The Central Board of Direct Taxes ( CBDT) has directed re-opening of all cases under the search and seizure label, income-escaping assessments and deductions claimed from profits and gains on all eligible businesses.
This is now allowed, thanks to amendments to relevant sections which have provided for reopening of cases much beyond the present stipulated limit of eight years. The amendments to relevant Sections 80A, 80IB, 132 and 147 have been made with retrospective effect, from financial year 2003, 2000, 1998 and 1989.

In its plan for the year 2009-10 for boosting tax collection, discussed in the presence of the finance minister last week, the board feels its departments across India should reopen all such cases which attract provisions where amendments have been made in the Finance Bill, 2009, with retrospective effect.

The plan also requires the companies to furnish complete details of the latest balance sheet and bank accounts during their tax assessment, instead of the current practice of providing details pertaining to only that assessment year. Regular assessment is an exercise to find why there is gap between taxes paid by a company year on year.

Sources added the board has directed the department to assess cases for scrutiny not only for cases getting time-barred on March 31, 2010, but also to pick up cases which are to be assessed next year, where the department has noticed blatant violations through advance tax returns filed by the companies. 

Section 80A deals with companies seeking deduction of profits and gains of undertaking or enterprise from total income. (Exempt from this new amendment’s scope are deductions for newly established undertakings in special economic zones, 100 per cent export oriented units or free trade zones, and projects for commercial production and/or refining of mineral oil, from total income). The amendment to this section stated that a company seeking deductions under this section cannot claim these under any other provisions for the same assessment year.

Besides, it has also been clarified in the amendment that if any goods/services are transferred from such undertaking/ enterprise to another but the value of transfer of goods do not correspond to the market value of these goods, the profit or gains of such undertaking will be calculated as if the transfer was done on the basis of market value of the goods/services. This amendment has been made with effect  from 2003.

Similarly, Section 801B has made changes in the mode of deduction of profits or gains from commercial production or refining of mineral oil from total income. Cases which have availed of such deductions could be reopened from April 2000, from which the amendment comes into effect. The amendment has widened the number of cases that become eligible for claiming deduction and thus become liable for reopening.

Note:

Amendment of section 147.

58. In section 147 of the Income-tax Act, after Explanation 2, the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1989, namely:

Explanation 3.For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.

Amendment of section 80A.

29. In section 80A of the Income-tax Act,

(a) after sub-section (3), the following sub-sections shall be inserted, and shall be deemed to have been inserted with effect from the 1st day of April, 2003, namely:

(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading C-Deductions in respect of certain incomes, where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be.

(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading C.Deductions in respect of certain incomes, no deduction shall be allowed to him thereunder.;

(b) after sub-section (5) as so inserted, the following sub-section shall be inserted, namely:

(6) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading C-Deductions in respect of certain incomes, where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date.

Explanation.For the purposes of this sub-section, the expression market value,

(i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any;

(ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any.

Amendment of section 80-IB.

37. In section 80-IB of the Income-tax Act,

(a) for sub-section (9), the following sub-section shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2000, namely:

(9) The amount of deduction to an undertaking shall be hundred per cent of the profits for a period of seven consecutive assessment years, including the initial assessment year, if such undertaking fulfils any of the following, namely:

(i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before the 1st day of April, 1997;

(ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997;

(iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998.

Explanation.For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by Central or a State Government in any other manner, shall be treated as a single undertaking.;

(b) in sub-section (9), as so substituted,

(A) in clause (iii), after the words, figures and letters the 1st day of October, 1998, the words, figures and letters but not later than the 31st day of March, 2012 shall be inserted;

(B) after clause (iii), the following clauses shall be inserted with effect from the 1st day of April, 2010, namely:

(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereafter referred to as NELP-VIII) under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after the 1st day of April, 2009..

(v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts for Coal Bed Methane blocks and begins commercial production of natural gas on or after the 1st day of April, 2009;

(c) in sub-section (10),

(i) in the opening portion, for the figures, letters and words 31st day of March, 2007, the figures, letters and words 31st day of March, 2008 shall be substituted;

(ii) in clause (c), for the words any other place; and, the words any other place; shall be substituted with effect from the 1st day of April, 2010;

(iii) after clause (d), the following clauses shall be inserted with effect from the 1st day of April, 2010, namely:

(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and

(f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:

(i) the individual or the spouse or the minor children of such individual,

(ii) the Hindu undivided family in which such individual is the karta,

(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta;;

(iv) the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2001, namely:

Explanation.For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)..

(d) in sub-section (11A), with effect from the 1st day of April, 2010,

(i) after the words vegetables or, the following words shall be inserted, namely:

meat and meat products or poultry or marine or dairy products or.

(ii) the following proviso shall be inserted, namely:

Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009..

Amendment of section 132.

51. In section 132 of the Income-tax Act,

(a) in sub-section (1),

(i) for the words Where the Director General or Director or the Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board,, the words Where the Director General or Director or the Chief Commissioner or Commissioner or Additional Director or Additional Commissioner shall be substituted and shall be deemed to have been substituted with effect from the 1st day of June, 1994;

(ii) after the words Where the Director General or Director or the Chief Commissioner or Commissioner or Additional Director or Additional Commissioner as so substituted, the words or Joint Director or Joint Commissioner shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1998;

(iii) in clause (A), after the words may authorise any, the words Additional Director or Additional Commissioner or shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1994;

(iv) in clause (B), after the word such, the words Additional Director or Additional Commissioner or shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1994;

(v) after the third proviso, the following proviso shall be inserted, namely :

Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.;

(b) in sub-section (1A),

(i) for the words Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board, the words Commissioner or Additional Director or Additional Commissioner shall be substituted and shall be deemed to have been substituted with effect from the 1st day of June, 1994;

(ii) after the words Commissioner or Additional Director or Additional Commissioner as so substituted, the words or Joint Director or Joint Commissioner shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1998.

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0 responses to “CBDT directed to re-opening of all cases under the search and seizure label and those claimed deduction u/s. 80IB, 80A”

  1. Vijay D Bhatt says:

    Dear Sir,

    Please suggest that if Employer pay Notice Pay on behalf of Employee then the same will be taxable in the hands of Employee or not ?

    Second where Employer shows this Notice Pay in Form – 16 and whether this is count @ 7.5% per annum for computation of Value of Perquisites.

    • Sandeep Kanoi says:

      The liability to pay the notice pay admittedly is that of the employee and the company was under no obligation to pay the same. Attention is drawn to the provisions of s. 15 and s. 17 wherein any payment made by an employer which was otherwise payable by an employee under his obligation is taxable under the head ‘Salary’ and in the circumstances, the reimbursement of such payment will be taxable in the hands of the employee.

      Secondly, the reimbursement is made to the employee by the company as per the terms of his employment, though not recorded in the letter of appointment, and by this count the same become taxable in the hands of the employee, as a salary u/s 15 and alternatively as the perquisite or profit in lieu of salary u/s 17 (1)(iv) of the Income tax Act. A useful reference may be made to the decision in the case of I.E.L.Ltd. v. CIT , 204 ITR 386 (Cal.). In this view of the matter the querist company is advised to deduct tax at source on such reimbursement by treating the same as taxable under the head Salary, in the hands of the employee.

      So in you case notice period salary paid/reimbursed by your company will be taxable in your hand.

      Full payment will be added to your taxable income.

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