Income Tax Act with Master Guide to Income Tax Act

Transcription

1 Income Tax Act with Master Guide to Income Tax Act SECTION Income Tax Act DIVISION ONE 1 Income-tax Act, 1961 Arrangement of Sections I-3 Text of the Income-tax Act, 1961 as amended by the Finance Act, Appendix : Text of remaining provisions of Allied Acts referred to in Income-tax Act Subject Index DIVISION TWO 2 Finance Act, 2012 Arrangement of Sections 2.3 Text of the Finance Act, DIVISION THREE 3 National Tax Tribunal Act, 2005 Arrangement of Sections 3.3 Text of the National Tax Tribunal Act, 2005 as amended up to date 3.5 DIVISION FOUR 4 Securities Transaction Tax Arrangement of Sections 4.3 Text of the Securities Transaction Tax as amended by the Finance Act, v

2 Master Guide to Income Tax Act DIVISION ONE Commentary on Finance Act, 2012 Amendments made by Finance Act, 2012 at a glance GENERAL ANTI AVOIDANCE RULE ( GAAR ) 1.1 Introduction Nature of provisions Objective Arrangement Definition Analysis Arrangement entered into by assessee may be declared to be an impermissible avoidance arrangement (IAA) Onus May Impermissible Avoidance Arrangement (IAA) Conditions Illustrations Factual exercise Explanation to section May Onus Options available to Assessing Officer for invoking GAAR 1.93 I-7

3 I Tax benefit Definition Analysis Main purpose Main Purpose Statutory presumption Shall presume Alternate Conditions Onus Creation of rights or obligations which are not ordinarily created [section 96(1)(a)] Ordinarily Arm s length Misuse or abuse of the provisions of the Act [section 96(1)(b)] Abuse Objective behind introduction of a provision Benefit of a provision in the Act does not per se result in abuse/misuse Lack of commercial substance [Section 96(1)(c)] Arrangement lacking or deemed to lack commercial substance Meaning of commercial substance Illustration Deemed lack of commercial substance Irrelevant factors Direct Taxes Code Round trip financing Accommodating Party Carried out by means or manner not ordinarily employed for bona fide purposes Ordinarily Bona fide purpose 1.111

4 I Arrangement to be declared to be an IAA Consequences of applicability of Chapter X-A [section 98] Statutory provisions Analysis Application of GAAR (section 100) Chapter to be applied in accordance with prescribed guidelines etc Procedure regarding application of GAAR by Income tax department (section 144BA) Steps Consequences of directions Other matters Analysis AO s reference Assessment proceedings Opinion by Commissioner Approving Panel Prior approval of the Commissioner Nature of proceedings before the AO in relation to determination of consequences Tremendous sanctity of the review by the Commissioner/Approving Panel Appeal against assessment order Advance ruling in respect of an impermissible avoidance arrangement Background Amendments Analysis A GAAR vis-à-vis binding force of AAR s rulings Other aspects of GAAR and applicability of GAAR to other provisions Complex and interlinked provisions Benefit Relevance of Finance Minister s speech and Explanatory Memorandum 1.128

5 I-10 Annex No threshold limit Legal or genuine arrangements are also covered Non-related parties Whether applicable to past transactions? Non obstante provisions Year of application of Chapter XA GAAR and DTAA Applicability to Court sanctioned schemes Specific Anti Avoidance Regulations (SAAR) v. General Anti Avoidance Regulations (GAAR) Assessment of representative assessee TDS Penalties Recommendations by the Standing Committee of the Parliament Onus Implications under other laws Reliance on Memorandum explaining the provisions of the Finance Bill TAXATION OF NON-RESIDENTS 2.1 Amendment to definition of property Amendment Analysis Amendment to definition of transfer Amendment Analysis Amendment to section 9(1)(i) Brief description of amendments in section 9(1)(i) Statutory explanation regarding the amendment in section 9(1)(i) Notes on Clauses to Finance Bill, Explanatory Memorandum to Finance Bill, Finance Minister s Speech 1.153

6 I Analysis of amendment in section 9(1)(i) Explanation Explanation Consequences of the amendments in section 9(1)(i) No threshold for smaller transactions No exception to listed companies No limit to tiers Illustration Interest in any entity is covered by the amendment No proportionate abatement qua value derived from non India assets Determination of value Taxation of transfer of shares in all holding companies situated in the UK/USA No step up of cost Through qualifies all the limbs of section 9(1)(i) Substantial Retrospectivity General principles regarding retrospective amendment Retrospective legislation and Income-tax Restrictions on retrospective amendments Retrospective amendment when permissible Onus to prove that amendment not permissible Factors considered relevant in assessing unreasonableness of amendment View 1 : Retrospective amendment to section 9(1)(i) is permissible View 2 : Retrospective amendment to section 9(1) and allied provisions is not permissible (see paras to ) Amendment to through Explanation 5 regarding deemed location in India Fresh imposition of levy Validation clause 1.177

7 I Amendments to section 9(1)(vi) Amendments Object Analysis Amendment to section Amendment Analysis Amendments to section 90A Section 115A Amendment in relation to taxation of non-resident entertainers (Section 115BBA) Analysis Validation of Demand Annex 2.1 Meaning of the word Management EXEMPTIONS 3.1 Exemption of maturity proceeds of Life Insurance Policy [Section 10(10D)] Amendment Effects of the amendment Analysis A Exemption to Prasar Bharati Application of first proviso to section 2(15) ( First proviso ) and effects on exemption to charitable trusts First proviso Amendment Analysis Amendment in the definition of Venture Capital Undertaking [Section 10(23FB)] Background and Amendment Analysis 1.203

8 I Exemption to income of a foreign company on account of sale of crude oil [section 10(48)] Amendment Analysis BUSINESS INCOME 4.1 Additional depreciation - Extension to the business of generation or generation and distribution of power Background Amendment Analysis Weighted Deduction for Scientific Research and Development Deduction in respect of capital expenditure on specified business Amendment Analysis Expenditure on agricultural extension project [Section 35CCC] Agricultural extension project meaning of Expenditure An assessee Other issues Expenditure on skill development project [Section 35CCD] Skill Development project Expenditure Other issues Disallowance under section 40(a)(ia) Present provision Amendment Analysis Amendment to section 40A(2) in respect of disallowance of unreasonable or excessive expenditure Background Amendment relating to specified domestic transactions Amendment relating to list of specified persons 1.221

9 I Threshold limit for Tax Audit [Section 44AB] Amendment Analysis A Specified Date for Furnishing Tax Audit Report Tax on presumptive basis in case of certain eligible business Person carrying on profession referred to in section 44AA Person earning brokerage/commission income Agency Business Increase in threshold limit to Rs. 1 crore Annex 4.1 Relevant extracts from National Manufacturing Policy CAPITAL GAINS 5.1 Demerger Amendment Analysis Exemption from capital gains to a shareholder in case of amalgamation [Section 47] Cost of capital asset in case of succession to business by companies [Section 49] Fair Market Value to be deemed as full value of consideration in certain cases [Section 50D] Objects of the provision Rulings neutralised Other issues Exemption of Capital Gain on transfer of land used for agriculture purpose [Section 54B] Exemption to capital gains on transfer of residential property not to be charged in certain cases [Section 54GB] Salient Features of the provision Analysis of the provision Residential property Owned by 1.252

10 I Eligible assessee Utilisation of the net consideration for subscribing to shares Eligible company Utilisation by the company Quantum of capital gains exempt Cost of new asset Withdrawal of exemption in case of certain transfers within 5 years [Sub-section (4)] Reference to Valuation Officer Amendment Tax on short-term capital gains [Section 111A] Tax on long-term capital gains [Section 112] Amendment Analysis Special provisions relating to conversion of Indian branch of a foreign bank into a subsidiary company Initial failure to comply with the conditions Subsequent failure INCOME FROM OTHER SOURCES 6.1 Exemption of any sum or property received by HUF from its members Amendment Share premium in excess of the fair market value deemed as income Salient features of the provision Objective of the amendment Certain aspects relevant for interpreting clause Analysis of the clause Allowance of expenditure Applicability of section 55A Effects 1.312

11 I-16 7 DEDUCTION UNDER CHAPTER VI-A 7.1 Amendment to the definition of market value in section 80A(6) Amendment A Analysis of amendment Deduction in respect of Life Insurance Premium Effects of the amendments Deduction in respect of health insurance premium Amendment Analysis Deduction in respect of medical treatment, etc. [Section 80DDB] Deductions in respect of certain donations under sections 80G and 80GGA - Mode of Payment Extension of sunset clause for tax holiday under section 80-IA Amendment to the definition of market value in section 80-IA(8)/(10) Amendment to section 80-IA(8) Amendment to section 80-IA(10) Deduction of interest on savings account deposit Analysis Deduction for investment under equity saving scheme Salient features of the provision Analysis TRANSFER PRICING 8.1 Extension of transfer pricing provisions to specified domestic transactions (SDT) Amendment Analysis Amendment to section 92C(2) regarding deviation from arithmetic mean (AM) Background Amendments relating to second proviso 1.332

12 I Amendments relating to first proviso Analysis Amendment relating to transactions not reported in the Audit Report under section 92E Amendment in definition of international transaction Amendment Analysis Advance Pricing Agreement [section 92CC] Amendment Analysis Effect of APA in term of return of income/assessment (section 92CD) Analysis MINIMUM ALTERNATE TAX ( MAT ) AND ALTERNATE MINIMUM TAX ( AMT ) 9.1 Minimum Alternate Tax (MAT) Preparation of accounts Adjustment of amount standing to the credit of revaluation reserve Option for preparation of accounts Exemption to life insurance business Alternate Minimum Tax ( AMT ) The Provision Amendment Analysis RETURN, ASSESSMENT AND APPEALS 10.1 Furnishing return of income by certain resident Amendment Assessment Amendment 1.357

13 I Analysis Third Proviso /4 Dispute Resolution Panel /4-1 Background /4-2 Amendments /4-3 Analysis Amendment relating to reassessment of income [section 147] Background Amendments Analysis Amendment relating to provisions relating to time limit for notice under section Background Amendments Analysis Time limit for completion of assessment or reassessment Amendments Notice for assessment in search or requisition or other cases Amendment Amendments to section 153B Rectification of mistakes Amendment Section Notice of Demand Appeal to Commissioner (Appeals) Rights of appeal to deductor Appeal against assessment order under section 143(3) - Exceptions Appeal against assessment etc. under section Exceptions Assessment or reassessment pursuant to search Appeal against assessment or reassessment or recomputation of total income pursuant to Advance Pricing Agreement ( APA ) Appeal against rectification orders - Exceptions Appeal against penalty order under section 271AAB 1.371

14 I Appeal to the Appellate Tribunal Appeal against certain orders passed under section 153A/153C Appeal against order passed under section 144BA(12) Appeal by AO against own order, pursuant to objection to DRP Cross objections Disposal of appeal by ITAT within specified period DEDUCTION AND COLLECTION OF TAX AT SOURCE 11.1 TDS from interest on securities Amendment TDS from payments to non-resident sportsmen etc TDS from fees for professional or technical services Analysis TDS from payment of compensation on acquisition of certain immovable property TDS from interest payable by specified Indian company Insertion of section 194LC Analysis Amendments to section Analysis Amendment in section 197A No deduction of tax to be made No TDS in case of certain payments to notified institutions etc Person deemed to be assessee in default Amendment Conditions Analysis Amendment in section 206C Consequences where person responsible treated as assessee in default 1.388

15 I Interest under section 201(1A) Limitation period under section 201(3) Interest under section 220(2) Person responsible for paying Collection of tax from buyers of coal or lignite or iron ore or bullion or jewellery Amendment Inclusion of specified minerals Goods utilised for power generation - Not subject to tax collection Bullion or Jewellery Interest under section 206C(7) Fees for default in furnishing statements in respect of tax deductible or collectible Amendment Analysis TAX & INTEREST PAYMENTS 12.1 Credit for payment of Alternate Minimum Tax (AMT) Amendment Effect of the amendment Advance tax - Exemption to resident senior citizen having non-business income Amendment Analysis Computation of advance tax Background Analysis Interest under section 234A and AMT Credit Background Amendment Interest under section 234B and AMT Credit Background Amendment 1.401

16 I Interest under section 234C Background Amendment Interest on excess refund Amendment PENALTIES 13.1 Penalty for concealment of income in respect of Specified Domestic Transaction (SDT) Background Amendment Penalty for failure to keep and maintain documentation in respect of SDT [Section 271AA] Penalty in search cases Penalty under section 271AAB Analysis Penalty for failure to furnish information or document under section 92D Penalty for failure to furnish statements etc TDS statements TCS statements Failure to furnish TDS/TCS statements Furnishing incorrect information Penalty under section 272A(2)(k) Reasonable cause PROSECUTION 14.1 Prosecution provisions Amendments Details Objectives of the amendments 1.417

17 I Increasing threshold and reduction in period Special Court Compounding MISCELLANEOUS 15.1 Definition of Commissioner Cash credits under section 68 of the Act Background Amendment Salient features of the first proviso Analysis Taxation of income referred to in section 68, etc Amendment Objective of the amendment Illustration Other issues Tax on dividends received from foreign companies Dividend distribution tax Amendment Analysis Taxation of investors in VCC/VCF [Section 115U] Background Amendments Analysis Amendment to taxation of tonnage income Settlement of cases Application for Advance Ruling [Section 245Q] Authorisation and assessment in case of search or requisition Background Amendment Consequential amendment in section Amendment in Schedule IV 1.438

18 I Definition of asset under section 2(ea) of the Wealth-tax Act Reassessment of wealth escaping assessment [Section 17] Exemption to RBI from Wealth-tax Retrospective amendments and its practical effects Mode and manner in which effect can be given Retrospective amendments, whether retrospective or prospective Amendment to securities transaction tax DIVISION TWO Practice Manual 1 CHARTS & TABLES UNDER INCOME-TAX ACT List of tax-free incomes 2.3 Deductions/Allowances 2.19 Periods of limitation 2.41 Penalties 2.68 Offences and prosecutions IMPORTANT PROCEDURES UNDER INCOME-TAX ACT Deduction of tax at source Salary [Section 192] Interest on securities [Section 193] Dividends [Section 194] Interest other than interest on securities [Section 194A] Winnings from lottery or crossword puzzle [Section 194B] Winnings from horse races [Section 194BB] Payments to contractors [Section 194C] 2.98

19 I-24 - Insurance commission [Section 194D] Payments to non-resident sportsmen/sports associations [Section 194E] Payments in respect of deposits under NSS, etc. [Section 194EE] Payments on account of repurchase of units by UTI/Mutual Fund [Section 194F] Commission on sale of lottery tickets [Section 194G] Commission or brokerage [Section 194H] Rent payments [Section 194-I] Fees for professional or technical services, etc. [Section 194J] Payment of compensation on acquisition of certain immovable property [Section 194LA] Income by way of Interest from Infrastructure Debt Fund [Section 194LB] Interest from specified Indian Company [Section 194LC] (From ) Payments to non-residents [Section 195] Income from units in case of offshore fund [Section 196B] Income from foreign currency bonds or global depository receipts of Indian companies [Section 196C] Income of foreign institutional investors from securities [Section 196D] Processing of TDS statements [Section 200A] Effect of non-furnishing of PAN [Section 206AA] Tax Deduction and Collection Account Number [Section 203A] Collection of tax at source [Section 206C] Advance tax [Section 211] e-payment of tax Self-assessment tax [Section 140A] Return of income [Section 139] Summary assessment [Section 143(1)] 2.152

20 I-25 Scrutiny assessment [Section 143(2)/(3)] Refunds [Section 237] Interest chargeable [Sections 201(1A), 220(2), 234A to 234D & 244A] Permanent Account Number [Section 139A] Quoting of Permanent Account Number in documents pertaining to certain prescribed transactions [Section 139A] Rectification of mistakes [Section 154] Revision of orders by Commissioner [Sections 263 & 264] Waiver of penalty by Commissioner [Section 273A] Waiver of penalty under section 273AA Appeals to Commissioner (Appeals) [Sections 246A to 249] Appeals to Tribunal [Sections 252 to 255] Appeal to High Court [Section 260A] Advance rulings [Sections 245N to 245V] Survey [Section 133A] Search and seizure [Section 132] Annual information returns [Section 285BA] TAX RATES Tax liability - How to find out Income-tax Compulsory deposit Wealth-tax Gift-tax Estate duty Rates for tax deduction at source Rates for tax collection at source Dividend tax under section 115-O 2.203

21 I-26 Tax on income distributed by UTI/Mutual Fund under section 115R Other taxes TAX RATES FOR THE LAST TEN ASSESSMENT YEARS Income-tax rates for individuals, HUFs, associations of persons and body of individuals Income-tax rates for firms (PFAs) Income-tax rates for companies Dividend tax rates under section 115-O Income-tax rates for co-operative societies Rates of wealth-tax Rates of gift-tax GOLD AND SILVER RATES FOR THE CURRENT YEAR, LAST TEN ASSESSMENT YEARS AND ON APRIL 1, 1981 Gold and Silver rates for the current year, last ten assessment years and on April 1, DIVISION THREE Circulars, Clarifications & Notifications [ March 2012] Section key to Circulars, Clarifications & Notifications issued by CBDT [ March 2012] 3.i Alphabetical key to Circulars, Clarifications & Notifications issued by CBDT [ March 2012] 3.v Circulars, Clarifications & Notifications [ March 2012] 3.3

22 I-27 DIVISION FOUR Case Laws [ March 2012] Section key to Landmark Rulings of Supreme Court/High Courts [ March 2012] 4.i Alphabetical key to Landmark Rulings of Supreme Court/ High Courts [ March 2012] 4.v Case Laws [ March 2012] 4.3