Analysis of Income Tax Proposals – Budget 2015-2016

The Finance Minister, Mr. Arun Jaitley, appears to have maneuvered the way to spur growth and fulfill on the promises of the NDA Government with the limited room available, having regard to the tight fiscal situation, outsize expectations from all sectors of the country etc. by delivering the expertly crafted Union Budget 2015-2016 which is his maiden full-fledged– also first full budget of Narendra Modi led Government, on the 28^th February 2015, and thereafter presented the Finance Bill, 2015 before the Parliament.

As an annual event, we hereby elucidate and analyze the major and important amendments proposed in the Direct Tax and Service Tax Laws, with their implications; and are sure that the same would be handy to you.

As of date, these are proposals only, and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2016-2017 relevant to Financial Year 2015-16, unless specifically provided otherwise.

The key highlights of the this Budget are that the focus is towards broadening the tax base, rationalizing tax provisions so as to reduce litigation and, bring certainty and clarity to the taxpayers as regards the tax regime, with minimal unpleasant amendments in the fine print (he didn’t have many options though), all of which we have discussed with the respective proposed amendments herein below.

DIRECT TAXES

Amendments proposed under the Income-tax Act, 1961 (hereafter referred to as “the Act”).

1. Basic Exemption Limit, Income Slabs, Rates of Taxes and Education Cess unaltered, Surcharges increased:

Income thresholds, basic tax rates and Education Cess

The rates of Basic Tax, Education Cess and Higher Secondary Education Cess (Education Cess and Higher Secondary Education Cess collectively referred to as ‘Education Cess’), as well as the Basic Exemption Limits and the income slabs, have been kept unaltered for all Assessees.

The applicable Basic Exemption and Income Slabs as well as basic tax rates, are given in the below Table for your ready reference:

Assessee	Basic exemption and Income Slabs for Financial Year 2015-16
	Total Income	Tax Rate
All Individuals, HUF, AOP and BOI (except those stated below)	upto Rs.2,50,000/-	Nil
	Rs.2,50,001/- to Rs.5,00,000/-	10% of income above Rs.2,50,001/-
	Rs.5,00,001/- to Rs.10,00,000/-	Rs.25,000/- plus 20% of income above Rs.5,00,001/-
	Above Rs.10,00,000/-	Rs.1,25,000/- plus 30% of income above Rs.10,00,001/-
Individuals, being resident, and above 60 years upto the age of 80 years	upto Rs.3,00,000/-	Nil
	Rs.3,00,001/- to Rs.5,00,000/-	10% of income above Rs.3,00,001/-
	Rs.5,00,001/- to Rs.10,00,000/-	Rs.20,000/- plus 20% of income above Rs.5,00,001/-
	Above Rs.10,00,000/-	Rs.1,20,000/- plus 30% of income above Rs.10,00,001/-
Individuals, being resident, and age 80 years and above	upto Rs.5,00,000/-	Nil
	Rs.5,00,001/- to Rs.10,00,000/-	20% of income above Rs.5,00,001/-
	Above Rs.10,00,000/-	Rs.1,00,000/- plus 30% of income above Rs.10,00,001/-

 Increase in Surcharges

The Finance Minister has proposed to increase the Surcharge by 2% in case of all Assessees (though from the Budget Speech it appeared that increased Surcharge would apply only to individuals), except foreign company and also proposed to apply the increased Surcharge on dividend/ income distribution by companies, securitization trust etc., which are discussed below.

The increased surcharge of 12% (against the existing rate of 10%) of tax (dubbed as super-rich tax) is proposed to be levied on all non-company Assessees (viz. Individuals, HUFs, AOPs, BOIs, firms etc.) with income exceeding Rs. 1 crore. However, marginal relief would be allowed to ensure that the additional tax and surcharge payable on excess of income over Rs.1 crore is limited to the amount by which the income exceeds Rs.1 crore.

Further, currently, domestic companies and foreign companies having taxable income above Rs.1 crore and upto Rs.10 crore (including under MAT provisions), are liable to a surcharge of 5% and 2% of tax respectively. It is now proposed to levy a surcharge of 7% on domestic companies whereas surcharge on foreign companies is unaltered (with marginal relief as stated in the preceding paragraph).

On similar lines, in case of domestic companies having taxable income exceeding Rs.10 crores (including under MAT provisions), a surcharge of 12% is proposed against existing rate of 10% whereas the surcharge on such foreign companies is kept unaltered at 5% (with marginal relief as stated in the preceding paragraph).

This creates a situation where companies with taxable income of more than Rs. 1 crore (but less than Rs.10 crores) would an tax at an effective rate of 33.063% (considering 7% surcharge and 3% Education Cess), while the non-company Assessees with taxable income above Rs.1 crore would pay tax at a higher effective rate of 34.608% (including Surcharge of 12% and Education Cess of 3%).

Similarly, surcharge @ 12% of the amount of tax is also proposed to be levied on dividend/ income distribution by companies (section 115-O), mutual funds (section 115-R), securitization trust to its investors (section 115TA) as well as on amount paid by unlisted domestic company to its shareholders by way of buy-back of shares (section 115QA) against the existing rate of 10%.

Thus, there would be an increase in effective rate of tax in case of all Assessees.

The good news, however, is that the Finance Minster has proposed to reduce the Corporate Tax from present 30% to 25% over the next four years, beginning from the next year.

2. Abolition of levy of Wealth Tax:

As a pragmatic Finance Minister, Mr. Jaitley was quick enough to realize that levy of Wealth Tax in the past has hardly yielded the Government much revenue, whereas created a significant amount of compliance burden on the Assessees as well as administrative burden on the Department, and therefore he has proposed to abolish this levy.

The tax sacrifice on abolishing Wealth Tax is proposed to be collected through increase in the rate of Surcharge by 2% (discussed above).

It is also proposed that information relating to assets which is currently required to be furnished in the wealth-tax return would continue to be captured by suitably modifying income-tax return form.

3. Measures to curb Black Money-Amendment in Section 269SS and Section 269T:

As stated in the Budget speech, cracking down black money is the abiding commitment of the BJP Government which has already taken various measures in that direction in the nine month tenure so far and the Government is keen to deal with the evil effectively and forcefully by enacting a comprehensive new law on black money, amongst other things. Further, the offenders will not be permitted to approach the Settlement Commission.

There apart, to curb generation of black money by way of dealings in cash in immovable property transactions it is proposed to amend section 269SS and section 269T of the Act, to provide that no person shall accept from/ repay to any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is Rs.Twenty thousand or more.

Consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions are also proposed.

4. Deferment of provisions relating to General Anti Avoidance Rule (“GAAR”):

As per the existing provisions in the Act, GAAR provisions would come into effect from 1^st April 2016 i.e. Assessment Year 2016-17 relevant to Financial Year 2015-16. However, since the implementation of GAAR has been a matter of public debate; and the investment sentiment in the country has jus turned positive, there is need to accelerate this momentum. Therefore, the Finance Minister has proposed to defer the applicability of GAAR by two years. Further, it also proposed that when GAAR is implemented, it would apply prospectively to investments made on or after 1^st April 2017.

5. Streamlining of the taxation regime for Alternative Investment Funds (‘AIF’s) by granting pass through status-structure of AIF’s made workable:

The existing provisions of section 10(23FB) of the Act provide a tax pass through only to the funds, being set up as a company or a trust, which are registered either before 21^st May 2012 as a Venture Capital Fund under SEBI (Venture Capital Funds) Regulations, 1996, or as Venture Capital Fund as a sub-category of Category-I Alternative Investment Fund which is regulated by SEBI (Alternative Investment Funds) Regulations, 2012.

With the objective of streamlining the taxation regime of AIF’s, it is proposed to provide pass through status to all the sub-categories of Category-I and Category-II AIF’s governed by the regulations of SEBI, such that structure of AIF becomes workable.

In order to rationalize the taxation of Category-I and Category-II AIFs (hereafter referred to as investment fund) it is proposed to provide a special tax regime, the salient features of which are as under:-

• Taxation in the hands of the unit holders of AIF:

a)      Income of a person, being a unit holder of AIF, out of investments made in the AIF shall be chargeable to income-tax in the same manner as if it were the income accruing or arising to, or received by, such person had the investments, made by the AIF, been made directly by him.

b)      Income in the hands of unit holders in the nature of profits and gain of business shall be exempt.

c)      The income paid or credited by the investment fund shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as if it had been received by, or had accrued or arisen to, the investment fund.

d)      No loss is allowed to be passed through to the unit holders.

• Taxation in the hands of the AIF:

a)      All income in the hands of investment fund, other than income from profits and gains of business, shall be exempt from tax. The income in the nature of profits and gains of business or profession shall be at level of AIF.

b)      In respect of any income payable to a unit holder, other than in nature of profits and gains of business or profession, the AIF shall do Withholding tax @10%.

c)      If in any year there is a loss at the level of AIF either current loss or the loss which remained to be set off, the same would be carried over at fund level to be set off against income of the next year in accordance with the provisions of Chapter VI of the Income-tax Act.

d)      The provisions of Chapter XII-D (Dividend Distribution Tax) or Chapter XII-E (Tax on distributed income) shall not apply to the income paid by AIF to its unit holders.

e)      The income received by the AIF would be exempt from TDS requirement by virtue of notification to be issued under section 197A(1F) of the Act.

f)       It shall be mandatory for the investment fund to file its return of income. The investment fund shall also provide to the prescribed income-tax authority and the investors, the details of various components of income, etc. for the purposes of the scheme.

6. Clarity on- Location of Fund Managers in India not to constitute business connection of Offshore Funds:

In July 2014, an amendment was made in Finance Act (No. 2) 2014 to provide that income arising to Foreign Portfolio Investors (‘FPIs’) from transaction in securities will be treated as capital gains. However, the provisions of the Act have not been adequately amended to address the aforesaid apprehension of the fund managers, resulting in a large number of offshore funds choosing to locate their investment manager outside India.

In his Budget for 2015, the Finance Minister has proposed to introduce section 9A for providing clarity on issues relating to business connection/ permanent establishment and residential status of offshore funds. This would immensely benefit India by providing a sense of comfort to fund managers for choosing India as the base for investment.

In order to facilitate location of fund managers of off-shore funds in India, section 9A has been proposed in the Act in line with international best practices with the objective that, subject to fulfillment of certain conditions by the fund and the fund manager:

a) the tax liability in respect of income arising to the Fund from investment in India would be neutral to the fact as to whether the investment is made directly by the fund or through engagement of Fund manager located in India; and

b) that income of the fund from the investments outside India would not be taxable in India solely on the basis that the Fund management activity in respect of such investments have been undertaken through a fund manager located in India;

c) in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund;

d) Further, it is proposed that an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India, subject to certain conditions.

It is further proposed that every eligible investment fund shall, in respect of its activities in a financial year, furnish within ninety days from the end of the financial year, a statement in the prescribed form to the prescribed income-tax authority containing information relating to the fulfillment of the conditions or any information or document which may be prescribed. In case of non-furnishing of the prescribed information or document or statement, a penalty of Rs. 5 lakh shall be leviable on the Fund.

Bringing about clarity in the taxation of fund managers further to the already introduced provisions in Finance Act (No 2) of 2014 is a welcome step. This would pave way for larger investments into India and certainty in taxation of such entities.

7. Much needed clarity on pass through for Real Estate Investment Trusts (‘REIT’):

The current regime of taxation of REIT’s is summarized in the table below:

Nature of Income	In the hands of Business Trust	In the hands of Investor
Interest from SPV	Exempt	Taxable in the hands of the Investors
Sale of shares of SPV	Taxable as LTCG/ STCG	Exempt
Rentals Derived from theProperties	Taxable at maximum marginal rate	Exempt
Any other Income of Trust	Taxable at maximum marginal rate	Exempt

 Since large part of the income of the REIT’s would be in the form of rental income it would suffer tax at maximum marginal rate thereby dissuading set up REIT’s real as a attractive investment vehicle.

Also, the benefit of concessional tax regime is not available to the sponsor at the time it disposal of units of business trust acquired in exchange of its shareholding in the SPV through Initial offer at the time of listing of business trust on stock exchange. This places the sponsor at a disadvantageous tax position vis-a-vis direct listing of the shares of the SPV, in which case the tax on short term capital gains would be levied @ 15% and the long term capital gain are exempt under section 10(38) of the Act.

The Finance Minister intends to resolve all the above issues related to REIT’s by the following proposals:

a. any income by way of renting, leasing or letting of real estate properties will be an exempt in the hands of the REIT income provided the properties are directly owned by the trust;

b. Further, no TDS is required to be done from such rental income paid to the REIT;

c. the benefit of concessional tax regime of tax @15 % on STCG and exemption on LTCG under section 10(38) of the Act shall be available to the sponsor on sale of units received in lieu of shares of SPV subject to levy of STT.

The proposed taxation structure of REIT’s is summarized hereunder:

Nature of Income	In the hands of Business Trust	In the hands of Investor
Interest from SPV	Exempt	Taxable in the hands of theInvestors
Sale of shares of SPV	Taxable as LTCG/ STCG	Exempt
Rentals Derived from theProperties	Exempt under Section10(23FCA)	Taxable in the hands of the investor
	Further there will not be any TDS for the same
Any other Income of Trust	Taxable at maximum marginal rate	Exempt

 Thus, it will be more beneficial for REITs to invest directly in the properties and not through SPV to enjoy the taxation benefit, rather than going through the SPV route. No deduction of TDS on the rentals also comes as a great relief as it takes away the hassles REIT’s would have faced otherwise.

8. Welcome move to allow balance 50% of additional depreciation:

To remove the discrimination and controversies in the matter of allowing additional depreciation on plant or machinery used for less than 180 days in the year of acquisition and installation of such plant or machinery and used for 180 days or more, the Finance Minister has proposed to provide that the balance 50% of the additional depreciation shall be allowed in the immediately succeeding previous year.

This measure shows the equitable approach of the Finance Minister to ensure that the benefits intended to be passed on to the Assessees are indeed available without doubt or discretion. This gesture would not continue to motivate the Assessee to defer such investment to the next year for availing full 100% of additional depreciation in the next year and go a long way in attracting investment in the manufacturing sector of the country.

9. Clarity on Taxation of Indirect transfer-Vodafone like deals to be taxed in India in future:

With a view to provide stable and predictable taxation regime aimed at reinstating the investor’s confidence, the Finance Minister has issued much required clarification with respect to taxation of indirect transfers.

Interpreting the provisions of Section 9(1)(i) of the Act, the Supreme Court in the landmark ruling of Vodafone International Holdings BV v. UOI [2012] 17 taxmann.com 202 held that the provisions under the Act can tax only those transactions which involved transfer of a capital asset which was based in India.

Thereafter, indirect transfers were proposed to be taxed retrospectively from 1^st April 1962 i.e. from the time the existing tax law got enacted, to bring Vodafone’s and other similar transactions within tax net by making various amendments in the Act. The amended legislation proceeded to tax those transactions which although involve transfer of shares or interest in a foreign entity, but such share or interest derives its value substantially from the assets based in India. However, the most ambiguous part till date was the undefined criteria upon which such an indirect transfer becomes taxable in India i.e. the term ‘substantially’ used in Explanation 5 to Section 9 of the Act.

This kind of arbitrary approach of the Government in the matter has resulted in withdrawal of investment plans in India by foreign investors – who are already dealing with huge tax litigations.

Keeping in mind the objective of fiscal discipline, protecting the revenue of the country and at the same time promoting a non-adversarial tax regimen, the Finance Minister has clarified the meaning of the term “substantially”, thereby putting to rest the never ending controversy.

To bring indirect transfers within the tax net, the following amendments are proposed:

a) The value of assets (whether tangible or intangible) situated in India shall exceed Rs. 10 Crore and should comprise of at least 50% of the value of total assets of the company as on the valuation date (without reduction of any liabilities);

b) Valuation date shall be the last day of the accounting period preceding the date of transfer or the date of transfer in case the book value of assets on the date of transfer exceeds book value as on the last day of the accounting period by 15%.

c) The manner of determination of fair market value of the Indian assets vis-à-vis global assets would be prescribed in the rules.

d) The taxation of gains arising on transfer of a share or interest deriving directly or indirectly its value substantially from assets located in India will be on proportional basis and the method for determination of proportionality is proposed to be provided in the rules.

To avoid hardship in genuine cases, exemption is available in certain transfers subject to fulfillment of prescribed conditions.

Moreover, to keep a track of such offshore transactions, it is proposed to cast an obligation on the Indian concern to furnish information in respect of off-shore transactions resulting into modification of its control or ownership structure.

Any non-compliance in this regard by the Indian concern would attract penalty of Rs.5 lakhs or 2% of transaction value, as the case may be.

10. Rationalization of taxation regime in the case of charitable trusts and institutions:

The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore, it is proposed to include ‘yoga’ as a specific category in the definition of charitable purpose under Section 2(15) of the Act on the lines of education.

In so far as the advancement of any other object of general public utility is concerned, there is a need is to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution.

It is, therefore, proposed to amend the definition of charitable purpose to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless,-

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent. of the total receipts, of the trust or institution undertaking such activity or activities, for the previous year .

Moreover, for the purpose of accumulation of income as per Section 11, to remove the ambiguity regarding the period within which the Assessee is required to file Form 10, and to ensure due compliance of the conditions within time, it is proposed to provide that the said Form shall be filed before the due date of filing return of income specified under Section 139 of the Act for the fund or institution.

In case the Form 10 is not submitted before this date, then the benefit of accumulation would not be available and such income would be taxable at the applicable rate. Further, the benefit of accumulation would also not be available if return of income is not furnished before the due date of filing return of income.

11. Procedure for appeal by revenue when an identical question of law is pending before Supreme Court-to avoid multiplicity of proceedings:

Unlike Section 158A, there is presently no parallel provision for revenue to not file appeal for subsequent years where the Department is in appeal on the same question of law for an earlier year. As a result, appeals are filed by the revenue year after year on the same question of law until it is finally decided by the Supreme Court thus, multiplying litigation.

Therefore, it is proposed to insert a new Section 158AA to deal with the situation where any question of law arising in the case of an Assessee for any assessment year is identical with a question of law arising in his case for another assessment year which is pending before the Supreme Court, in an appeal or in a special leave petition filed by the revenue. In that case, the Commissioner or Principal Commissioner may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal, direct the Assessing

Officer to make an application to the Appellate Tribunal in the prescribed form within sixty days from the date of receipt of order of the Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the earlier case.

12. Raising the income-limit of the cases that may be decided by single member bench of ITAT:

It is proposed to amend sub-section (3) of section 255 of the Income-tax Act so as to provide that a Bench

constituted of a single member may dispose of a case where the total income as computed by the Assessing Officer does not exceed Rs.15,00,000/- against the existing limit of Rs.5,00,000/-.

13. Clarity regarding source rule in respect of interest received by the non-resident in certain cases:

The provisions of section 5 of the Act provide for scope of total income for the purposes of its chargeability to tax. In case of a non-resident person, the chargeability of income in India is on the basis of source rule under which certain categories of income are deemed to accrue or arise in India.

Further, income of a non-resident from business activity is taxable in India if it has a business connection in India in accordance with the provisions contained in section 9(1)(i) and only such income is taxable as is attributable to the business connection. Similarly, under the DTAA income from business activity in the case of a non-resident shall be taxable only if such non-resident has a permanent establishment (‘PE’) in India and only such income is taxable which is attributable to the PE. The concept of PE is almost on similar lines as business connection with variations as per different DTAA’s. The DTAA further provides

the manner of computation of income attributable to the PE. It is provided that for the purpose of computation of income the PE shall be deemed to be an independent enterprise with certain restrictions regarding allowability of expense paid to head office by the PE. Under DTAA’s in case of a banking company the interest paid by a PE to its head office and other branches is allowed as deduction treating such a permanent establishment as an independent enterprise.

While computing income chargeable to tax in India under Income tax Act, 1961 (‘the Act’) with respect to their Indian branches, the foreign banks claim deduction of interest payable by the branch to head office abroad and even to branches or permanent establishments of the head office in other countries. On the other hand the interest so paid is claimed as not taxable under the Act in the hands of recipient. These ostensibly self-contradictory claims found favour by the Special Bench of Income tax Appellate Tribunal in the case of Sumitomo Mitsui Banking Corporation [136 ITD 66 (Bom)(SB)].

Considering that there are several disputes on the issue which are pending and likely to arise in future, the Finance Minister thought it essential to bring clarity and certainty in the Act, as under:

In the case of a non-resident, being a person engaged in the business of banking, any interest payable by the permanent establishment in India of such non-resident to the head office or any permanent establishment or any other part of such non-resident outside India shall be deemed to accrue or arise in India and shall be chargeable to tax in addition to any income attributable to the permanent establishment in India and the permanent establishment in India shall be deemed to be a person separate and independent of the non-resident person of which it is a permanent establishment and the provisions of the Act relating to computation of total income, determination of tax and collection and recovery would apply .

Accordingly, the PE in India shall be obligated to deduct tax at source on any interest payable to either the head office or any other branch or PE, etc. of the non-resident outside India. Further, non-deduction would result in disallowance of interest claimed as expenditure by the PE and may also attract levy of interest and penalty in accordance with relevant provisions of the Act.

14. Reduction in tax rates on income from royalty and fees for technical services of non-residents:

Section 115A, inter alia, provides for a tax rate of 25% on royalty and fees for technical services earned by a non-resident or a foreign company from Indian government/entity, subject to fulfillment of other conditions therein.

In order to reduce the hardship faced by small entities due to high rate of tax, it is proposed to reduce the rate of tax provided under section 115A on royalty and fees technical services payments made to non-residents to 10%.

15. Furnishing of information on remittances made outside India, whether chargeable to tax or not:

Under the existing mechanism of obtaining information of foreign remittances u/s.195(6) of the Act, information only in respect of remittances which the remitter declared as taxable is collected. This defeats one of the main intentions of obtaining information for foreign remittances i.e. to identify the taxable remittances on which tax was deductible but was not deducted.

Therefore, it is now proposed to provide that person responsible for paying any sum, to a non-resident, not being a company, or to a foreign company, whether chargeable to tax or not, shall be required to furnish the information of the prescribed sum in such form and manner as may be prescribed.

In case of non-furnishing of information or furnishing of incorrect information under sub-section (6) of section 195(6) of the Act, a penalty of Rs.1,00,000/- is proposed to be levied.

(The above amendments will take effect from 1^st June, 2015).

16. Domestic Transfer Pricing- Threshold limit raised to Rs.20 crores:

With a view to address the issue of compliance cost incurred on           Domestic Transfer Pricing by small businesses, on account of low threshold of Rs.Five crores, it is proposed to amend section 92BA of the Act to provide that the aggregate of specified domestic transactions entered into by the Assessee in the previous year should exceed a sum of Rs.Twenty crores for such transaction to be treated as ‘specified domestic transaction’.

17. Additional Investment Allowance of 15% for acquisition and installation of new plant and machinery to boost manufacture or production in Andhra Pradesh or Telangana – benefit over and above the existing deduction available under section 32AC of the Act:

To support and to provide incentive for manufacture or production in the notified backward areas of Andhra Pradesh and Telangana, it is proposed to extend to an Assessee engaged in the business of manufacture or production of any article or thing, an allowance of 15% of the actual cost of new assets acquired and installed, during the period beginning from the 1st April, 2015 to 31st March, 2020.

With a view to ensure that the manufacturing units which are set up by availing this proposed incentive actually contribute to economic growth of these backward areas by carrying out the activity of manufacturing for a substantial period of time, it is proposed to provide suitable safeguards for restricting the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply to the amalgamating or demerged company or the predecessor in a case of amalgamation or demerger or business reorganization but shall continue to apply to the amalgamated company or resulting company or successor, as the case may be.

Thus, if an undertaking is set up in the notified backward areas in the States of Andhra Pradesh or Telangana by a company, it shall be eligible to claim deduction under the existing provisions of section 32AC of the Act as well as under the proposed section 32AD if it fulfills the conditions specified in both the sections.

18. Additional Depreciation @ 35% for acquisition and installation of new plant and machinery to further incentivize manufacture or production in Andhra Pradesh or Telangana:

To support and to provide incentive for manufacture or production in the notified backward areas of Andhra Pradesh and Telangana, it is proposed to allow higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new machinery or plant (other than a ship and aircraft) acquired and installed by a manufacturing undertaking or enterprise which is set up in the notified backward area of the State of Andhra Pradesh or the State of Telangana on or after the 1st day of April, 2015. This higher additional depreciation shall be available in respect of acquisition and installation of any new machinery or plant for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020.

It is also proposed to make consequential amendments in the second proviso to section 32(1) of the Act for allowing of balance 50% of the allowance in the immediately succeeding financial year, if the assets are used for the purpose of business for less than 180 days in the year of acquisition and installation.

19. Rationalization of provisions of Section 115JB-Anomalies rectified:

Share of income received by a Company-member from AOP/ BOI (where AOP/BOI is chargeable to tax at maximum marginal rate):

Section 86 of the Act provides that no income-tax is payable on the share of a member of an AOP/ BOI, in circumstances when the income of AOP/ BOI is chargeable to tax at maximum marginal rate. However, under 115JB of the Act, a company which is member of an AOP is liable to MAT on its share of income of AOP, since such income is not excluded while computing MAT liability of the company.

Therefore, it is proposed to amend computation of MAT under section 115JB of the Act so as to provide that share of a member of an AOP, in the income of the AOP, on which no income–tax is payable in accordance with the provisions of section 86 of the Act, should be excluded while computing MAT liability of the member under 115JB of the Act.

Needless to mention that, the expenditures, if any, debited to the profit loss account, corresponding to such income (which is being proposed to be excluded from the MAT liability) be added back to the book profit for the purpose of computation of MAT.

No MAT on long term capital gains derived by FII:

The Finance (No. 2) Act, 2014 amended Section 2(14) of the Act to characterize the securities held by FII’s as capital asset. Consequently, the income arising to FII’s from transactions in securities would thus be in the nature of capital gains.

However, FII’s have to pay MAT even on capital gains arising out sale of securities, as such income is not excluded while computing the MAT liability.

Therefore, it is proposed that that income from transactions in securities (other than short term capital gains arising on transactions on which securities transaction tax is not chargeable) arising to a FII, shall be excluded from the chargeability of MAT and the profit corresponding to such income shall be reduced from the book profit.

The expenditures, if any, debited to the profit loss account, corresponding to such income are also to be added back to the book profit for the purpose of computation of MAT.

The above move will definitely bring a cheer for FII’s and will result in attracting more investments in India. However, the much needed clarity on MAT related issues such as, requirement of maintaining books of accounts by a foreign company for its India operations and their coverage under the ambit of MAT provisions; whether all the FII’s even those with no Permanent Establishment in India are required to maintain books of accounts and covered under provisions of MAT are still unanswered and have largely left the sword of MAT still hanging on the foreign investors.

20. Assessment of income of a person other than the person in whose case search has been initiated or books of account, other documents or assets have been requisitioned:

In the course of assessment proceedings, under section 153A, of a person who has been searched (hereinafter referred to as Mr. A) under section 132 or 132A if the AO comes to a finding that the assets, articles, or books of accounts, or document belong to a person other than the searched person (hereinafter referred to as Mr. B) then in such circumstances the AO shall hand over such assets, articles, books of accounts or document to the AO having jurisdiction over Mr. B.

The existing provision in this regard is as under:

To invoke provisions of section 153C the assets or books of account or documents seized belonging to Mr. B, shall be handed over to the Assessing Officer having jurisdiction over Mr. B. Accordingly, the Assessing Officer shall proceed against Mr. B, if he is satisfied that the books of accounts or documents or assets seized have a bearing on determination on his total income.

A literal interpretation of section 153C(1) requires that assets or books of account or documents seized should belong to Mr. B. If the books of accounts of Mr. A under section 153A reveals income of Mr. B then such books cannot be used to invoke provisions of section 153C against Mr. B as those books do not belong to him rather it belongs to Mr. A.

To overcome the above controversy, the Finance Bill, 2015 proposes to amend sub-section (1) of Section 153C so as to provide that where the Assessing Officer is satisfied that:

(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or

(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information

contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned, shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if that Assessing Officer is satisfied that the books of account or documents or assets, seized or requisitioned, have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A.

Thus, by the proposed amendment the word ‘belongs to’ is proposed to be replaced with the word ‘relates to’ which indicates that even if the books of accounts does not belong to the person who has not been searched under section 132 (i.e. Mr. B), he can still be proceeded with for block assessment if the books found during search reveals any income which has a bearing on him.

The above amendment is proposed is to nullify the decision of the Gujarat High Court in the case of Vijaybhai N Chandrani v ACIT 333 ITR 436.

 Having given discretionary power to the Assessing Officer to proceed against any person to whom the books or document ‘relate to’, it would now be critical to ensure that this power is exercised judiciously and should not be used to harass the ordinary person.

21. Section 263-Conditions prescribed for ‘deeming an order as erroneous’ for revision:

The interpretation of expression “erroneous in so far as it is prejudicial to the interests of the revenue” has been a contentious issue.

In order to provide clarity on the issue it is proposed to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner:

a)      the order is passed without making inquiries or verification which, should have been made;

b)      the order is passed allowing any relief without inquiring into the claim;

c)      the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

d)      the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

(The above amendment is proposed to take effect from 1^st June 2015).

22. Amount of tax sought to be evaded for the purposes of penalty u/s. 271(1)(c) in case of section 115JB or 115JC:

Problems have arisen in the computation of amount of tax sought to be evaded where the concealment of income or furnishing inaccurate particulars of income occurs in the computation of income under provisions of section 115JB or 115JC of the Act and also under the provisions other than the provisions of section 115JB or 115JC of the Act (hereafter referred as general provisions). Further, courts have held that penalty under section clause (c) of sub-section (1) of section 271 cannot be levied in cases where the concealment of income occurs under the income computed under general provisions and the tax is paid under the provisions of section 115JB or 115JC of the Act.

Further, tax paid under the provisions of section 115JB or 115JC over and above the tax liability arising under general provisions is available as credit for set off against future tax liability. Understatement of income and the tax liability thereon under general provisions results in larger amount of such credit becoming available to the Assessee for set off in future years.

Therefore, to deal with the above situation effectively, it is proposed to amend section 271 of the Act so as to provide that the amount of tax sought to be evaded shall be the summation of tax sought to be evaded under the general provisions and the tax sought to be evaded under the provisions of section 115JB or 115JC. However, if an amount of concealment of income on any issue is considered both under the general provisions and provisions of section 115JB or 115JC then such amount shall not be considered in computing tax sought to be evaded under provisions of section 115JB or 115JC.

23. ‘Place of Effective Management’ to determine residential status of company instead of Control and Management:

Under the existing provisions, a company is said to be resident in India in any previous year, if:

(i) It is an Indian company; or

(ii) During that year, the control and management of its affairs is situated wholly in India.

Therefore, currently, a non-Indian company which is partially or wholly controlled abroad is to be regarded as non-resident in India.

Due to the requirement that whole of control and management should be situated in India and that too for whole of the year, the condition has been rendered to be practically inapplicable. A company can easily avoid becoming a resident by simply holding a board meeting outside India. This facilitates creation of shell companies which are incorporated outside but controlled from India.

To overcome this mischief, the Finance Minister has proposed to introduce the concept of ‘Place of effective management’ (POEM) which is an internationally recognized concept for determination of residence of a company incorporated in a foreign jurisdiction, in substitution of the existing provisions requiring the control and management of affairs to be situated wholly in India.

In view of the above, it is proposed to amend the provisions of section 6 to provide that a person being a company shall be said to be resident in India in any previous year, if:

(i) It is an Indian company; or

(ii) its place of effective management, at any time in that year, is in India .

Further, it is proposed to define the place of effective management to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.

It is also proposed to issue in due course, a set of guiding principles to be followed in determination of POEM for the benefit of the taxpayers as well as, the Department.

The modification in the condition of residence in respect of company by including the concept of effective management would align the provisions of the Act with the Double Taxation Avoidance Agreements (DTAA’s) entered into by India with other countries and would also be in line with international standards. This is a measure to deal effectively with cases of creation of shell companies outside India but being controlled and managed from India.

24. Rationalization of provisions relating to Tax Deduction at Source (‘TDS’) and Tax Collection at Source (‘TCS’):

• The existing provisions of Sec.200A of the Act do not provide mechanism for determination of late fee under Sec. 234E at the time of processing of TDS statements. It is, therefore, proposed to amend the provisions of Section 200A of the Act so as to enable computation of fee payable under section 234E of the Act at the time of processing of TDS statement under section 200A of the Act.

• Further, currently, there is no provision for allowing a collector to file correction statement in respect of TCS statement which has been furnished. It is, therefore, proposed to amend the provisions of section 206C of the Act so as to allow the collector to furnish TCS correction statement.

• Also, it is proposed to insert a provision in the Act for processing of TCS statements on the line of existing provisions for processing of TDS statement contained in section 200A of the Act.

• Moreover, intimation generated after processing of TCS statement shall also be—

(i) subject to rectification under section 154 of the Act;

(ii) appealable under section 246A of the Act; and

(iii) deemed as notice of demand under section 156 of the Act.

• To remove the possibility of charging interest on the same amount for the same period of default both under section 206C (7) and section 220(2) of the Act, it is proposed to provide that where interest is charged for any period under section 206C (7) of the Act on the tax amount specified in the intimation issued under proposed provision, then, no interest shall be charged under section 220(2) of the Act on the same amount for the same period.

• Further, under the existing mechanism of obtaining information of foreign remittances u/s.195(6) of the Act, information only in respect of remittances which the remitter declared as taxable is collected. This defeats one of the main intentions of obtaining information for foreign remittances i.e. to identify the taxable remittances on which tax was deductible but was not deducted.

• Thus, it is now proposed to provide that person responsible for paying any sum, to a non-resident, not being a company, or to a foreign company, whether chargeable to tax or not, shall be required to furnish the information of the prescribed sum in such form and manner as may be prescribed.

In case of non-furnishing of information or furnishing of incorrect information under sub-section (6) of section 195(6) of the Act, a penalty of Rs.One lakh is proposed to be levied.

• Presently, section 194C of the Act exempts payments made to contractors during the course of plying, hiring and leasing goods carriage if the contractor furnishes his PAN. It is proposed to restrict such exemption to cases where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to such effect, along with PAN.

• Following changes have been proposed in Section 194A of the Act, which relate to deduction of tax on interest (other than interest on securities):

(i) The current exemption from TDS on payments of interest to members by a co-operative society will be withdrawn in respect payment of interest by co-operative banks to its members.

(ii) The definition of ‘time deposits’ currently excludes recurring deposits from its scope. It is proposed to amend the definition of “time deposit” so as to include recurring deposits within its scope.

The deduction of tax under this section from interest payments on the compensation amount awarded by the Motor Accident Claim Tribunal shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds Rs.50,000/-.

(All the above amendments will take effect from 1^st June, 2015).

25. Simplification of Tax Deduction at Source (TDS) mechanism for Employees Provident Fund Scheme (EPFS):

It is proposed to insert a new provision in Act, for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS. However, to reduce the compliance burden of the employees having taxable income below the taxable limit, it is also proposed to provide a threshold of payment of Rs.30,000/- for applicability of this proposed provision. In spite of providing this threshold for applicability of deduction of tax, there may be cases where the tax payable on the total income of the employees may be nil even after including the amount of pre-mature withdrawal.

For reducing the compliance burden of these employees, it is further proposed that the facility of filing self-declaration for non-deduction of tax under section 197A of the Act shall be extended to the employees receiving pre-mature withdrawal i.e. an employee can give a declaration in Form No. 15G to the effect that his total income including taxable pre-mature withdrawal from EPFS does not exceed the maximum amount not chargeable to tax and on furnishing of such declaration, no tax will be deducted by the trustee of EPFS while making the payment to such employee. Similar facility of filing self-declaration in Form No. 15H for non-deduction of tax under section 197A of the Act shall also be extended to the senior citizen employees receiving pre-mature withdrawal.

However, some employees making pre-mature withdrawal may be paying tax at higher slab rates (20% or 30%). Therefore, the shortfall in the actual tax liability vis-à-vis TDS is required to be paid by these employees either by requesting their new employer to deduct balance tax or through payment of advance tax / self-assessment tax. For ensuring the payment of balance tax by these employees, furnishing of valid Permanent Account Number (PAN) by them to the EPFS is a prerequisite. In case of non-furnishing of PAN, it is proposed that deduction of tax at the maximum marginal rate would be attracted.

26. Concessional rate of Withholding tax on Interest paid to FII’s and QFI’s- extended till June 2017

To maintain parity with the benefit of reduced rate of Withholding tax available in respect of external commercial borrowings (ECB) which was extended from 30^th June, 2015 to 30^th June, 2017 by Finance (No.2) Act, 2014, the Finance Minister has extended the concessional rate of 5% withholding tax on interest payment under section 194LD for interest payable upto 30^th June, 2017.

27. Deduction under section 80JJAA-benefit extended to non-corporate and smaller units also:

With the objective of encouraging generation of employment, it is proposed to extend the benefit to all Assessees having manufacturing units rather than restricting it to corporate Assessees only. Further, in order to enable the smaller units to claim this incentive, it is proposed to extend the benefit under the section to units employing even 50 regular workmen instead of the requirement of 100 regular workmen earlier.

28. Clarity on Interest under Section 234B-in case of re-assessment and where additional income is disclosed before the Settlement Commission:

The Finance Minister has proposed to clarify the levy of Interest u/s.234B of the Act, as under:

No additional liability where the income admitted is accepted by the Settlement Commission:

Where an application for settlement of the case is filed under section 245C, the Assessee is liable to pay simple interest at 1% for every month or part of a month for the period from the first day of April of the assessment year and ending with the date of making such application. However, this interest is only on the additional amount of income tax payable as per the settlement application.

Additional liability where the admitted income is enhanced by Settlement Commission:

Where the total income disclosed in the application is enhanced by the Settlement Commission, the Assessee is liable to pay simple interest at 1% for every month or part of a month for the period from first day of April of the assessment year and ending with the date of order of Settlement Commission. This interest is on the tax amount arising due to increase in income than the income originally admitted in the application for settlement.

Interest on re-assessment or search assessment:

In the case of reassessment under section 147 or search assessment under section 153A interest under section 234B is leviable from the first day of April of the relevant assessment year and ending with the date of reassessment or re-computation under section 147 or section 153A. However, this interest is on the amount of tax on income which exceeds the total income determined under section 143(1) or on regular assessment.

29. Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund:

“Swachh Bharat Kosh” has been set up by the Central Government to mobilize resources for improving sanitation facilities in rural and urban areas and school premises through the Swachh Bharat Abhiyan.

Similarly, Clean Ganga Fund has been established by the Central Government to attract voluntary contributions to rejuvenate river Ganga.

It is proposed to provide that donations made by any donor to the Swachh Bharat Kosh and donations made by domestic donors to Clean Ganga Fund will be eligible for a 100% deduction from the total income. However, any sum spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor.

(The deduction for above donations is proposed to be effective from 1^st April 2015.)

30. 100% Deduction for National Fund for Control of Drug Abuse:

The National Fund for Control of Drug Abuse is a fund created by the Government of India in the year 1989, under the Narcotic Drugs and Psychotropic Substances Act, 1985. Since National Fund for Control of Drug Abuse is also a Fund of national importance, it is proposed amend Section 80G to provide 100% deduction in respect of donations made to the said National Fund for Control of Drug Abuse.

31. Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme:

Pursuant to the Budget announcement in July 2014, a special small savings instrument for the welfare of the girl child has been introduced under the Sukanya Samriddhi Account Rules, 2014. The following tax benefits have been envisaged in the Sukanya Samriddhi Account scheme:-

(i) The investments made in the Scheme will be eligible for deduction under section 80C of the Act.

(ii) The interest accruing on deposits in such account will be exempt from income tax.

(iii) The withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax.

With a view to allow the deduction under Section 80C to the parent or legal guardian of the girl child, amendment of Section 80C of the Act is proposed to be made so as to provide that a sum paid or deposited during the year in the Scheme in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under Section 80C of the Act.

(The above amendments will take effect from 1^st April, 2015.)

32. Increased deduction in respect of Health Insurance Premia under Section 80D:

In view of continuous rise in the cost of medical expenditure, it is proposed to amend section 80D of the Act, to raise the limit of deduction from Rs.15,000/- to Rs.20,000/-. It is further proposed to raise the limit of deduction for senior citizens from Rs.20,000/- to Rs.30,000/-.

Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D. Accordingly, as a welfare measure towards very senior citizens, it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person, as does not exceed Rs.30,000/- shall be allowed as deduction under section 80D of the Act.

33. Raising the limit of deduction under Section 80DDB:

Under the existing provisions of Section 80DDB of the Act, an Assessee, resident in India is allowed a deduction of a sum not exceeding Rs.40,000/-, being the amount actually paid, for the medical treatment of certain chronic and protracted diseases such as Cancer, full blown AIDS, Thalassaemia, Haemophilia etc. This deduction is allowed up to Rs.60,000/- where the expenditure is in respect of a senior citizen i.e. a person who is of the age of sixty years or more at any time during the relevant previous year.

Under the existing provisions of this section, to claim deduction a certificate in the prescribed form, from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital is required.

However, it is now proposed to amend Section 80DDB of the Act to provide that the Assessee will be required to obtain a prescription from a specialist doctor for the purpose of availing this deduction.

 Further, it is also proposed to provide for a higher limit of deduction of upto Rs.80,000/-, for the expenditure incurred in respect of the medical treatment of a “very senior citizen”.

34. Raising the limit of deduction under Section 80DD and Section 80U for persons with disability and severe disability :

In view of the rising cost of medical care and special needs of a disabled person, it is proposed to amend Section 80DD of the Act, o raise the limit of deduction in respect of a person with disability from Rs.50,000/- to Rs.75,000/-.

It is also proposed to amend Section 80U of the Act, to raise the limit of deduction in respect of a person with severe disability from Rs.1,00,000/- to Rs. 1,25,000/-.

35. Raising the limit of deduction under Section 80CCC:

In order to promote social security, it is proposed to amend sub-section (1) of the Section 80CCC of the Act, to raise the limit of deduction from Rs.1,00,000/- to Rs.1,50,000/-, within the overall limit provided in section 80CCE.

36. Additional deduction under Section 80CCD:

With a view to encourage people to contribute towards National Pension System (‘NPS’), it is proposed to remove the restriction under Section 80CCD(1A) of the Act, which currently restricts deduction under Section 80CCD(1) of the Act to Rs.1,00,000/-.

Therefore the limit for deduction under section 80CCD(1) of the Act, stands enhanced of Rs.1,50,000/-.

In addition to the above, it is further proposed to provide for an additional deduction in respect of any amount paid, of upto Rs.50,000/- for contributions made by any individual Assessee under the NPS by insertion a new sub-section (1B) in Section 80CCD.

Since sub-section (1B) of Section 80CCD is outside the overall cap of Rs.1,50,000/- prescribed by Section 80CCE of the Act, the deduction upto Rs.50,000/- is over and above the normal limit of Rs.1,50,000/-.

37. Tax neutrality on merger of similar schemes of Mutual Funds:

In order to facilitate consolidation of different schemes of mutual funds having similar features, it is proposed to provide tax neutrality to unit holders upon consolidation or merger of mutual fund schemes provided that the consolidation is of two or more schemes of an equity oriented fund or two or more schemes of a fund other than equity oriented fund.

It is further proposed that the cost of acquisition of the units of consolidated scheme shall be the cost of units in the consolidating scheme and period of holding of the units of the consolidated scheme shall include the period for which the units in consolidating schemes were held by the Assessee.

38. Amendments relating to Global Depository receipts (GDR’s):

The current taxation scheme of income arising in respect of depository receipts under Section 115ACA of the Act is aligned with the earlier scheme which was limited to issue of Depository Receipts (DR’s) based on the underlying shares of the company issued for this purpose (i.e sponsored GDR) or FCCB of the issuing company and where the company was either a listed company or was to list simultaneously. Besides, the holder of such DR’s was a non-resident only.

As per the new scheme, DRs can be issued against the securities of listed, unlisted or private or public companies against underlying securities which can be debt instruments, shares or units etc; Further, both the sponsored issues and unsponsored deposits and acquisitions are permitted. DR’s can be freely held and non-residents.

Since the tax benefits under the Act were intended to be provided in respect of sponsored GDR’s and listed companies only, it is proposed to amend the Act in order to continue the tax benefits only in respect of such GDRs as defined in the earlier depository scheme.

39. Amendments relating to Settlement Commission:

The Finance Bill, 2015 proposes to streamline the procedure relating to applications by Assessee to the Settlement Commission, with amendments on the followings: summarized as under:

a)      Application for settlement for an assessment year for which assessment has been re-opened under Section 147;

b)      Deemed date of commencement of proceedings and deemed date of conclusion of proceedings;

c)      Time-limit for making application for rectification of order to the Settlement Commission;

d)      Grant of Immunity from prosecution by Settlement Commission;

e)      Abatement of settlement proceedings;

f)       Bar on subsequent applications;

g)      Application of assets seized against the amount of liability arising on an application made to the Settlement Commission.

(All the above amendments are proposed to take effect from 1^st June 2015).

40. Direct Tax Code (‘DTC’):

In his Budget Six years ago, the then Finance Minister announced the introduction of the Direct Taxes Code (‘DTC’) and a draft of the same was also circulated for comments and discussion. Thereafter, there have been revisions and a variation therein based on inputs from various lobbies and it has been under discussion for quite long.

After considering all aspects, the Narendra Modi led NDA Government has decided not to go ahead with implementation of the DTC.

41. Retrospective amendments:

As promised in the last Budget, this time as well the Finance Minister has reiterated that the NDA Government would not ordinarily bring about any retrospective amendments to adversely impact the stability and predictability of the taxation regime and resort to such provisions shall be avoided.

The Finance Minister has promised to the investors, to provide a stable and predictable tax regime which would be investor friendly and spur growth.

42. Other proposals:

Besides major Direct tax proposals summarized above, the Finance Bill, 2015 also has proposals about the following:

• to provide that an auditor who is not eligible to be appointed as auditor of a company as per the provisions of sub-section (3) of section 141 of the Companies Act, 2013 shall not be eligible for carrying out any audit or furnishing of any report/certificate under any provisions of the Act in respect of that company. On similar lines, ineligibility for carrying out any audit or furnishing of any report/certificate under any provisions of the Act in respect of non-company is also proposed to be provided.

• In order to have a better and meaningful monitoring mechanism for weighted deduction allowed under section 35 (2AB) of the Act, it is proposed to amend the provisions of section 35(2AB) of the Act to provide that deduction under the said section shall be allowed if the company enters into an agreement with the prescribed authority for cooperation in such research and development facility and fulfills prescribed conditions with regard to maintenance and audit of accounts and also furnishes prescribed reports.

• It is proposed to amend the Act to provide that in the case of an Individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.

• To bring simplicity, it is proposed to provide that no notice under section 148 shall be issued by an assessing officer upto four years from the end of relevant assessment year without the approval of Joint Commissioner and beyond four years from the end of relevant assessment year without the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

• Orders passed by the prescribed authority under section sub-clauses (vi) and (via) of clause (23C) of section 10 made appealable before Income-tax Appellate Tribunal.

• Mandatory furnishing of return of income by certain universities and hospitals referred to in section 10 (23C) of the Act.

• Introducing facility of filing Form 15G/15H for payment made under life insurance policy.

• Relaxing the requirement of obtaining TAN for certain deductors.

• Enabling the Board to notify rules for giving foreign tax credit of any income-tax paid in any country or specified territory outside India, under section 90, or under section 90A, or under section 91, against the income-tax payable under the Act.

• Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations.

• Exemption for transport allowance to be increased from Rs.800/- per month to Rs.1,600/- per month.

Also Read-An Analysis of Service Tax Proposals – Budget 2015-2016

(Compiled By Partners of ‘B. S. Shah & Co., Chartered Accountant’ Namely (i) Bhupendra Shah -B.Com., L.L.B. (SP.), A.C.S., F.C.A. (ii) N. Krishnakumar- B.Com., F.C.A., Grad CWA and (iii) Shreyam Shah -B.Com. A.C.A.,DISA)