion fee chargeable for sending such money. It has also been clarified that Indian counterpart or financial institutions or entity who charges the foreign bank or any other entity for the services provided at the receiving end will also not be liable to service tax. [Circular No.163/14/2012 ST dated 10.07.2012] Some relevant questions from the RTP Read questions 1 to 12 from RTP just to referesh the points raised there. Specifically do the following 2. State, with reference to the provisions of the Income-tax Act, 1961, whether the following are chargeable to tax and if so, the amount liable to tax : (i) Shivam received ` 45,000 as his share of income from a partnership firm. (ii) Prasar Bharti (Broadcasting Corporation of India) has earned a net profit of ` 20 lacs during the financial year 2012-13. (iii) Mr. Sameer received a sum of ` 10 lacs on 13.12.2012 from Life Insurance Corporation of India in respect of a policy, where the sum assured was ` 7.5 lacs, taken on 1.04.2004 and for which a one time premium of ` 5 lacs was paid. (iv) Leave travel concession of ` 1,25,000 (being the total cost of tickets) received by Mr. Ravi, employee of A Ltd. for his holiday (with spouse & one child) to Goa by Air India (executive class). The flight fare for executive class is 2.5 times the fare for economy class. (v) Gratuity of ` 12 lacs received by Mr. B, a Government employee, on his retirement. (vi) Income-tax of ` 25,000 paid by employer on non-monetary perquisites provided to employees. (vii) Mr. Tata has derived an income of ` 1,00,000 derived from growing and manufacturing tea in India during the financial year 2012-13.
3. State with reasons the allowability or otherwise of the following items under the Income-tax Act, 1961 while computing income under the head Profits and gains of business or profession for the Assessment Year 2013-14: (i) (v) Tax deducted at source on salary paid to employees in India not remitted till the due date for filing the return prescribed in section 139. (ii) (vi) An electric generator has been purchased for ` 50 lakhs by an assessee engaged in the business of generation of power, on 01.04.2012 and installed on the same day.
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AMENDMENTS : FINANCE ACT 2012

At a glance for last day lookup(all have been covered in the modules)
PART A - INCOME TAX I. BASIC CONCEPTS: 1. Rates of Tax :
RESIDENT SENIOR CITIZEN: In the case of every individual(male or female) , being a resident (ordinary or not ordinary) in India, who is of the age of sixty years or more but less than 80 years( 60 years but < 80 years) at any time during the previous year:
Upto Rs. 2,50,000 Rs. 2,50,001 to Rs. 5,00,000 Rs. 5,00,001 to Rs. 10,00,000 Above Rs. 10,00,000 Nil. 10 % 20 % 30 %
RESIDENT VERY SENIOR CITIZEN In the case of every individual, being a resident (ordinary or not ordinary) in India, who is of the age of 80 years at any time during the previous year
Upto 500,000 Rs 5,00,001 to 10,00,000 Above 10,00,000 Nil 20% 30%
In the case of every other individual Resident Male or female < 60 years of age Non resident male or female whatever be their age HUF, AOP, BOI & AJP whether R or NR are also taxable at the rates given below
Upto Rs. 2,00,000 Rs. 2,00,001 to Rs. 5,00,000 Rs. 5,00,001 to Rs. 10,00,000 Above Rs. 10,00,000 Nil. 10 % 20 % 30 %
Surcharge No surcharge is leviable on the tax of an Individual Education Cess 2% of the Tax Secondary & Higher Education Cess 1% of the Tax
2. Effect of Vodafone judgement:

Finance Act 2012: w.r.e.f. 01/04/1962 Sec 9(1)(i): insertion of Explanation 4 & 5 Explanation 5.For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. Note: In CIT v Vodafone International Holding B.V the supreme court had held that Sec 9 does not directly state that shares of a foreign company which derives its value from shares of an indian company to be covered by Sec 9(1)(i) For example if X Ltd is a company in Country A and owns 90% shares in Y Ltd(Indian Company). Now if Z Ltd in Country C buys X Ltd in a transaction that takes place outside India, then technically nothing will be deemed to accrue or arise in India as per interpretation of the Supreme Court in the aforesaid judgement. However by amending the provisions of the section w.r.e.f. 01/04/1962 the aforesaid transaction will come within the ambit of deemed accrual and will thus be taxable in India since the shares of X Ltd derive its value from the shares of Y Ltd (which is a company located in India) The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
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However as per assurance of the Finance Minister in the budget speech this amendment will not be used to reopen cases where assessment orders have already been finalised prior to the budget
Finance Act 2012: w.r.e.f. 01/06/1976 Sec 9(1)(vi): insertion of Explanation 4 & 5 'Explanation 4.For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred. Note: In a lot of judicial rulings it had been held that supply of software amounts to sale and cannot be treated as Royalty thus not falling within the ambit of Sec 9(1)(i). To overrule these judgements the Act now clarifies that any payment for use of software. For example where X Ltd in India enters into an agreement with Y Ltd in USA and acquires software for running its telecom business in India for ` 10 crore. It was earlier claiming that it had purchased the software thus there will be no deemed accrual in the hands of Y Ltd as the payment did not come within the ambit of Royalty. However the amendment now clarifies that such payments will come within the ambit of sec 9(1)(vi) Explanation 5.For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not (a) the possession or control of such right, property or information is with the payer; (b) such right, property or information is used directly by the payer; (c) the location of such right, property or information is in India. Explanation 6.For the removal of doubts, it is hereby clarified that the expression "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret.
3. ADVANCE TAX: Sec 2(1) Advance Tax means the advance tax payable in accordance with the provisions of Chapter XVII-C. To ensure proper collection of tax the Income Tax Act, each assessee whose total advance tax payable is Rs. 10,000 is required to pay certain prescribed percentages of such advance Tax in quarterly instalment spread over the previous year. The assessee is required to estimate the Total Income which such assessee is likely to earn during that previous year. On this total income the assessee is required to calculate the estimated tax at rates as applicable given in Part III of the first schedule. If such tax , after deduction of TDS, is Rs. 10,000 or more, then the assessee shall be required to deposit advance tax as per the provisions of section 211 given below. In order to reduce the compliance burden of such senior citizens[ 60 years], it is proposed that a resident senior citizen, not having any income chargeable under the head "Profits and gains of business or profession", shall not be liable to pay advance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment of self assessment tax.
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4. COMPULSORY FILING OF INCOME TAX RETURN IN RELATION TO ASSETS LOCATED OUTSIDE INDIA Finance Act 2012 w.r.e.f AY 2012-13 has amended Sec 139(1) to add that furnishing of return of income under section 139 is now made mandatory for every resident and ordinary resident[R+OR] (does not apply to R+NOR) having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India.
Furnishing of return by such a resident would be mandatory irrespective of the fact whether the resident taxpayer has taxable income or not.
What is the Due Date for filing the ROI for PY 2012-13? A. in the case of an assessee being a company, which is required to furnish a report referred to u/s 92E (transfer pricing)- 30th Nov of the AY(30/11/2013 for PY 2012-13) B. Section 44AB Who is compulsorily required to get the Tax audit done under this Act? Only an assessee having income under the head Business or Profession and whose
Turnover of business for the relevant PY of the assessee is in excess of Rs. 1 crore 1 or Gross receipts from profession for the relevant PY is in excess of Rs. 25 lacs 2, ...then the assessee shall be compulsorily be required to get the tax audit done from a Chartered Accountant.
C. MANDATORY e-FILING OF INCOME TAX RETURN: PRESS RELEASE , DATED 2-7-2012 CBDT has issued notification dated 28th March 2012 vide which e-Filing has been made compulsory for Assessment Year 2012-13 onwards for : an individual or a Hindu undivided family, if his or its total income, or the total income in respect of which he is or it is assessable under the Act during the previous year, exceeds ten lakh rupees; and an individual or a Hindu Undivided Family (HUF), being a resident, having assets (including financial interest in any entity) located outside India or signing authority in any account located outside India and required to furnish the return in Form ITR-2 or ITR-3 or ITR-4. However, digital signature will not be mandatory for these taxpayers and they can also transmit the data in the return electronically and thereafter submit the verification of the return in Form ITR-V. Filing of returns electronically under digital signatures is already mandatory for any company required to furnish the return in Form ITR-6 or a firm required to furnish the return in Form ITR-5 or an individual or HUF required to furnish the return in Form ITR-4 and to whom provisions of section 44AB are applicable. The Income Tax Department has received a record number of 1.64 crore income tax returns electronically in the year 2011-12. E-filing is an easy, fast and secure method of filing of income tax return. The electronically filed returns are processed at the Centralized Processing Centre, Bengaluru. The processing for e-filed return is faster and taxpayers get their refunds, if due, quickly. The Department also provides some value added services like tracking of refunds, viewing tax credit status (Form 26AS), e-mail and SMS alerts regarding status of processing and refunds to taxpayers who e-file their returns.
1 2
For PY 2011-12 was 60 Lacs For PY 2011-12 was 15 Lacs
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II.Exempted Incomes:
Sec 20(22B)
EXEMPTIONS - NEWS AGENCY - NOTIFIED NEWS AGENCY

NOTIFICATION NO. 23/2012 [F.NO. 165/02/2010-ITA.I] S.O. 1359(E), DATED 15-6-2012
In exercise of the powers conferred by the clause (22B) of section 10 of the Income-tax Act, 1961, the Central Government hereby specifies the "The Press Trust of India Limited, New Delhi" as a news agency set up in India solely for collection and distribution of news, for the purpose of the said clause for two assessment years 2012-2013 to 2013-2014. 2. The notification is subject to the condition that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members.
Sec 10(23BBH) Finance Act 2012
Exemption to prasar bharati (broadcasting corporation of india) A specific exemption from income tax to the prasar bharati (broadcasting corporation of india) has been provided by inserting a new clause (23bbh) in section 10 of the act. This amendment will take effect from 1st april, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. Income of venture Capital Funds and Venture Capital Companies [from AY 2000-01] Sec 10(23FB) provided exemption to the income of a venture capital fund or company set up to raise funds for investment in a venture capital undertaking. Exemption is available only for the venture capital funds or company from income earned from investment in a venture capital undertaking.
a. Venture Capital Company [VCC] a company registered under the companies act and approved by SEBI. b. Venture Capital Fund [VCF] a fund that has been granted a certificate of registration by the SEBI c. Venture Capital Undertaking [VCU]- has been amended to define a venture capital undertaking to be a domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the business of nanotechnology, information technology relating to hardware and software development; seed research and development; bio-technology; research and development of new chemical entities in the pharmaceutical sector; production of bio-fuels; building and operating composite hotelcum-convention centre with seating capacity of more than three thousand; or developing or operating and maintaining or developing, operating and maintaining any infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA; or dairy or poultry industry.
Sec 10(23FB)
The following clause (c) shall be substituted for the existing clause ( c) of Explanation 1 to clause (23FB) of section 10 by the Finance Act, 2012, w.e.f. 1-42013 : "venture capital undertaking" means a venture capital undertaking referred to in the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996
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made under the Securities and Exchange Board of India Act, 1992; Explanation 2 clarifies that the income of the VCC or the VCF shall continue to be exempt if the shares of the VCU , in which the VCC or the VCF has made the initial investment are subsequently listed on a RSE in India Comments on Finance Bill 2012 TDS provisions are not applicable to any payment made by the VCF to its investor and payment by VCC to the investor is exempted from Dividend Distribution Tax (DDT). Sec 10(46) any specified income( as notified by the Central Government in the official gazette) arising to a body or authority or Board or Trust or Commission (by whatever name called) which (a) has been established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public; (b) is not engaged in any commercial activity; and (c) is notified by the Central Government in the Official Gazette for the purposes of this clause.
the Central Government, hereby notifies the National Iranian Oil Company, as the foreign company for exemption from 01/04/2012
NOTIFICATION NO. 22/2012 [F.NO. 142/14/2012-SO (TPL)] S.O. 1324(E), DATED 14-6-2012 NOTIFICATION NO. 11/2012 [F.NO.142/15/2011-SO (TPL)]/S.O. 343(E), DATED 28-2-2012 -
the Central Government hereby notifies for the purposes of the said clause, the National Skill Development Corporation, a body constituted by the Central Government, in respect of the specified income arising to the said Corporation , as follows: long-term or short-term capital gain out of investment in an organisation for skill development; dividend and royalty from skill development venture supported or funded by National Skill Development Corporation; interest on loans to Institutions for skill development; interest earned on fixed deposits with banks; and amount received in the form of Government grants. This Notification shall be applicable for the specified income of the National Skill Development Corporation for the financial year 2011-12 to financial year 2015-16.
Sec 10(47)
Sec 10(48)
Any income of an infrastructure debt fund, set up in accordance with the guidelines as may be prescribed, which is notified by the Central Government in the Official Gazette for the purposes of this clause. Any income received in India in Indian currency by a foreign company on account of sale of crude oil to any person in India: Provided that a) receipt of such income in India by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government; b) having regard to the national interest, the foreign company and the agreement or
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arrangement are notified by the Central Government in this behalf; and c) the foreign company is not engaged in any activity, other than receipt of such income, in India.
NOTIFICATION NO. 22/2012 [F.NO. 142/14/2012-SO (TPL)] S.O. 1324(E), DATED 14-6-2012 - the Central Government, having regard to
the national interest, hereby notifies for the purposes of the said clause , the National Iranian Oil Company, as the foreign company as eligible for exemption from 01/04/2012
III.
Business & Profession:
5. Sec 35CCC Weighted deduction in respect of expenditure incurred on notified agricultural extension project (i) In order to incentivize the business entities to provide better and effective agriculture extensive services, new section 35CCC has been inserted to provide a weighted deduction of a sum equal to 150% of expenditure incurred by an assessee on agricultural extension project in accordance with the prescribed guidelines. The agricultural extension project eligible for this weighted deduction shall be notified by the Board. In case deduction in respect of such expenditure is allowed under this section then, no deduction in respect of such expenditure shall be allowed under any other provisions of the Act in the same or any other assessment year.
(ii) (iii)
6. Sec 35CCD Weighted deduction in respect of expenditure incurred by companies on notified skill development project (i) The National Manufacturing Policy (NMP) has been notified by the Department of Industrial Policy & Promotion (DIPP) vide Press Note dated 4th November, 2011. As per the notified NMP, the government will provide weighted standard deduction of 150% of the expenditure (other than land or building) incurred on Public Private Partnership (PPP) project for skill development in the ITIs in manufacturing sector. This is to encourage private sector to set up their own institution in coordination with National Skill Development Corporation. In order to encourage companies to invest on skill development projects in the manufacturing sector, a new section 35CCD has been inserted to provide for a weighted deduction of a sum equal to 150% of the expenditure (not being expenditure in the nature of cost of any land or building) on skill development project incurred by the company in accordance with the prescribed guidelines. The skill development project eligible for this weighted deduction shall be notified by the Board. In case deduction in respect of such expenditure is allowed under this section then, no deduction of such expenditure shall be allowed under any other provisions of the Act in the same or any other assessment year.
(ii)
(i) (iii)
7. Sec 35AD: Expenditure of capital nature for specified business Eligible Businesses (a) Setting up and operating cold chain facilities on or after the 1st day of April, 2009.
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(b) Setting up and operating warehousing facilities for storage of agricultural on or after the 1st day of April, 2009. (c) Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network on or after the 1st day of April, 2007
Inserted by Finance Act 2010
(d) Building and operating a new hotel of two-star or above category on or after 01/04/2010
Finance Act 2012: Owner of a hotel eligible for investment-linked tax deduction even if he transfers the operation of the hotel to another person [Section 35AD(6A)] As per section 35AD, as it stands at present, an assessee engaged in the business of building and operating a hotel, of 2-star or above category in India, becomes eligible for deduction under section 35AD only if he owns and operates the hotel himself. However, on account of the franchisee business structure which is prevalent in hotel industry, the owner of the hotel generally outsources the operation of the hotel to another person. Therefore, in order to clarify that the hotel owner would continue to be eligible for the investment-linked tax deduction in such cases, new sub-section (6A) provides that where the assessee builds a hotel of two-star or above category as classified by the Central Government and subsequently, while continuing to own the hotel, transfers the operation of the said hotel to another person, the assessee shall be deemed to be carrying
(e) Building and operating a new hospital with at least one hundred beds for patients on or after 01/04/2010 (f) Developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, on or after 01/04/2010
(g) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed; and (h) production of fertilizer in India. The dates of commencement of the specified business - the date of commencement of operations in the case of the two specified businesses of affordable housing projects and production of fertilizer in a new plant or in a newly installed capacity in an existing plant shall be on or after 1st April, 2011.
(i) setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962; (j) bee-keeping and production of honey and beeswax; and (k) setting up and operating a warehousing facility for storage of sugar. if the date of commencement of operations of such business is on or after 1 st April, 2012. Analysis: a) Deduction: 100 per cent deduction: would be allowed in respect of the whole of any expenditure of capital nature incurred, wholly and exclusively, for the purposes of the specified business during the previous year in which such expenditure is incurred. The expenditure of capital nature shall not include any expenditure incurred on acquisition of any land or goodwill or financial instrument. Further, the expenditure incurred, wholly and exclusively, for the purpose of specified business prior to commencement of operation would be allowed as deduction during the previous year in which the assessee commences operation of his specified business provided that such amount incurred prior to
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commencement should be capitalized in the books of account of the assessee on the date of commencement of its operations. 150% deduction: Weighted investment-linked tax deduction for certain specified businesses [Section 35AD(1A)] The following specified businesses would be eligible for weighted deduction @150% of the capital expenditure (including capital expenditure incurred before commencement of operations and capitalized in the books of account on the date of commencement of operations) under section 35AD(1A), if they commence operations on or after 1st April, 2012 (i) setting up and operating a cold chain facility; (ii) setting up and operating a warehousing facility for storage of agricultural produce; (iii) building and operating, anywhere in India, a hospital with at least 100 beds for patients; (iv) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government. Such scheme should be notified by the CBDT in accordance with the prescribed guidelines; and (v) production of fertilizer in India. b) The assessee shall not be allowed any deduction in respect of the specified business under the provisions of Chapter VIA [Section 80IA to 80JJAA]. Where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading C.Deductions in respect of certain incomes in relation to such specified business for the same or any other assessment year. No deduction in respect of the expenditure in respect of which deduction has been claimed shall be allowed to the assessee under any other provisions of the Income-tax Act. Sec 28(vii) Sale of asset for which deduction has been claimed: Any sum received or receivable on account of any capital asset , in respect of which deduction has been allowed under section 35AD, being demolished, destroyed, discarded or transferred shall be treated as income of the assessee and chargeable to Income-tax under the head profits and gains of business or profession. Sec 73A: Any loss computed in respect of the specified business shall not be set off except against profits and gains, if any, of any other specified business. To the extent the loss is unabsorbed the same will be carried forward for set off against profits and gains from any specified business in the following assessment year and so on.
c) d)
e)
8. Sec 40(a)(ia) : Finance Act 2012: Certain payment allowed even if TDS is not deducted: has been amended to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee.
These beneficial provisions are proposed to be applicable only in the case of resident payee. Conditions to be fulfilled by the resident payee are i. ii. the payer has furnished a ROI u/s 139(1) he has taken into account such sum for computing the income in such return of income
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iii.
he has paid tax on the income declared by him in the ROI
the payer must furnish a certificate in the prescribed from from a chartered accountant What would be the answer if X Ltd. Does not pay TDS, however Mr Y files his ROI before the due date u/s 139(1) and shows the interest as his income and pays tax on the same.[Finance Act 2012] In such a case X Ltd will be entitled to the deduction of Rs 100,000 in the PY 2012-13. Since even TDS is paid after the due date u/s 200(1) and after the due date u/s 139(1), however as per amended Sec 200(1) X Ltd, for the purposes of allowability of the deduction will not be treated as an assesse in default and the TDS will be deemed to have been deducted and paid before the due date u/s 200(1) and thus the expenditure will be allowed 9. Sec 32 (iia) in the case of any new machinery or plant ( other than ships and aircraft ), acquired by an assessee engaged in the business of manufacture or production any article or thing or Generation and distribution of power [Finance Act 2012], a further sum equal to 20% of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : 10. Sec 44AD: It is not applicable to a professional referred to u/s 44AA(1), a person carrying on any agency business or a person earning income in the nature of commission or brokerage Finance Act 2012 w.r.e.f 01/04/2011 IV. CAPITAL GAINS:
11. Sec 50D: Fair market value[FMV] of the capital asset on the date of transfer to be taken as sale consideration[FVC], in cases where the consideration is not determinable [Section 50D] Sec 50D. Fair market value deemed to be full value of consideration in certain cases. - Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. Analysis: (i) Recently, some of the courts have ruled that, in case of transfer of a capital asset for which the sale consideration is not determinable, the gain arising from transfer of such asset shall not be taxable, due to failure of the machinery provision. Consequently, a new section 50D has been inserted by the Finance Act, 2012 providing that, in case where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of consideration received or accruing as a result of such transfer. (Effective from A.Y. 2013-14)
(ii)
12. Reference to Valuation Officer [Sec 55A] :

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With a view of ascertaining the fair market value of a capital asset for the purposes of computing capital gains, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer when the AO feels necessary. Such valuation officer will be appointed by the Income Tax authorities. The reference can be made in the following situations
a.
Where value claimed by the assessee is in accordance with the valuation of a registrated valuer (registered private valuer - not binding on the AO), but the AO is of the opinion that such valuation is less than the FMV
b. Where the AO feels that the FMV of the asset exceeds the value declared by more than 25,000 or 15% whichever is less. c.
Where the AO feels that having regard to the nature of the asset and other relevant circumstances, it is necessary to make a reference to the valuation officer .
NOTE: The Determination of the FMV for the purposes of calculating capital gains is restricted to Sec 45(1A), 45(2), 45(4), 46(2), 55(FMV on 01/04/81), Sec 2(47) (for exchange), Sec 50C, where there is a reference to the market value being relevant to computation of capital gains or loss. Finance Act 2012: Assessing Officer enabled to make a reference to the Valuation Officer in case the assessee has taken the fair market value as the cost of acquisition of the asset in accordance with the estimate made by the Registered Valuer [Section 55A] (i). In a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, the Assessing Officer may refer to the Valuation Officer under section 55A if he is of the opinion that the value of asset claimed by the assessee is less than the fair market value of the asset i.e., in cases where the fair market value is taken to be the sale consideration of the asset. However, so far, under the existing provisions, where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, the Assessing Officer could not refer a case to the Valuation Officer where the fair markevalue is taken as the cost of acquisition of the asset. For example, let us take a case where the asset is acquired before 1st April, 1981 and the fair market value of the asset as on 1st April, 1981 is taken as the cost of acquisition at the option of the assessee. The assessee may declare a higher fair market value as cost of acquisition so as to reduce his capital gains and consequent tax liability. (ii). Consequently, section 55A has been amended to provide that the Assessing Officer may refer to the Valuation Officer in a case where the value of asset, as claimed by the assessee is in accordance with the estimate made by a registered valuer, and the Assessing Officer is of the opinion that the value so claimed is at variance with the fair market value of the asset. (iii). As a result, the Assessing Officer can now make a reference to the Valuation Officer even in a case where the fair market value of the asset as on 01.04.1981 is taken as the cost of the asset , if he is of the view that there is any variation between the value as on 01.04.1981 claimed by the assessee in accordance with the estimate made by a registered valuer and the fair market value of the asset on that date. (Effective from 1st July, 2012)
13
13. Exemption for investment in a SME [Sec 55A] :

Section Eligible Capital gains - Long term[LT] or short term [ST] 54GB
LTCG Purchasing equity shares of a newly incorporated eligible company engaged in manufacture Residential Property [Building or a plot of land]
Situation
Transferred Eligible asset Purchased Eligible Person i.e. transferor should be Equity shares of eligible company..the company must use the money to buy new P&M Individual HUF NFVC must be used by Ind/HUF before the due date of filing the ROI The Company can purchase P&M within 1 year from the date subscription of equity shares YES (for company) If the equity shares (ind/HUF) or the new P&M (Company) are sold within 5 years from the date of their acquisition then the amount of capital gains exempt earlier will be deemed to be income of the Ind/HUF of the year in which the asset(shares or P&M) is sold
Period within which to purchase the eligible asset
Is deposit money before due date for filing the return of income is compulsory?
Withdrawal of exemption (on transfer of new asset within 3 years of its purchase)
14
14. Sec 47(xiii)/(xiv): Finance Act 2012: Transfer of a Firm to a company fulfilling conditions of Sec 47(xiii) has been added to Sec 49(1), thus (i). cost of assets[COA] to the company will be cost of assets to the firm. (ii). Further since the transfer is covered by Sec 49(1) it is automatically covered by Sec 2(42A) explanation(b) thus the period of holding in the hands of the company will include the period of holding in the hands of the firm 15. Finance Act 2012:Definition of Amalgamation Modification in the conditions to be satisfied in case of amalgamation and demerger for not being regarded as transfer [Section 47(vii) & 2(1B) & 2(19AA)] (i) As per section 47(vii), any transfer by a shareholder in a scheme of amalgamation of a capital asset being a share or shares held by him in the amalgamating company is not regarded as a transfer if, (a) any transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company, and (b) the amalgamated company is an Indian company. (ii) However, in a case where a subsidiary company amalgamates with the holding company, it is not possible to satisfy the condition mentioned in (a) above, i.e., the requirement of the amalgamated company (the holding company) to issue shares to the shareholders of the amalgamating company (subsidiary company), since the holding company is itself the shareholder of the subsidiary company and cannot issue shares to itself. (iii) Therefore, section 47(vii) has been amended so as to exclude the requirement of issue of shares to the shareholder where such shareholder itself is the amalgamated company. However, the amalgamated company will continue to be required to issue shares to the other shareholders of the amalgamating company.
15
For example, let us take a case where A Ltd. holds 60% of shares in B Ltd. B Ltd. amalgamates with A Ltd. Since A Ltd. itself is the shareholder of B Ltd., A Ltd., being the amalgamated company, cannot issue shares to itself. However, A Ltd. has to issue shares to the other shareholders of B Ltd. (iv) Likewise, in the case of a demerger, there is a requirement under section 2(19AA)(iv) that the resulting company has to issue its shares to the shareholders of the demerged company on a proportionate basis. However, it is not possible to satisfy this condition where the demerged company is a subsidiary company and the resulting company is the holding company. Therefore, section 2(19AA) has been amended to exclude the requirement of issue of shares where resulting company itself is a shareholder of the demerged company. However, the resulting company would still have to issue shares to the other share holders of the demerged company. 16. Finance Act 2012: To cover cases like the Vodafone case Section 2(14) defines a capital asset to mean property of any kind held by an assessee, whether or not connected with his business or profession. An Explanation has been inserted to clarify that property includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever. Section 2(47) provides an inclusive definition of transfer, in relation to a capital asset. Explanation 2 has been inserted below section 2(47) to clarify that transfer includes and shall be deemed to have always included (1) disposing of or parting with an asset or any interest therein, or
- directly or indirectly,
- absolutely or conditionally, - voluntarily or involuntarily (2) creating any interest in any asset in any manner whatsoever
V. OTHER SOURCES: 17. Sec 56(2)(vii) : member of HUF is a relative 18. Finance Act 2012: Sec 56(2)(viib): Where a company(not being a company in which the public are substantially interested) receives, in any previous year, from any person being a resident, consideration for issue of shares in excess of the face value of such shares, the aggregate consideration received for such shares (-) the fair market value of the shares shall be chargeable to income-tax under the head "Income from other sources" of the company However, the said new clause 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. It is further proposed that 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.
16
19. Undisclosed Incomes:

a. Sec 68 unexplained cash credits where there is any money standing as a credit for which the assessee cannot give satisfactory explanation, it will be treated as income of the year of receipt Example: unsecured loans, gifts, share application money or any other credit for which the recipient cannot explain the source of receipt Finance Act 2012: Judicial pronouncements, while recognizing that the pernicious practice of conversion of unaccounted money through the route of investment in the share capital of a company needs to be prevented, Sec 68 of the Act has been amended to provide that the nature and source of any sum credited, as share capital, share premium 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 proposed 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). b. Sec 69 unexplained investment where there is any investment found in possession of the assessee for which the assessee cannot offer satisfactory explanation then the value of such investment will be treated as income of the year in which it is found. Sec 69A unexplained money - where there is any money is found in possession of the assessee for which the assessee cannot offer satisfactory explanation then such amount will be treated as income of the year in which it is found. Sec 69B Amount Of investments etc. not fully disclosed in the books of accounts - where there is any investment found in possession of the assessee the value of which is not fully disclosed and for which the assessee cannot offer satisfactory explanation then the value of such investment less disclosed will be treated as income of the year in which it is found. Sec 69C unexplained expenditure where there is any expenditure shown by the assessee for which the assessee cannot offer satisfactory explanation then such expenditure will be treated as income of the year in which it is found. Sec 69D Amount borrowed or repaid on a hundi Where any amount is borrowed or repaid on a hundi from any person otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be deemed to be the income of the person for the previous year in which the amount was borrowed or repaid, as the case may be.
c.
d.
e.
f.
Unexplained money, investments etc. to attract maximum marginal rate of tax @30% [Sec 115BBE]
(i)
At present, the unexplained money, investments, expenditure etc. which are deemed as income under section 68 or section 69 or section 69A or section 69B or section 69C or section 69D, are subject to the normal rates of tax applicable to the assessee. In case of individuals, HUFs etc., there is a benefit given by way of basic exemption limit, and slab rate of tax. Therefore, there were cases where the unexplained money, though deemed as income, was not subject to tax on account of the amount being lower than the basic exemption limit or subject to tax at a lower slab rate of, say, 10%. In order to control laundering of unaccounted money by availing the benefit of basic exemption limit, the unexplained money, investment, expenditure, etc. deemed as income under section 68 or section 69 or section 69A or section 69B or section 69C or section 69D would now be taxed at the maximum marginal rate of 30% (plus surcharge and cesses) with effect from A.Y.2013-14. No basic exemption or allowance or expenditure shall be allowed to the assessee under any provision of the Income-tax Act, 1961 in computing such deemed income.
(ii)
(iii)
(iv)
17
VI.
DEDUCTIONS:
20. Sec 80D: Medical Insurance premium 80D Deduction in respect of medical insurance premium paid by a mode other than cash for insuring the health of the assessee a. Individual - himself or his spouse or dependent children. b. In case of HUF - for any member of HUF For premium paid for the medical insurance of parents, whether dependant or not.
Individual or HUF whether resident or nonresident
Actual amount paid by any mode other than cash subject to max. Rs. 15,000 In addition to the above a deduction for actual amount paid by any mode other than cash subject to maximum Rs. 15,000
Where the person for whom the premium is paid is a senior citizen Either the individual or spouse or parent refer to Annexure III
For an individual resident in India and is of the age of 60 years or more
The limits above will be increased to 20,000 in respect of premiums paid for the senior citizen
Finance Act 2010: Contribution to the Central Government Health Scheme (CGHS): CGHS is a medical facility available to serving and retired Government servants. This facility is similar to the facilities available through health insurance policies. A deduction is now allowed in respect of any contribution made to CGHS by including such contribution under the provisions of section 80D. The deduction will be within the limit of 15,000/20,000 as prescribed. Finance Act 2012: deduction is now allowed within the limit of 15,000/20,000 for any payment made on account of preventive health check-up of the assessee or his family however the maximum deduction allowable in respect of expenditure on preventive health check-up of self, spouse, dependent children and parents would be Rs 5,000. Such amount can be paid in cash as well Mode of payment: Further it is provided that, for claiming such deduction under section 80D, the payment can be made (1) by any mode, including cash, in respect of any sum paid on account of preventive health check-up (2) by any mode other than cash, in all other cases
21. Sec 80CCG: One time deduction for investment by a resident individual in listed equity shares as per notified scheme In order to encourage flow of savings in financial instruments in the domestic capital market Finance Act 2012 has introduced a section 80CCG (i) (ii) It is available to a resident individual For purchase of listed equity shares in a previous year in accordance in a scheme notified by the Central Government
18
(iii) (iv)
The deduction will be available only for one year. Thus if a deduction u/s 80CCG has been claimed in one year no deduction under this section can be claimed for any other year. The deduction would be a. 50% of amount invested in such equity shares or b. Rs 25,000, whichever is lower. Thus a maximum deduction of Rs 25,000 would be available on investment of Rs 50,000 in such listed equity shares.
(v)
The following conditions have to be satisfied for claiming the above deduction (a) The gross total income[GTI] of the assessee for the relevant assessment year should be Rs 10 lakh. (b) The assessee should be a new retail investor as per the requirement specified under the notified scheme. (c) The investment should be made in notified listed shares as may be specified under the notified scheme. (d) The minimum lock-in period in respect of such investment is 3 years from the date of acquisition in accordance with the notified scheme. In addition to the above, other conditions may also be prescribed, subject to fulfillment of which, deduction under section 80CCG can be claimed If the individual, after having claimed such deduction, fails to comply with any of the conditions in any previous year, say, he sells the shares before three years, then, the deduction earlier allowed shall be deemed to be the income of the previous year in which he fails to comply with the condition. The income shall, accordingly, be liable to tax in the assessment year relevant to such previous year.
22. Deduction in respect of interest on deposits in savings accounts [New Section 80TTA] Section 80TTA has been introduced to provide that in case the gross total income of an assessee, a. being an individual or a Hindu Undivided Family,
b. includes any income by way of an interest on deposits in a saving account (not being time deposits,
which are deposits repayable on expiry of fixed periods), c. deduction up to ` 10,000 in aggregate shall be allowed while computing the total income of such assessee. d. Such deduction shall be allowed in case the saving account is maintained with: i) a banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act); ii) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or iii) a post office. However, if the aforesaid income is derived from any deposit in a savings account held by, or on behalf of, a firm, an AOP/BOI, no deduction shall be allowed in respect of such income in computing the total income of any partner of the firm or any member of the AOP or any individual of the BOI.
19
In effect the deduction under this section shall be allowed only in respect of the income derived in form of the interest on the saving bank deposit (other than time deposits) made by the individual or Hindu Undivided Family directly. 23. 80G & 80GGA: Donations given more than 10,000 must be in a mode other than cash(i.e cash and self cheque will not be allowed VII. TDS:
24. Sec 194E: Rate of tax deduction at source under section 194E increased from 10% to 20% and payment to a nonresident entertainer included within the scope of section 194E Section 115BBA has been amended by the Finance Act, 2012 to increase the rate of tax in respect of income specified therein from 10% to 20% and to also include within its scope, income of non-resident entertainers from performance in India. Therefore, the following income shall be charged to tax at the rate of 20% as per the provisions of section 115BBA w.e.f. 1st July, 2012: a. the income of a non-resident sportsman (including an athlete) who is not a citizen of India, by way of participation in any game (other than a game the winnings from which are taxable under section 115BB i.e lottery etc) or sport in India or advertisement or any contribution of article in relation to any game or sport in India; or b. any amount guaranteed to be paid or payable to any non-resident sports association or institution in relation to any game (other than a game the winnings from which are taxable under section 115BB) or sport played in India; or c. income of a non-resident entertainer who is not a citizen of India, received or receivable from his performance in India 25. Sec 194J:
Tax to be deducted under section 194J on any remuneration paid to a director, other than in the nature of salary on which tax is deductible under section 192
a. At present, a company, being an employer, is required to deduct tax at the time of payment of salary to its employees including Managing director/Whole time director. However, there is no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. b. Therefore, section 194J has been amended to provide that tax is required to be deducted@10% on any remuneration or fees or commission, by whatever name called, paid to a director, which is not in the nature of salary on which tax is deductible at source under section 192.
(Effective from 1st July, 2012)
Section 193
1. SUMMARY OF AMENDMENTS Upto 30.6.2012 On or after 1.7.2012 Exemption under clause (v) of the proviso Exemption under clause (v) of the proviso available only in respect of payment of interest available only in respect of payment of (i) on debentures listed in a recognized stock interest exchange; (i) on debentures, whether or not listed in a (ii) to resident individuals; recognized stock exchange; (iii) not exceeding ` 2500 in aggregate (ii) to resident individuals and HUFs
20
(iii) not exceeding ` 5,000 in aggregate.
194E
TDS@10% on certain payments or credits to (i) non-resident sportsman, who is not a citizen of India; or (ii) non-resident sports associations or institutions.
194J
Directors remuneration, fees and commission not included within the scope of section 194J.
194LA
TDS provisions attracted if payment or aggregate payment of compensation on compulsory acquisition of immovable property exceeds ` 1 lakh.
TDS @ 20% on certain payments or credits to (i) non-resident sportsman who is not a citizen of India; or (ii) non-resident sports associations or institutions; or (iii) non-resident entertainer who is not a citizen of India. Directors remuneration, fees and commission, by whatever name called, other than in the nature of salary on which tax is deductible under section 192, included within the scope of section 194J. TDS provisions attracted if payment or aggregate payment of compensation on compulsory acquisition of immovable property exceeds ` 2 lakh.
VIII. Charitable Trust: Finance Act 2012: If in one year the proceeds exceed Rs 25 lacs the trust will not be eligible for the exemption u/s 11 for that year even if the registration certificate u/s 12AA still exists
21
Go Solve
Questions have been given in the modules, these are given here only for last minute revision of questions on amendments
Sec 32: Additional Depreciation Lights and Power Ltd. engaged in the business of generation of power, furnishes the following particulars pertaining to PY 201213. Compute the depreciation allowable under section 32 for AY 2013-14, while computing its income under the head Profits and gains of business or profession. The company has opted for the depreciation allowance on the basis of written down value. 1. 2. 3. 4. 5. 6. 7. Opening Written down value of Plant and Machinery (15% block) as on 01/04/2012 (Purchase 5,78,000 value ` 8,00,000) Purchase of second hand machinery (15% block) on 29/12/2012 for business purpose 2,00,000 Machinery Y (15% block) purchased and installed on 12/07/2012 for the purpose of power 8,00,000 generation Acquired and installed for use a new air pollution control equipment on 31/07/2012 2,50,000 New air conditioner purchased and installed in office premises on 08/09/2012 3,00,000 New machinery Z (15% block) acquired and installed on 23/11/2012 for the purpose of 3,25,000 generation of power Sale value of an old machinery X, sold during the year (Purchase value Rs 4,80,000, WDV as on 3,10,000 01/04/2012 Rs 3,46,800) [Ans :Total depreciation 15% Block - 4,37,075 100% Block - 2,50,000]
Sec 35CCC & 35CCD Isac limited is a company engaged in the business of biotechnology. The net profit of the company for the financial year ended 31/03/2014 is Rs 15,25,890 after debiting the following items: 1. Purchase price of raw material used for the purpose of in-house research and development 1,80,000
2.
Purchase price of asset used for in-house research and development wrongly debited to profit and loss account: (1) Land (2) Building 5,00,000 3,00,000 1,50,000
3. 4.
Expenditure incurred on notified agricultural extension project Expenditure on notified skill development project: (1) Purchase of land (2) Expenditure on training for skill development 5. Expenditure incurred on advertisement in the souvenir published by a political party
2,00,000 2,50,000
75,000
Compute the income under the head Profits and gains of business or profession for the AY 2013-14 of Isac Ltd. The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
22
Answer Computation of income under the head Profits and gains of ` business or profession for the AY 2013-14 Particulars Net profit as per profit and loss account Add: Items debited to profit and loss account, but to be disallowed Purchase price of Land used in in-house research and development - being capital expenditure not allowable as deduction under section 35 Purchase price of building used in in-house research and development - being capital expenditure, 100% of which is allowable as deduction under section 35(1)(iv) read with section 35(2) Expenditure incurred on notified agricultural extension project (to be treated separately) Expenditure incurred on notified skill development project Purchase of land - being capital expenditure not qualifying for deduction under section 35CCD Expenditure incurred on notified skill development project Expenditure on training for skill development (to be treated separately) Expenditure incurred on advertisement in the souvenir published by a political party not allowed as deduction as per section 37(2B) Less:
` 15,25,890
5,00,000
1,50,000 2,00,000
2,50,000
75,000
11,75,000
Purchase price of raw material used for in-house research and development qualifies for 200% deduction under section 35(2AB). Since, it is already debited to profit and loss account balance 100% is allowed. Expenditure incurred on notified agricultural extension project qualifies for 150% deduction under section 35CCC.
27,00,890 1,80,000
Less: Less:
2,25,000
Expenditure incurred on training for skill development in a notified skill development project qualifies for 150% deduction under section 35CCD. Profit and gains from business
3,75,000
7,80,000 19,20,890
Note : The expenditure incurred on advertisement in the souvenir published by a political party is disallowed as per section 37(2B) while computing income under the head Profit and Gains of Business or Profession but the same would be allowed as deduction under section 80GGB from the gross total income of the company. Sec 35A Sec 35CCC & 35CCD Mr. A commenced operations of the businesses of setting up a warehousing facility for storage of food grains, sugar and edible oil on 01/04/2012. He incurred capital expenditure of Rs 80 lakh, Rs 60 lakh and Rs 50 lakh, respectively, on purchase of land and building during the period January, 2012 to March, 2012 exclusively for the above businesses, and capitalized the same in its books of account as on 1st April, 2012. The cost of land included in the above figures are RS 50 lakh, Rs 40 lakh and Rs 30 lakh, respectively. Further, during the PY 2012-13, it incurred capital expenditure of Rs 20 lakh, Rs 15 lakh & Rs 10 lakh, respectively, for extension/ reconstruction of the building purchased and used exclusively for the above businesses. Compute the income under the head Profits and gains of business or profession for the AY 2013-14 and the loss to be carried forward, assuming that Mr. A has fulfilled all the conditions specified for claim of deduction under section 35AD and has not claimed any deduction under Chapter VI-A under the heading C. Deductions in respect of certain incomes. The profits from the business of setting up a warehousing facility (before claiming deduction under section 35AD and section 32) for the AY 2013-14 is Rs 16 lakhs, Rs 14 lakhs and Rs 31 lakhs, respectively.
23
Particulars
Profit from business of setting up of warehouse for storage of edible oil (before providing for depreciation under section 32) Less: Depreciation under section 32 10% of ` 30 lakh, being (` 50 lakh ` 30 lakh + ` 10 3 lakh) Income chargeable under Profits and gains 28 from business or profession Computation of income/loss from specified business under section 35AD Particulars FG Sugar Total ` (in lakhs) (A) Profits from the specified 16 14 30 business of setting up a warehousing facility (before providing deduction under section 35AD) Less: Deduction under section 35AD (B) Capital expenditure incurred prior 30 20 50 to 1.4.2012 (i.e., prior to commencement of business) and capitalized in the books of account as on 1.4.2012 (excluding the expenditure incurred on acquisition of land) = ` 30 lakh (` 80 lakh ` 50 lakh) and ` 20 lakh (` 60 lakh ` 40 lakh) (C) Capital expenditure incurred 20 15 35 during the P.Y.2012-13 (D) Total capital expenditure (B + 50 35 85 C) (E) Deduction under section 35AD 150% of capital expenditure (food grains) 75 100% of capital expenditure (sugar) 35 Total deduction u/s 75 35 110 35AD for A.Y.201314 (F) Loss from the specified (59) (21) (80) business of setting up and operating a warehousing facility (after providing for deduction under section 35AD) to be carried forward as per section 73A (A-E) Notes: (1) Weighted deduction@150% of the capital expenditure is available under section 35AD for A.Y.2013-14 in respect of specified business of setting up and operating a warehousing facility for storage of agricultural produce which commences operation on or after 01.04.2012. Food grains constitute agricultural produce and therefore, the capital expenditure incurred for setting up a warehousing facility for storage of food grains is eligible for weighted deduction@150% under section 35AD. (2) Deduction of 100% of the capital expenditure is available under section 35AD for A.Y.2013-14 in respect of specified business of setting up and operating a warehousing facility for storage of sugar, where operations are commenced on or after 01.04.2012. The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
` (in lakhs) 31
24
(3) (4) (5)
However, since setting up and operating a warehousing facility for storage of edible oils is not a specified business, Mr. A is not eligible for deduction under section 35AD in respect of capital expenditure incurred in respect of such business. However, Mr. A can claim depreciation@10% under section 32 in respect of the capital expenditure incurred on buildings. It is presumed that the buildings were put to use for more than 180 days during the P.Y.2012-13. Loss from a specified business can be set-off only against profits from another specified business. Therefore, the loss of ` 80 lakh from the specified businesses of setting up and operating a warehousing facility for storage of food grains and sugar cannot be setoff against the profits of ` 28 lakh from the business of setting and operating a warehousing facility for storage of edible oils, since the same is not a specified business. Such loss can, however, be carried forward indefinitely for set-off against profits of the same or any other specified business
Sec 56(2)(vii) / Sec 49(1) & (4) Mr A, a dealer in shares, received the following without consideration during the PY 2012-13 from his friend Mr. B, (i). Cash gift of Rs.75,000 on his anniversary, 15th April, 2012. (ii). Bullion, the fair market value of which was Rs.60,000, on his birthday, 19 th June, 2012. (iii). A plot of land at Faridabad on 1st July, 2012, the stamp value of which is Rs.5 lakh on that date. Mr.B had purchased the land in April, 2007. Mr.A purchased from his friend C, who is also a dealer in shares, 1000 shares of X Ltd. @ Rs.400 each on 19 th June, 2012, the fair market value of which was Rs.600 each on that date. Mr.A sold these shares in the course of his business on 23rd June, 2012. Further, on 1st November, 2012, Mr. A took possession of property (building) booked by him two years back at Rs.20 lakh. The stamp duty value of the property as on 1st November, 2012 is Rs.32 lakh. On 1st March, 2013, he sold the plot of land at Faridabad for Rs.7 lakh. Compute the income of Mr. A chargeable under the head Income from other sources and Capital Gains for AY 2013-14. Computation of Income from other sources of Mr.A for the AY 2013-14 Particulars Rs. (1) (2) Cash gift is taxable under section 56(2)(vii), since it exceeds Rs.50,000 Bullion has been included in the definition of property w.e.f. 1.6.2010. Therefore, when bullion is received without consideration after 1.6.2010, the same is taxable, since the aggregate fair market value exceeds Rs.50,000 Stamp value of plot of land at Faridabad, received without consideration, is taxable under section 56(2)(vii) Difference of Rs.2 lakh in the value of shares of X Ltd. purchased from Mr. C, a dealer in shares, is not taxable as it represents the stock-in-trade of Mr. A. Since Mr. A is a dealer in shares and it has been mentioned that the shares were subsequently sold in the course of his business, such shares represent the stock-in-trade of Mr. A. Appreciation in the value of immovable property between the time of its booking and its actual registration is outside the scope of section 56(2)(vii). 75,000 60,000
(3) (4)
5,00,000 -
(5)
6,35,000
Income from Other Sources Computation of Capital Gains of Mr.A for the A.Y.2013-14 Sale Consideration Less: Cost of acquisition [deemed to be the stamp value charged to tax under section 56(2)(vii) as per section 49(4)] Short-term capital gains 7,00,000 5,00,000 2,00,000
25
Sec 54GB: Mr. Akash sold his residential property on 2nd February, 2013 for Rs 90 lakh and paid brokerage@1% of sale price. He had purchased the said property in May 2000 for Rs 24,36,000. In June, 2013, he invested Rs 75 lakh in equity of A (P) Ltd., a newly incorporated SME manufacturing company, which constituted 63% of share capital of the said company. A (P) Ltd. utilized the said sum for the following purposes (a) Purchase of new plant and machinery during July 2013 Rs 65 lakh (b) Included in (a) above are Rs 6 lakh for purchase of computers and Rs 8 lakh for purchase of cars. (c) Air-conditioners purchased for Rs 1 lakh, included in the (a) above, were installed at the residence of Mr. Akash. (d) Amount deposited in specified bank on 28.9.2013 Rs 10 lakh Compute the chargeable capital gain for the AY 2013-14. Assume that Mr. Akash is liable to file his return of income on or before 30th September, 2013 and he files his return on 29.09.2013 Computation of taxable capital gains for AY 2013-14 Particulars Full value of consideration Less: Expenses on transfer (1% of the gross consideration) Net Full value of consideration Less: Indexed cost of acquisition (Rs 24,36,000 CII of FY 2012-13 852/406) Less: Exemption under section 54GB (Rs 60,00,000 51,12,000/ 89,10,000) Taxable capital gains
90,00,000 90,000 89,10,000 (51,12,000) 37,98,000 (34,42, 424) 3,55,576 Rs 65,00,000
Particulars (1) Purchase cost of new plant and machinery acquired in July, 2013 Less: Cost of office appliances, i.e., computers 6,00,000 Cost of vehicles, i.e., cars 8,00,000 Cost of air-conditioners installed at the residence of Mr. 1,00,000 Akash (2) Amount deposited in the specified bank before the due date of filing of return Deemed cost of new plant and machinery for exemption under section 54GB
(15,00,000) 50,00,000 10,00,000 60,00,000
Sec 47(xiii)/(xiv): Neerja was carrying on the textile business under a proprietorship concern, Neerja Textiles. On 21/07/2012 the business of Neerja Textiles was succeeded by New Look Textile Private Limited and all the assets and liabilities of Neerja Textiles on that date became the assets and liabilities of New Look Textile Private Limited and Neerja was given 52% share in the share capital of the company. No other consideration was given to Neerja on account of this succession. The assets and liabilities of Neerja Textiles transferred to the company included an urban land which was acquired by Neerja on 19/07/2009 for Rs 9,80,000. The company sold the same on 30/03/2013 for Rs 15,00,000. Discuss the tax implication of the above mentioned transaction and compute the income chargeable to tax in such case(s). Answer Taxability in case of succession of Neerja Textiles by New Look Textile Private Limited As per provisions of section 47(xiv), in case a proprietorship concern is succeeded by a company in the business carried by it and as a result of which any capital asset is transferred to the company, then the same shall not be treated as transfer and will not be chargeable to capital gain tax in case the following conditions are satisfied: (i) all the assets and liabilities of sole proprietory concern becomes the assets and liabilities of the company. (ii) the shareholding of the sole proprietor in the company is not less than 50% of the total voting power of the company and continues to so remain as such for a period of 5 years from the date of succession. The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
26
the sole proprietor does not receive any consideration or benefit in any form from the company other than by way of allotment of shares in the company. In the present case, all the conditions mentioned above are satisfied therefore, the transfer of capital asset by Neerja Textiles to New Look Textiles Private Limited shall not attract capital gain tax provided Neerja continues to hold 50% or more of voting power of New Look Textiles Private Limited for a minimum period of 5 years. Taxability in case of transfer of land by New Look Textiles Private Limited As per the provisions of section 49(1) and Explanation 1 to section 2(42A), in case a capital asset is transferred in the circumstances mentioned in section 47(xiv), the cost of the asset in the hands of the company shall be the cost of the asset in the hands of the sole proprietor. Consequently, for the determining the period of holding of the asset, the period for which the asset is held by the sole proprietor shall also be considered. Therefore, in the present case, the urban land shall be a long-term capital asset since it is held for more than 36 months by New Look Textile Private Limited and Neerja Textiles taken together. Cost of acquisition of land in the hands of the company shall be Rs 9,80,000 i.e., the purchase cost of the land in the hands of Neerja. Computation of capital gain chargeable to tax in the hands of New Look Textile Private Limited Particulars Net Sale Consideration Less: Indexed cost of acquisition Long-term capital gain Rs 15,00,000 9,80,000 5,20,000
(iii)
Note: The year of transfer and the year in which the company first held the asset are the same in this case, which is the reason why the numerator and the denominator for calculating the indexed cost of acquisition would remain the same. Therefore, in effect, there is no benefit of indexation in this case. However, as per the view expressed by Bombay High Court in CIT v. Manjula J. Shah 16 Taxman 42, in case the cost of acquisition of the capital asset in the hands of the assessee is taken to be cost of such asset in the hands of the previous owner, the indexation benefit would be available from the year in which the capital asset is acquired by the previous owner. If this view is considered, the indexed cost of acquisition would have to be calculated by taking the CII of F.Y.2009-10, being the year in which the capital asset was acquired by the previous owner, Neerja, as the denominator, in which case, the capital gains chargeable to tax would undergo a change Sec 56(2)(vii): Discuss the taxability or otherwise of the following in the hands of the recipient under section 56(2)(vii) the Income-tax Act, 1961 -
a) Akhil HUF received Rs 75,000 in cash from niece of Akhil (i.e., daughter of Akhils sister). Akhil is the Karta of the HUF. b) Nitisha, a member of her fathers HUF, transferred a house property to the HUF without consideration. The stamp duty
value of the house property is Rs 9,00,000.
c) Mr. Akshat received 100 shares of A Ltd. from his friend as a gift on occasion of his 25th marriage anniversary. The fair
market value on that date was Rs 100
d) per share. He also received jewellery worth Rs 45,000 (FMV) from his nephew on the same day. e) Kishan HUF gifted a car to son of Karta for achieving good marks in XII board examination. The fair market value of the
car is Rs 5,25,000.
f)
Ms. Kratika purchased a land from PMC Co. a partnership concern for Rs 7,15,000. The stamp duty value of the same was Rs 12,00,000.
May 2010 : Clubbing: Discuss the following X commences a proprietary business in the year 2000. His capital as on April 1, 2011 is Rs. 6,00,000. On April 10, 2011, Mrs. X gifts Rs. 2,00,000 which he invests in the business on the same date. X earns profit from his proprietary business as given below : Previous year 2011-12 : Rs. 3,00,000 Previous year 2012-13 : Rs. 4,40,000 Compute the income from business chargeable to tax in the hands of X for the assessment year 2013-14. The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
27
During the previous year 2012-13, X transfers a vacant site which resulted in chargeable long-term capital gain of Rs. 5,00,000 (computed). The vacant site is transferred on December 20, 2012. Compute the total income and tax liability of X and the installments of advance tax payable for the previous year 2012-13. Computation of income of X Business income for the assessment year 2013-14 First day of the previous year : April 1, 2012 Total investment by X on April 1, 2012 (Rs. 6,00,000 + Rs. 2,00,000 + profit of 2011-12 : Rs. 3,00,000) (a) 11,00,000 How much of amount given in (a) has been gifted by Mrs. X (b) 2,00,000 Business income of the previous year 2012-13 (c) 4,40,000 Income taxable in the hands of X [(c) - (c) X (b) + (a)] 3,60,000 Computation of income of X for the assessment year 2013-14 Business income 3,60,000 Long-term capital gain 5,00,000 Net income 8,60,000 Tax on net income (20% of Rs. 5,00,000 + normal tax on Rs. 3,60,000) 1,18,000 Add: Education cess 2,360 Add: Secondary and higher education cess 1,180 Tax payable 1,21,540 Computation of advance tax instalments - X has transferred the capital asset (being vacant plot of land) on December 20, 2012. The first two instalments (i.e., instalments due on September 15, 2012 and December 15, 2012) shall be calculated without including tax on long-term capital gain. However, the third instalment (i.e., instalment due on March 15, 2013) shall be calculated after taking into consideration tax on long-term capital gain as follows Net income (without including long-term capital gain generated on December 20, 2012) 3,60,000 Tax on net income of Rs. 3,60,000 (including cess) 18,540 First advance tax instalment which becomes due on September 15, 2012 (30% of Rs. 18,540) Second advance tax instalment which becomes due on December 15, 2012 5,562
(60% of Rs. 18,540 - Rs. 5,562) 5,562 Recomputing tax before the third installment: Net income (after including) long-term capital gain generated on December 20, 2012 8,60,000 Tax on net income of Rs. 8,60,000 1,21,540 Third instalment which becomes due on March 15, 2013 (100% of Rs. 1,21,540- 11,124) 1,10,416 Sec 80D: Mr. A, aged 40 years, paid medical insurance premium of ` 12,000 during the P.Y.2012-13 to insure his health as well as the health of his spouse. He also paid medical insurance premium of ` 17,000 during the year to insure the health of his father, aged 63 years, who is not dependent on him. He contributed ` 2,400 to Central Government Health Scheme during the year. He has incurred ` 3,000 in cash on preventive health check-up of himself and his spouse and ` 4,000 by cheque on preventive health check-up of his father. Compute the deduction allowable under section 80D for the A.Y.2013-14. Solution Actual Payment Max allowable A. Premium paid and medical expenditure incurred for self and spouse (i) Medical insurance premium paid for 12,000 self and spouse (ii) Contribution to CGHS 2,400 (iii) Exp. on preventive health check-up of 3,000 self & spouse 12,000 2,400 600
28
17,400 B. Premium paid and medical expenditure incurred for father, who is a senior citizen (i) Mediclaim premium paid for father, 17,000 who is over 60 years of age (ii) Expenditure on preventive health 4,000 check-up of father 21,000 Total deduction under section 80D (15,000 = 35,000 + 20,000) Notes
15,000 17,000 3,000 20,000
a) The total deduction under A. (i), (ii) and (iii) above should not exceed ` 15,000. Therefore, the expenditure on preventive health
check-up for self and spouse would be restricted to ` 600, being (` 15,000 - ` 12,000 - ` 2400).
b) The total deduction under B. (i) and (ii) above should not exceed ` 20,000. Therefore, the expenditure on preventive health
check-up for father would be restricted to ` 3,000, being (` 20,000 - ` 17,000).
c) In this case, the total deduction allowed on account of expenditure on preventive health check-up of self, spouse and father is `
3,600 (i.e., ` 600 + ` 3,000), which is less than the maximum permissible limit of ` 5,000. Sec 80TTA: Mr. Gurnam, aged 62 years, earned professional income (computed) of ` 5,50,000 during the year ended 31/03/2013. He has earned interest of ` 14,500 on the saving bank account with State Bank of India during the year. Compute the total income of Mr. Gurnam for the assessment year 2013-14 from the following particulars: (i) Life insurance premium paid to Birla Sunlife Insurance in cash amounting to ` 25,000 for insurance of life of his dependent parents. The insurance policy was taken on 15/07/2012 and the sum assured on life of his dependent parents is ` 1,25,000. (ii) Life insurance premium of ` 25,000 paid for the insurance of life of his major son who is not dependent on him. The sum assured on life of his son is ` 1,75,000 and the life insurance policy was taken on 18/04/2011. (iii) Life insurance premium paid by cheque of ` 22,500 for insurance of his life. The insurance policy was taken on 08/09/2012 and the sum assured is ` 2,00,000. (iv) Subscription to long-term infrastructure bonds amounting to ` 25,000. (v) Premium of ` 16,000 paid by cheque for health insurance of self and his wife. (vi) ` 1,500 paid in cash for his health check-up and ` 4,500 paid in cheque for health check-up for his parents. (i) Paid interest of ` 6,500 on loan taken from bank for MBA course pursued by his daughter. (ii) A sum of ` 15,000 donated in cash to an institution approved for purpose of section 80G for promoting family planning. (iii) Contribution ` 10,500 made in cash to an electoral trust. Answer Computation of total income of Mr. Gurnam for the Assessment Year 2013-14 Professional Income (computed) Interest on saving bank deposit Gross Total Income Less: Deduction under Chapter VIA Under section 80C (See Note 1) Life insurance premium paid for life insurance of: - major son 25,000 - self ` 22,500 restricted to 20,000 45,000 10% of ` 2,00,000 Under section 80D (See Note 3) Premium paid for health insurance of self and wife by 16,000 cheque Payment made for health check-up:
5,50,000 14,500 5,64,500
29
- Self - His Parents
` 1,500 ` 4,500 ` 6,000 restricted to
5,000 21,000 6,500 10,500 10,000 93,000 4,71,500
Under section 80E For payment of interest on loan taken from bank for MBA course of his daughter Under section 80GGC Contribution to electoral trust Under section 80TTA (See Note 5) Interest on savings bank account ` 14,500 restricted to Total Income (a)
In respect of premium paid for life insurance only to the extent of 10% of sum assured in respect of insurance policy issued after 01.04.2012. In case the insurance policy is issued before 01.04.2012, deduction of premium paid on life insurance policy shall be allowed up to 20% of sum assured. Therefore in the present case, deduction of ` 25,000 is allowable in respect of life insurance of Mr. Gurnams son since the insurance policy was issued before 01.04.2012 and the premium amount is less than 20% of ` 1,75,000. However, in respect of premium paid for life insurance policy of Mr. Gurnam himself, deduction is allowable only up to 10% of ` 2,00,000 since, the policy was issued after 01.04.2012 and the premium amount exceeds 10% of sum assured. Deduction under section 80CCF for subscription to long-term infrastructure fund was allowed up to A.Y. 2012-13. Therefore, no deduction for the same is allowable for A.Y. 2013-14. As per section 80D, in case the premium is paid in respect of health of a person specified therein and for health check-up of such person who is a senior citizen i.e., aged 60 years or more, deduction shall be allowed up to ` 20,000. Further, as per amendment made by Finance Act, 2012, deduction up to ` 5,000 in aggregate shall be allowed in respect of health check-up of self, spouse, children and parents. In order to claim deduction under section 80D, the payment for healthcheck up can be made in any mode including cash. However, the payment for health insurance premium has to be paid in any mode other than cash. Therefore, in the present case, deduction of ` 16,000 is allowed in respect of premium paid for health insurance of self and wife, since Mr. Gurnam is a senior citizen and the payment is made by cheque. Also, the aggregate value of premium paid for health insurance and the payment for health check-up is ` 17,500 (` 16,000 + ` 1,500), which is less than ` 20,000. Further, deduction up to a maximum of ` 5,000 is allowable in respect of health check-up of self and his parents. This implies that ` 3,500 is allowable for health check-up of parents which falls within the additional limit of ` 20,000 for mediclaim premium and expenditure on preventive health check-up of parents. As per the Finance Act, 2012, no deduction shall be allowed under section 80G in case the donation is made in cash of a sum exceeding ` 10,000. Therefore, no deduction is allowed under section 80G in respect of donation made to institution approved therein. However, there is no such restriction for contribution to an electoral trust which qualifies for deduction under section 80GGC. As per section 80TTA, deduction shall be allowed from the gross total income of an individual or Hindu Undivided Family in respect of income by way of interest on deposit in the savings account included in the assessees gross total income, subject to a maximum of ` 10,000. Therefore, a deduction of ` 10,000 is allowable from the gross total income
(b)
(c) (d)
(e)
(f)
(g)
Sec 56(2)(vii): Discuss whether the person making payment is liable to deduct tax at source in the following circumstances. Also compute the amount of tax to be deducted.
(i)
Interest of Rs 1,750 paid by Histax Ltd. to Yash and Rs 4,500 to his HUF on 15/05/2012, by way of account payee cheque on account of debentures of the company held by them separately. Debentures of Histax Ltd. are listed in Bombay Stock Exchange. Interest of Rs 5,750 paid by United Ltd. to Yamini and Rs 4,785 to Janak HUF on 31/01/2013, by way of account payee cheque on account of debentures of the company held by them. Debentures of United Ltd. are not listed on a recognised stock exchange in India. The copyright of these notes is with CA. Arvind Tuli. No part of these notes may be reproduced in any manner without the prior permission in writing of CA. Arvind Tuli Coaching at: SCO 269 Sector 32, Chandigarh. Ph.: 09915001199. E-mail arvind.tuli@gmail.com
(ii)
30
(iii) (iv) (v) (vi) (vii)
Interest of Rs 11,700 on recurring deposit credited to Mr. Pritam. HNY Ltd. paid Rs 5,00,000 to non-resident entertainer on 18/07/2012 in respect performance in an event of promotion of a new product. Delhi Sports Magazine paid Rs 2,00,000 to Shane Warne, a non-resident cricketer, for writing an article for the September issue. The payment for the same was made on 25/06/2012. Sitting fees of Rs 15,700 paid to director of the company on 28/08/2012. 1,50,000 paid to Mr. A on 25/03/2013 by Delhi State Government on compulsory acquisition of his urban land. Tax deductible or not Amount of tax to be deducted at source (`) Nil Reason As per the proviso to section 193 the company shall not be liable to deduct tax at source on the interest less than ` 2,500 paid to a resident individual in respect of listed debentures by way of account payee cheque before 1.7.2012. Therefore, no tax shall be deducted at source on the interest paid to Yash by Histax Ltd. provided Yash is a resident in India during the year. Tax shall be deducted at source on interest paid by Histax Ltd. to the HUF of Yash on 15.05.2012 under section 193. United limited is liable to deduct tax at source on the interest paid to Yamini on account of debentures under section 193, since the payment exceeds ` 5,000. As per the proviso to section 193 a company shall not be liable to deduct tax at source on the interest paid to a resident individual or Hindu Undivided Family in respect of debentures, whether or not listed on a recognized stock exchange in India, if such payment made does not exceed ` 5,000 during the year and the same is paid by way of account payee cheque on or after 1.7.2012. Therefore, United Ltd. is not liable to deduct tax at source on interest paid to Janak HUF, provided Janak HUF is resident in India. As per the provisions of section 194A, tax shall not be deducted at source on interest paid on account of recurring deposit. As per the provisions of section 194E, any person making payment to a non-resident entertainer on or after 1.7.2012, which is taxable under section 115BBA, shall deduct tax at source@20%. As per the provisions of section 194E, any person making payment to a non-resident sportsperson before 1.7.2012, which is taxable under section 115BBA, shall deduct tax at source@10%. According to section 194J, the company shall be liable to deduct tax at source@10% under this section on any fees paid to a director on or after 1.7.2012, on which the tax is not deductible under section 192. No tax shall be deducted at source under section 194LA in case the consideration or enhanced consideration during the year does not exceed ` 2,00,000.
(i)
Not deductible
Deductible (ii) Deductible
450 (` 4,50010%) 575 (` 5,750 10%)
Not deductible
Nil
(iii) (iv)
Not deductible Deductible
Nil 1,00,000 (` 5,00,000 20%)
(v)
Deductible
20,000 (` 2,00,000 10%)
(vi)
Deductible
1,570 (` 15,700 10%)
(vii)
Not deductible
Nil
31
Sec 56(2)(viib): The following are the details of the shares issued by Ray (P) Ltd. Discuss the applicability of provisions of section 56(2) (viib) in the hands of the company: Face value of FMV of shares Issue price of Applicability of section 56(2)(viib) shares (Rs) (Rs) shares (Rs) (i) 100 120 130 The provisions of section 56(2)(viib) are attracted in this case since the shares are issued at a premium (i.e., issue price exceeds the face value of shares). The excess of the issue price of the shares over the FMV would be taxable under section 56(2) (viib). Rs10 (Rs 130 - Rs 120) shall be treated as income in the hands of Ray (P) Ltd. The provisions of section 56(2)(viib) are attracted since the shares are issued at a premium. However, no sum shall be chargeable to tax under the said section as the shares are issued at a price less than the FMV of shares. Section 56(2)(viib) is not attracted since the shares are issued at a discount, though the issue price is greater than the FMV. The provisions of section 56(2)(viib) are attracted in this case since the shares are issued at a premium. The excess of the issue price of the shares over the FMV would be taxable under section 56(2)(viib). Therefore,Rs 20 (Rs 110 - Rs 90) shall be treated as income in the hands of Ray (P) Ltd.
(ii)
100
120
110
(iii)
100
90
98
(iv)
100
90
110
32 Amendments Finance Act12

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1

Finance Act 2012: Amendments

Some important points(clarification of some points)

AMENDMENTS : FINANCE ACT 2012

2. Effect of Vodafone judgement:

For PY 2011-12 was 60 Lacs For PY 2011-12 was 15 Lacs

EXEMPTIONS - NEWS AGENCY - NOTIFIED NEWS AGENCY

Business & Profession:

he has paid tax on the income declared by him in the ROI

12. Reference to Valuation Officer [Sec 55A] :

13. Exemption for investment in a SME [Sec 55A] :

Period within which to purchase the eligible asset

19. Undisclosed Incomes:

Individual or HUF whether resident or nonresident

For an individual resident in India and is of the age of 60 years or more

(iii) not exceeding ` 5,000 in aggregate.

(3) (4) (5)

90,00,000 90,000 89,10,000 (51,12,000) 37,98,000 (34,42, 424) 3,55,576 Rs 65,00,000

(15,00,000) 50,00,000 10,00,000 60,00,000

15,000 17,000 3,000 20,000

5,50,000 14,500 5,64,500

- Self - His Parents

` 1,500 ` 4,500 ` 6,000 restricted to

5,000 21,000 6,500 10,500 10,000 93,000 4,71,500

Deductible (ii) Deductible

450 (` 4,50010%) 575 (` 5,750 10%)

Not deductible Deductible

Nil 1,00,000 (` 5,00,000 20%)

20,000 (` 2,00,000 10%)

1,570 (` 15,700 10%)

32 Amendments Finance Act12

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