Analysis of further proposed Amendments to Finance Bill, 2008

Section 10(26AAB)

Exemption of income of an agricultural produce market committee

1. With effect from the assessment year 2009-10, any income of an agricultural produce market committee/board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce, will be exempt from tax.

Section 10(29A)

Exemption to income of Coir Board

2. Exemption provided to Coir Board made effective from 1-4-2002, instead of 1-4-2009.

Sections 10A and 10B

Exemption under sections 10A and 10B extended by one year

3. Exemption available under sections 10A and 10B has been extended by one more year. Consequently, these exemptions will now be available up to the assessment year 2010-11.

Section 40(a)(ia)

TDS default

4. Interest, commission, brokerage, rent, royalty, fees for technical/professional services payable to a resident or amounts payable (for carrying out any work contract) to a resident contractor/sub-contractor are subject to tax deduction under different sections of Chapter XVII-B. If tax is deductible but not deducted or if tax is deducted but not deposited (or deposited late) with the Government, then these expenses are not allowed as deduction according to the provisions of section 40(a)(ia). These provisions were incorporated by the Finance (No. 2) Act, 2004 with effect from the assessment year 2005-06.

The scheme of disallowance under section 40(a)(ia) has been modified with retrospective effect from the assessment year 2005-06 on the following lines—

Tax is deductible but not deducted

u No deduction in the current previous year

u If tax is deducted in any subsequent year, the expenditure will be deducted in the year in which TDS will be deposited by the assessee with the Government.

Tax is deductible (and is so deducted) during the last month (i.e., in the month of March) of the previous year but it is not deposited on or before the due date of submission of return of income under section 139(1)

u No deduction in the current previous year

u If tax is deposited with the Government after the due date of submission of return of income, the expenditure will be deductible in that year in which tax will be deposited.

Tax is deductible (and is so deducted) during any month but other than the last month (i.e., any time before March 1) of the previous year but it is not deposited on or before March 31 of the previous year

u No deduction in the current previous year

u If tax is deposited with the Government after the end of the current previous year, the expenditure will be deductible in that year in which tax is deposited.

Section 44AB

Compulsory Tax Audit

5. From the assessment year 2008-09, audit report under section 44AB should be obtained on or before September 30 of the assessment year.

Section 80-IB

Deductions to industrial undertakings other than infrastructure under-takings

6. If an undertaking begins refining of mineral oil on or after April 1, 2009, deduction will be allowed to such undertaking only if the following conditions are satisfied—

u It is wholly owned by a public sector company or any other company in which a public sector company or companies hold at least 49 per cent of the voting rights.

u It is notified by the Central Government before June 1, 2008.

u It begins refining during April 1, 2009 and March 31, 2012.

Section 115JB

Minimum alternate tax

7. With effect from the assessment year 2001-02, the amount of deferred tax and provision therefor, if debited to profit and loss account, shall be added back to the net profit to convert it into book profit. Conversely, the amount of deferred tax, which is credited to the profit and loss account, shall be deducted from the net profit to find out book profit.

Section 115WE

Fringe benefit tax - Notice for scrutiny assessment

8. Notice for scrutiny assessment shall be served on the assessee within a period of 6 months from the end of the financial year in which return is furnished. This amendment is applicable from April 1, 2008.

Section 194C

Deduction of tax at source - Payment to contractors/sub-contractors

9. With effect from June 1, 2008, an association of persons/body of individuals, whether incorporated or not, shall be liable to deduct tax at source under section 194C(1) if the books of account of the association of persons/body of individuals are required to be audited under section 44AB(a)/(b) during the immediately preceding financial year.

Section 251

Commissioner (Appeals)

10. In an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, the Commissioner (Appeals) can (with effect from April 1, 2008) confirm, reduce, enhance or annul the assessment after taking into consideration the following—

u The material and other information produced by the assessee before the Settlement Commission.

u The results of the inquiry held by the Settlement Commission.

u The evidence recorded by the Settlement Commission in the course of proceedings before it.

u Such other material as may be brought on his record.

Section 292BB

Notice deemed to be valid in certain circumstances

11. Section 292BB has been inserted with effect from April 1, 2008 to provide that where an assessee has appeared in any proceeding or
co-operated in any inquiry related to an assessment or reassessment, it shall be deemed that any notice under any provision of the Act has been duly served upon him in time in accordance with the relevant provision of the Act. Further, such an assessee shall be precluded from taking any objection in any proceeding or inquiry under the Act that the notice was—

(a) not served upon him; or

(b) not served upon him in time; or

However, the provisions of section 292BB shall not be applicable where the assessee has raised the aforesaid objections before the completion of such assessment or reassessment.