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Direct Taxes and International Tax
April, 04th 2016
POST-BUDGET MEMORANDUM - 2016



         DIRECT TAXES




     THE INSTITUTE OF
       CHARTERED
   ACCOUNTANTS OF INDIA
        NEW DELHI
                   The Institute of Chartered Accountants of India


           POST-BUDGET MEMORANDUM ­ 2016

       A. INTRODUCTION

1.0    The Council of the Institute of Chartered Accountants of
       India considers it a privilege to submit this Post-Budget
       Memorandum to the Government.

       1.1    In this memorandum, we have suggested certain
              amendments to the proposals contained in the
              Finance Bill, 2016 which would help the Government
              to achieve the desired objectives.

       1.2    We have noted with great satisfaction that the
              suggestions given by the Committee in the past have
              been considered very positively. In formulating our
              suggestions in regard to the Finance Bill 2016, the
              Direct Taxes Committee of the ICAI has considered in
              a balanced way, the objectives and rationale of the
              Government and the practical difficulties/hardships
              faced by taxpayers and professionals in application
              of the provisions of the Income-tax Act, 1961. We are
              confident that the suggestions of the Direct Taxes
              Committee of ICAI given in this Memorandum shall
              receive positive consideration.

1.3    In this memorandum, firstly an executive summary of our
       suggestions on the specific clauses of the Finance Bill,
       2016 relating to income-tax have been given. The detailed
       suggestions are given thereafter.

1.4    In case any further clarifications or data is considered
       necessary, we shall be pleased to furnish the same.




Post-Budget Memorandum ­ 2016 (Direct Taxes)                         Page 2
                   The Institute of Chartered Accountants of India


       The contact details are:

            Name and Designation                          Contact Details

        CA. Naveen ND Gupta, Chairman, naveen@dassgupta.com
        Direct Taxes Committee
        CA. Nihar N. Jambusaria,       nihar.jambusaria@ril.com
        Chairman,      Committee   on
        International Taxation

        CA. Nidhi Singh,                        dtc@icai.in
        Secretary,     Direct          Taxes
        Committee

        CA. Mukta K. Verma,                     citax@icai.in
        Secretary,     Committee          on
        International Taxation




Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 3
                            The Institute of Chartered Accountants of India


                                       B. Executive Summary

S. No.      Clause Section          Particulars                   Suggestions             Page
            No                                                                            No
1.              -           -       Paragraph E of Part III       It is suggested that the 28
                                    to the First Schedule ­       benefit of reduction of
                                    ­ Proposed reduction          rate of tax to 29% of
                                    of 1% in rate of              total income for small
                                    taxation    in case of        domestic      companies
                                    company       assessees       may also be extended
                                    with               total      to firms and Limited
                                    turnover/gross                Liability Partnerships
                                    receipts of upto Rs. 5        as well since most of
                                    crore ­ Reduction in          the deductions and
                                    rate may be made              exemptions        phased
                                    applicable to Firms/          out as proposed by
                                    Limited        Liability      sunset      clause     of
                                    Partnerships also             Finance Bill, 2016 are
                                                                  applicable     to   both
                                                                  companies as well as
                                                                  firms/LLPs and so as
                                                                  to provide a level
                                                                  playing field amongst
                                                                  these      forms       of
                                                                  business.

                                                                  Further, the limit of Rs
                                                                  5         crore       for
                                                                  determining          the
                                                                  eligibility to avail the
                                                                  reduced rate may be
                                                                  with      reference    to
                                                                  P.Y.2015-16, being the
                                                                  previous            year
                                                                  immediately preceding
                                                                  the current previous
                                                                  year,            namely,
                                                                  P.Y.2016-17, relevant
                                                                  to A.Y.2017-18.
2.              -           -       No provision in the           Appropriate provision 29
                                    Finance Bill, 2016 to         to reduce the period of
                                    give effect to the            holding from three to
                                    proposal contained in         two years for availing
                                    para 127 of Hon'ble           benefit of long-term
                                    Finance       Minister        capital gains in case of
                                    speech to reduce the          unlisted       companies
                                    period of holding for         may be incorporated
                                    availing   benefit   of       in    line    with   the
                                    long-term       capital       proposal contained in
                                    gains    in case of           the Budget Speech.
                                    unlisted    companies
                                    from three to two
                                    years
         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 4
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions             Page
            No                                                                            No

3.           7(a)(ii)   10(12A)     Proposed         40%          It is suggested that the 29
                                    exemption          for        proposed clause (12A)
                                    withdrawal       from         of section 10 providing
                                    National      Pension         for exemption of 40%
                                    System (NPS) by any           of payment from the
                                    employee ­ Benefit to         NPS Trust to "an
                                    be     extended     to        employee" on closure
                                    withdrawals by any            of account or opting
                                    person     and     not        out      of     pension
                                    employees alone.              scheme,      may      be
                                                                  modified to allow such
                                                                  exemption to payment
                                                                  from the NPS Trust to
                                                                  "an individual", since
                                                                  exemption under the
                                                                  said clause is available
                                                                  in       respect      of
                                                                  withdrawals from NPS
                                                                  by        self-employed
                                                                  individuals also.

                                                                  In        effect,       the
                                                                  substitution of the
                                                                  words "an employee"
                                                                  in the said clause by
                                                                  "an individual" would
                                                                  help to bring within its
                                                                  fold, exemption to self-
                                                                  employed individuals
                                                                  as well.
4.                        14A       Para 167 of Finance           It is suggested that the 30
                                    Minister's speech ­           provisions of section
                                    Amendment in Rule             14A may not be made
                                    8D proposed ­ Further         applicable to dividend
                                    amendment required            income exempt under
                                    in section 14A so that        section 10(34) since it
                                    the said section is not       has already suffered
                                    made applicable to            an economic tax in the
                                    dividend        income        form       of     dividend
                                    exempt under section          distribution           tax.
                                    10(34) since the same         Likewise, section 14A
                                    has been subject to           may not be made
                                    dividend distribution         applicable to any other
                                    tax in the hands of the       income       which     has
                                    company                       been        subject      to
                                                                  economic       tax     like
                                                                  dividend.
5.             15          35       Weighted   Deduction          Scientific research is 31
                                    for contribution to           the lifeline of business
                                    Scientific  Research          in all countries of the

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 5
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                Page
            No                                                                               No
                                    and expenditure on            world. Like make in
                                    scientific research to        India, ease of doing
                                    be phased out ­               business            and
                                    Weighted deductions           encouragement         to
                                    to be continued for           start up initiatives of
                                    providing impetus to          the        government,
                                    scientific research and       innovation & scientific
                                    development in India          research      initiative
                                                                  should be given equal
                                                                  weightage.

                                                                  Withdrawal         of
                                                                  weighted deduction in
                                                                  respect of scientific
                                                                  research expenditure
                                                                  will be a retrograde
                                                                  step.

                                                                  Therefore,       it     is
                                                                  suggested            that
                                                                  weighted     deductions
                                                                  to various modes of
                                                                  Scientific      Research
                                                                  expenditure allowed at
                                                                  present        to      be
                                                                  continued.
6.             17        35AC       Deduction in respect          The         expenditure 32
                                    of    Expenditure    on       incurred on eligible
                                    Eligible Projects to be       projects or schemes
                                    withdrawn             ­       are        for        the
                                    Deduction to continue         development of the
                                    to provide impetus to         backward and weaker
                                    rural    sector     and       sections          thereby
                                    weaker sections of the        focusing               on
                                    economy                       development of rural
                                                                  areas.

                                                                  Further,     all    the
                                                                  projects are approved
                                                                  by      the    National
                                                                  Committee which is
                                                                  set up by the Central
                                                                  Government to ensure
                                                                  that the funds are
                                                                  utilized for the said
                                                                  purpose.

                                                                  Therefore,      this
                                                                  deduction which is
                                                                  serving the purpose
                                                                  for which it was

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 6
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                Page
            No                                                                               No
                                                                  enacted        so     well,
                                                                  should be continued
                                                                  to be allowed.
7.           25,26        44AB      Consequential                 It      is       therefore 33
                                    amendments due to             suggested that clause
                                    amendment proposed            (a) of section 44AB be
                                    in section 44AD -             appropriately modified
                                    Clarification       for       to      increase        the
                                    assessees with gross          threshold             limit
                                    receipts exceeding one        specified      thereunder
                                    crore rupees but less         from rupees one crore
                                    than two crore rupees         to rupees two crore, so
                                    regarding                     as    to      avoid    any
                                    maintenance of books          ambiguity                in
                                    of account                    interpreting the true
                                                                  intent of law regarding
                                                                  maintenance of books
                                                                  of account and audit
                                                                  of the same where the
                                                                  total turnover, gross
                                                                  receipts exceed rupees
                                                                  one crore but does not
                                                                  exceed rupees two
                                                                  crore.
8.             26        44AD       Proposed deletion of          For facilitating ease of 33
                                    proviso to sub-section        doing      business      by
                                    (2)    providing     for      small       firms      and
                                    deduction of interest         removing the genuine
                                    and      remuneration         hardship of having to
                                    paid to partners by           pay higher taxes on
                                    firm      from      the       their        presumptive
                                    presumptive     income        income on account of
                                    under section 44AD ­          the proposed denial of
                                    Proviso to remain to          deduction in respect of
                                    avoid          genuine        remuneration paid to
                                    hardship to small and         partners within the
                                    medium firms                  limits set out in
                                                                  section      40(b),     the
                                                                  proviso to section to
                                                                  44AD(2)        may       be
                                                                  retained.        Similarly,
                                                                  separate        deduction
                                                                  may be allowed for
                                                                  professional firms as
                                                                  well in respect of
                                                                  remuneration paid to
                                                                  partners under the
                                                                  proposed new section
                                                                  44ADA.
9.             27       44ADA       Proposed     section                                      34
                                    44ADA providing for

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 7
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                Page
            No                                                                               No
                                    special provision for
                                    computing profits and
                                    gains of profession on
                                    presumptive basis ­
                                    Issues and concerns
                                    arising therefrom to be
                                    addressed

      9.1      27       44ADA       Threshold limit of Rs It is suggested that the 35
                                    50 lakhs may be threshold limit of Rs
                                    increased               50 lakh may be raised
                                                            appropriately so that a
                                                            sizable percentage of
                                                            professionals in the
                                                            small and medium
                                                            segment are covered
                                                            under       the     said
                                                            provisions;        which
                                                            would ultimately lead
                                                            to the achievement of
                                                            stated    objective    of
                                                            introducing the new
                                                            provision.
      9.2      27       44ADA       Rate of estimated tax It is suggested that the 35
                                    @ 50% too high          estimated      rate    of
                                                            income @ 50% of the
                                                            total gross receipts
                                                            may      be     reduced
                                                            appropriately
                                                            considering the high
                                                            cost of providing the
                                                            services by specified
                                                            professionals specially
                                                            the small tax payers
                                                            having income from
                                                            profession.
10.            28       47(xiiib)   Conversion           of 1. The condition of 36
                                    company into LLP ­ asset base being less
                                    Clarification required than Rs. 5 crores may
                                    relating to additional be rationalised.
                                    condition
                                                            2. Provision may apply
                                                            prospectively         to
                                                            conversion proposals
                                                            initiated on or after 1
                                                            April 2016.

                                                                  3. Also, the scope of
                                                                  the term `value of total
                                                                  assets as appearing in
                                                                  the books of accounts'

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 8
                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions              Page
             No                                                                            No
                                                                  be clarified to provide
                                                                  certainty and reduce
                                                                  litigation .
11.            30         50C       Option for adopting           The amendment may 37
                                    stamp duty value on           be       treated       as
                                    date of agreement ­           clarificatory in nature.
                                    Amendment       to    be      Alternatively,          a
                                    treated as clarificatory      circular may be issued
                                    in nature                     to achieve the same
                                                                  result     in    pending
                                                                  assessments            or
                                                                  appeals.
12.            40       80-IAB      Phasing       out     of      Since the qualifying 37
                                    incentive          where      period of deduction
                                    development of SEZ            starts from year of
                                    begins on or after 1st        notification of SEZ,
                                    April, 2017 - Phasing         the phase out may
                                    out to be in respect of       also be with respect to
                                    SEZs notified on or           SEZs notified on or
                                    after 1st April, 2017         after 1 April 2017
                                                                  instead of currently
                                                                  proposed phase out
                                                                  with      respect      to
                                                                  commencement           of
                                                                  development on or
                                                                  after 1 April 2017.
13.            42        80-IB      Phasing       out      of     The sunset clause may 38
                                    incentive         under       be with reference to
                                    section     80-IB      in     acquisition     of  new
                                    respect of production         blocks        and     for
                                    of mineral oil and            commencing discovery
                                    natural gas, if the           process in the block
                                    specified        activity     already acquired. The
                                    commences on or after         sunset clause may not
                                    1.4.2017     - Phasing        be made applicable for
                                    out may be with               commencing
                                    reference              to     commercial
                                    acquisition    of   new       production of mineral
                                    blocks               and      oil or natural gas in
                                    commencing discovery          the eligible blocks in
                                    process in respect of a       which discovery has
                                    block already acquired        already      commenced
                                                                  before 1 April, 2017.
14.          41,49      80-IAC,     Special incentives to                                   39
                        115BA       start-ups ­ Issues to
                                    be addressed

      14.1   41,49      80-IAC,     Definition of "eligible       Clause      (ii)       of 39
                        115BA       start-up" to include          Explanation            to
                                    Partnership Firm and          proposed         section
                                    Limited       Liability       80IAC be amended to

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 9
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                 Page
            No                                                                                No
                                    Partnership                   define "eligible start-
                                                                  up" in line with the
                                                                  Start-up          scheme
                                                                  where, the term entity
                                                                  includes           Private
                                                                  Limited         Company
                                                                  (under The Companies
                                                                  Act,     2013)     or    a
                                                                  Registered Partnership
                                                                  Firm       (under     The
                                                                  Indian       Partnership
                                                                  Act, 1932) or Limited
                                                                  Liability    Partnership
                                                                  (under The Limited
                                                                  Liability    Partnership
                                                                  Act, 2008) so as to
                                                                  provide       ease      of
                                                                  running of business to
                                                                  startup firms and LLP
                                                                  also.
    14.2     41,49      80-IAC,     Benefit   of    100%          It is suggested that 40
                        115BA       deduction from the            sub-section      (2)    of
                                    year in which the             proposed          section
                                    eligible     start-up         80IAC                   be
                                    commences          its        appropriately
                                    business                      amended to give the
                                                                  benefit      of     100%
                                                                  deduction from the
                                                                  year in which the
                                                                  eligible         start-up
                                                                  commences              its
                                                                  business as against
                                                                  "year of incorporation"
                                                                  to avoid creation of
                                                                  paper/shell
                                                                  companies.
    14.3     41,49      80-IAC,     Profit linked       holiday   I.      In    order     to 41
                        115BA       for start-ups                 encourage start-ups, it
                                                                  is recommended that
                                                                  no turnover limit be
                                                                  prescribed.

                                                                  II.    Alternatively,
                                                                  instead of profit linked
                                                                  deduction,     start-ups
                                                                  may also be provided
                                                                  concessions in other
                                                                  aspects, illustratively,
                                                                  longer period for carry
                                                                  forward      of     loss,
                                                                  removing      restriction

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 10
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions             Page
            No                                                                            No
                                                              under      section     79,
                                                              annual advance tax,
                                                              annual compliance of
                                                              TDS statements, etc.
15.            43       80-IBA      Tax holiday to housing It is suggested that:          41
                                    projects ­ Issues to be
                                    addressed                 (a)     The definition of
                                                              built-up area in clause
                                                              (a) to sub-section (6)
                                                              be linked to clause (e)
                                                              of    sub-section       (2)
                                                              which            specifies
                                                              maximum         size     of
                                                              residential unit;
                                                              (b)     The words "and
                                                              interior door" in the
                                                              definition               of
                                                              "residential unit" be
                                                              replaced      with     "an
                                                              interior     door"       to
                                                              convey the real intent
                                                              (c)     The         period
                                                              within which project
                                                              has to be completed
                                                              may be extended from
                                                              three years to five
                                                              years from the date of
                                                              approval       by      the
                                                              competent authority.
16.            48       112(1)(c)   Long-term         capital The             following 43
                                    gains on shares of a alternative              modes
                                    company, not being a have been suggested:
                                    company in which
                                    public               are a) The        amendment
                                    substantially                 should be made
                                    interested,     to     be     retrospective from
                                    eligible              for     April 1, 2013; or
                                    concessional rate of
                                    tax@10%                 - b) A         clarificatory
                                    Amendment        to    be     circular may be
                                    made            effective     issued      by     the
                                    retrospectively               Central Board of
                                                                  Direct          Taxes
                                                                  clarifying        that
                                                                  since              the
                                                                  amendment is only
                                                                  clarificatory        in
                                                                  nature it will take
                                                                  effect from April 1,
                                                                  2013; or


         Post-Budget Memorandum ­ 2016 (Direct Taxes)                           Page 11
                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions                Page
             No                                                                              No
                                                                  c) An       Explanation
                                                                     may be added after
                                                                     the said clause
                                                                     clarifying that for
                                                                     the purposes of
                                                                     this clause unlisted
                                                                     securities     shall
                                                                     include shares of a
                                                                     company not being
                                                                     a     company      in
                                                                     which the public
                                                                     are     substantially
                                                                     interested.
17.            50      115BBDA      Dividend received by                                     44
                                    resident   individuals,
                                    HUFs      and     firms
                                    receiving dividend in
                                    excess of Rs.10 lakh to
                                    be subject to tax @
                                    10% in their hands ­
                                    Issues to be addressed

      17.1     50      115BBDA      Clarification required        It is suggested that 44
                                    in respect of amount          section 115BBDA be
                                    of dividend sought to         amended to reflect the
                                    be taxed under this           true legislative intent
                                    section                       stated      in      the
                                                                  Explanatory
                                                                  Memorandum.        The
                                                                  amendment may be
                                                                  effected     in     the
                                                                  following manner by
                                                                  adding    the    words
                                                                  "received in excess
                                                                  of Rs.10 lakh" in
                                                                  clause (a) of sub-
                                                                  section (1) after the
                                                                  words "income by way
                                                                  of such dividends" and
                                                                  before the words "at
                                                                  the rate of ten per
                                                                  cent"

      17.2     50      115BBDA      Consequence         of the It is recommended 45
                                    new      levy-        Triple that      new      levy
                                    taxation                     amounting to third
                                                                 level    taxation    on
                                                                 profits may be done
                                                                 away              with.
                                                                 Alternatively,      the
                                                                 earlier    system     of

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 12
                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions               Page
             No                                                                             No
                                                                  taxation of dividend,
                                                                  prior to 1997, namely,
                                                                  tax in the hands of the
                                                                  shareholder can be re-
                                                                  introduced and levy of
                                                                  Dividend Distribution
                                                                  Tax in the hands of
                                                                  the company may be
                                                                  removed.
18.            52       115BBF      Concessional rate of                                    45
                                    tax @ 10% on income
                                    from patent ­ Issues to
                                    be addressed

      18.1     52       115BBF      Benefit      may       be It is suggested that the 46
                                    extended     to     other benefit of concessional
                                    intellectual    property rate of tax @ 10% of
                                    rights                    income by way of
                                                              royalty in respect of a
                                                              patent developed and
                                                              registered in India be
                                                              also extended to other
                                                              intellectual    property
                                                              rights like know-how,
                                                              copyright, trade-mark
                                                              etc.
      18.2     52       115BBF      Benefit restricted to It is recommended 46
                                    `true and first inventor that the condition of
                                    of     the   invention': joint patentee also
                                    Benefit      may       be being `true and first
                                    extended to assignee inventor' be omitted. If
                                    of the true and first the intent is to allow
                                    inventor in respect of benefit only to first
                                    the right to make an person          to    register
                                    application      for    a patent, the phrase
                                    patent                    `being the true and
                                                              first inventor of the
                                                              invention'     used    in
                                                              context of joint person
                                                              may be substituted
                                                              with the phrase `being
                                                              the assignee of the
                                                              true and first inventor
                                                              in respect of the right
                                                              to make an application
                                                              for a patent'.
      18.3     52       115BBF      Benefit      may       be It is recommended 47
                                    extended to capital that, in line with BEPS
                                    gains arising on sale of Action 5, in addition to
                                    patented products         royalty income, this
                                                              concessional      regime

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 13
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                  Page
            No                                                                                 No
                                                                  should be extended to
                                                                  income on sale of
                                                                  patented        products
                                                                  also.
    18.4       52       115BBF      Extension of benefit to       It is recommended 48
                                    royalty income earned         that the concessional
                                    from inventions for           tax       regime       be
                                    which     patents    are      extended to royalty
                                    applied under Patents         income earned from
                                    Act       1970       but      patents     which     are
                                    registration is awaited       applied       for    and
                                                                  awaiting     registration
                                                                  as well.
    18.5       52       115BBF      Other Issues which            To make the regime 48
                                    need to be addressed          truly meaningful and
                                                                  comparable        to  the
                                                                  regimes which exist in
                                                                  other jurisdictions, its
                                                                  scope will need to be
                                                                  extended to cover or
                                                                  clarify the following:

                                                                  a.      Clarify       that
                                                                  condition of developed
                                                                  and registered in India
                                                                  is fulfilled once the
                                                                  qualifying       taxpayer
                                                                  gets      the       patent
                                                                  developed under his
                                                                  control and direction
                                                                  while some part of
                                                                  expenditure may be
                                                                  incurred outside India
                                                                  or some part of R&D
                                                                  activity (say, not more
                                                                  than       a       certain
                                                                  percentage, like 20%)
                                                                  may be outsourced to
                                                                  any     other      agency
                                                                  which works as per
                                                                  the     direction     and
                                                                  control       of       the
                                                                  taxpayer.

                                                                  b.     Clarify       that
                                                                  consideration received
                                                                  for               settling
                                                                  infringement disputes
                                                                  is also an alternative
                                                                  form of royalty which
                                                                  qualifies     for      the




         Post-Budget Memorandum ­ 2016 (Direct Taxes)                              Page 14
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                Page
            No                                                                               No
                                                                  benefit.

                                                                  c.     To provide an
                                                                  option to the taxpayer
                                                                  to opt out of the
                                                                  regime       if      the
                                                                  expenditure         and
                                                                  allowances admissible
                                                                  in    computation     of
                                                                  royalty income is likely
                                                                  to    result    in   net
                                                                  taxation below the
                                                                  regime       prescribed
                                                                  rate.

                                                                  d.     Since almost all
                                                                  comparable
                                                                  jurisdictions    extend
                                                                  benefit to non-resident
                                                                  permanent
                                                                  establishment which
                                                                  develops IP under the
                                                                  circumstances
                                                                  comparable to those
                                                                  under which IP is
                                                                  developed     by    the
                                                                  resident. The benefit
                                                                  may be extended to
                                                                  non-resident     having
                                                                  permanent
                                                                  establishment        in
                                                                  India.

                                                           e. In case of a
                                                           business
                                                           reorganisation in the
                                                           form       of     merger,
                                                           demerger       etc.,   the
                                                           successor entity and
                                                           in case of death of the
                                                           patent owner, its legal
                                                           heir/inheritor of the
                                                           patent        may       be
                                                           considered as eligible
                                                           to claim the benefit
                                                           provided             such
                                                           successor/legal       heir
                                                           satisfies the condition
                                                           of being a resident of
                                                           India.
19.            56       115QA       Rules to be prescribed a.      It is suggested 49

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 15
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S. No.      Clause Section          Particulars                   Suggestions               Page
            No                                                                              No
                                    for determining the           that a cut-off date for
                                    amount received by            applicability of rules
                                    the company for issue         may be prescribed. It
                                    of shares ­ Rules to be       is recommended that
                                    applicable for buy-           it should be explicitly
                                    back effected on or           provided     that   the
                                    after 01.06.2016              rules, once notified,
                                                                  shall be applicable
                                                                  only for computing
                                                                  consideration received
                                                                  on issue of shares in
                                                                  respect of buy back
                                                                  which takes place on
                                                                  or after 1 June 2016.

                                                                  b.     Further,
                                                                  necessary     provision
                                                                  should                be
                                                                  incorporated so that
                                                                  the cost paid for
                                                                  intermediate transfers
                                                                  between             the
                                                                  shareholders       post
                                                                  issue of share by the
                                                                  company is reduced
                                                                  for the purpose of
                                                                  calculating the buy-
                                                                  back tax.
20.            59       115TCA      Tax on income from            The      new    regime 50
                                    Securitisation Trust ­        should     be    made
                                    Tax     Treatment     in      applicable           for
                                    respect                of     distributions on or
                                    distributions in April        after 1 June 2016.
                                    and May 2016 to be
                                    clarified
21.            60       115TD,      Special       provisions      a.     The provisions 50
                        115TF       relating to tax on            of Chapter XII-EB be
                                    accreted income of            appropriately aligned
                                    certain    trusts    and      with      the     intent
                                    institutions ­ Issues to      expressed     in     the
                                    be addressed                  Explanatory
                                                                  Memorandum i.e., to
                                                                  levy exit tax only in
                                                                  case    of    voluntary
                                                                  wind-up of activities or
                                                                  dissolution or merger
                                                                  with charitable/non-
                                                                  charitable institutions
                                                                  or    conversion      of
                                                                  charitable institution
                                                                  into     non-charitable

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 16
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                  Page
            No                                                                                 No
                                                                  institution.

                                                                  b.     Without
                                                                  prejudice to generality
                                                                  of       the        above
                                                                  suggestion,      it     is
                                                                  suggested that, in case
                                                                  of    cancellation     of
                                                                  registration        under
                                                                  section     12AA,     the
                                                                  payment of tax should
                                                                  be stipulated within
                                                                  fourteen days from the
                                                                  disposal of the appeal,
                                                                  if any filed against the
                                                                  cancellation order.

                                                            c.     The amount on
                                                            which tax has been
                                                            levied in an earlier
                                                            year due to non-
                                                            compliance     of    the
                                                            provisions of section
                                                            11 to 13 should not be
                                                            included once again
                                                            while        computing
                                                            accreted income for
                                                            levy of exit tax, since
                                                            the same would result
                                                            in double taxation.
22.            65      139(4)/(5)   Time limit for filing It is suggested that:      52
                                    belated return reduced
                                    and           enabling (i)     Reference      to
                                    provisions for revising sub-section     (1)   of
                                    belated          return section 142 may be
                                    introduced - Reference reinstated     in    new
                                    to return in response section 139(4) i.e.,
                                    to section 142(1) to be enabling provision to
                                    included in Sections be made for filing of
                                    139(4) and 139(5)       belated    return     in
                                                            response    to notice
                                                            under section 142(1).

                                                                  (ii)   Section 139(5)
                                                                  may be amended to
                                                                  provide for revision of
                                                                  return      filed    in
                                                                  response     to notice
                                                                  under section 142(1),
                                                                  in line with the intent
                                                                  expressed      in   the

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                              Page 17
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions              Page
            No                                                                             No
                                                                  Explanatory
                                                                  Memorandum.
23.            66        143(1)     Increase in scope of          It is suggested that 53
                                    "Incorrect        claim       sub-clause (iv) may be
                                    apparent from any             appropriately
                                    information    in   the       reworded to disallow
                                    return" ­ New sub-            expenditure indicated
                                    clause     (iv) to be         in the report of audit
                                    redrafted to include          to be furnished under
                                    specific reference to         section 44AB but not
                                    report under section          taken into account in
                                    44AB                          computing          total
                                                                  income in the return.
24.            81       194LBB      Tax to be deducted at         Appropriate              54
                                    rates in force where          amendment may be
                                    the payee is a non-           made      to    exclude
                                    resident - Relief from        distribution of exempt
                                    tax        withholding        income from scope of
                                    obligation of AIF in          section 194LBB.
                                    respect of distribution
                                    of exempt income may
                                    be provided

25.            86        206C       TCS on sale of motor          It is suggested to 54
                                    vehicles of value above       introduce an enabling
                                    Rs. 10 lakhs- Enabling        provision for filing of
                                    provision for filing of       declaration by buyer
                                    declaration by buyer          for non-applicability of
                                    for non-applicability of      TCS in case of use of
                                    TCS in case of use of         motor vehicle for own
                                    motor vehicle for own         transportation
                                    transportation                business.            To
                                    business     may     be       safeguard the interests
                                    inserted.                     of     Revenue,    such
                                                                  facility    may      be
                                                                  provided only if buyer
                                                                  furnishes his PAN.
26.          87,89     211,234C Advance tax to be paid            It is suggested that 55
                                in one instalment on              section    211(1)    be
                                or before 15th March              suitably amended so
                                by    assessees opting            as to include section
                                for        presumptive            44ADA      within    its
                                taxation under section            ambit in the manner
                                44AD- Similar benefit             similar    to   section
                                may be extended to                44AD as proposed in
                                assessees opting for              sub-section (1)(b) in
                                section 44ADA                     the Finance Bill, 2016.

                                                                  Further, consequential
                                                                  amendment may also
                                                                  be made in section

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 18
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S. No.       Clause Section         Particulars                   Suggestions              Page
             No                                                                            No
                                                                  234C in line with
                                                                  amendment proposed
                                                                  ín clause (b) of sub-
                                                                  section (1) regarding
                                                                  assessees opting for
                                                                  section 44AD.
27.            88       220(2A)     Time       limit     for      The time limit may be 56
                                    disposing        waiver       redundant         unless
                                    applications provided -       there is a specific
                                    Consequence of not            provision             for
                                    passing     the   order       consequences in case
                                    within the time limit to      of failure to pass the
                                    be spelt out                  waiver order within
                                                                  prescribed time limit.
                                                                  Hence, it may be
                                                                  provided that, if the
                                                                  Principal
                                                                  Commissioner/
                                                                  Commissioner fails to
                                                                  pass the order within
                                                                  the time limit, interest,
                                                                  penalty etc. should be
                                                                  deemed to be waived.
28.            96        270A       New section 270A to                                     56
                                    be inserted to provide
                                    for levy of penalty in
                                    case      of    under
                                    reporting income and
                                    misreporting        of
                                    income- Issues to be
                                    addressed

      28.1     96        270A       Penalty order under    It is suggested that 56
                                    section 270A be made   section 246A may be
                                    an order appealable    suitably amended so
                                    before Commissioner    as to provide that
                                    (Appeals)under section penalty order under
                                    246A                   section 270A passed
                                                           by Assessing Officer
                                                           below the rank of
                                                           Commissioner may be
                                                           made       appealable
                                                           under section 246A
                                                           before Commissioner
                                                           (Appeals).
      28.2     96        270A       Insertion of reference It is suggested that 57
                                    to   section   270A(8) section 273A may be
                                    under section 273AA    amended to include
                                                           reference to Section
                                                           270A (8) i.e., mis-
                                                           reporting of income

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 19
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                 Page
            No                                                                                No
                                                        under its purview.
    28.3       96        270A       Penalty for under- Without        prejudice 58
                                    reporting of income thereto, with regard to
                                                        the newly introduced
                                                        methodology of levying
                                                        penalty, the following
                                                        suggestions may be
                                                        considered.

                                                                  ·       By    way      of
                                                                  express requirement,
                                                                  the Assessing Officer
                                                                  may be required to
                                                                  initiate             the
                                                                  proceedings prior to or
                                                                  concurrently with the
                                                                  closure of assessment
                                                                  proceedings.     Unless
                                                                  this is done, there may
                                                                  be initiation of penalty
                                                                  several years after the
                                                                  assessment
                                                                  proceedings          are
                                                                  completed. The time
                                                                  limit under section
                                                                  275(c)                is,
                                                                  unfortunately, linked
                                                                  with     the   date    of
                                                                  initiation             of
                                                                  proceedings.

                                                                  ·      Unlike
                                                                  Explanation      3    of
                                                                  section 271(1)(c), in
                                                                  the            proposed
                                                                  provision,        where
                                                                  return of income is not
                                                                  furnished, penalty will
                                                                  be    calculated with
                                                                  reference to tax on
                                                                  income         assessed
                                                                  without     considering
                                                                  the impact of tax
                                                                  deducted or advance
                                                                  tax paid by taxpayer.
                                                                  For example, in case
                                                                  of a person who is not
                                                                  required to furnish
                                                                  return     of    income
                                                                  under section 115A(5),
                                                                  tax may have been

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 20
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions                  Page
            No                                                                                 No
                                                                  paid, but, as per new
                                                                  methodology,        the
                                                                  whole of the income,
                                                                  as assessed, may be
                                                                  considered           as
                                                                  unreported     income.
                                                                  Such would also be
                                                                  the case in a situation
                                                                  where there is no
                                                                  revenue loss since the
                                                                  whole of the tax was
                                                                  already paid up and
                                                                  yet, the return may
                                                                  not     have      been
                                                                  furnished.

                                                                  ·      There may be
                                                                  some     concern      on
                                                                  resolution     of    the
                                                                  formula specified in
                                                                  the      section       if,
                                                                  intimation        under
                                                                  section 143(1)(a) is not
                                                                  available. It may be
                                                                  good to clarify that, in
                                                                  such a case, returned
                                                                  income will be the
                                                                  substituted basis.

                                                                  ·       If immunity is
                                                                  granted u/s. 270A, the
                                                                  immunity holds valid
                                                                  against initiation of
                                                                  prosecution       u/s.
                                                                  276C. The reference
                                                                  may also be made to
                                                                  section 276CC which
                                                                  can be invoked in a
                                                                  case where there is
                                                                  failure    to  furnish
                                                                  return of income.

                                                                  ·      As per proposed
                                                                  section 270A(10), the
                                                                  tax payable on under-
                                                                  reported income shall
                                                                  be amount of tax
                                                                  calculated (a) in the
                                                                  case of company, firm
                                                                  or local authority, on
                                                                  under-reported income

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S. No.      Clause Section          Particulars                   Suggestions                 Page
            No                                                                                No
                                                                  as    if   the     under-
                                                                  reported income were
                                                                  the total income and
                                                                  (b) in case of any other
                                                                  assessee, at the rate of
                                                                  30%       on       under-
                                                                  reported income. This
                                                                  provides       iniquitous
                                                                  results when under-
                                                                  reporting is of income
                                                                  chargeable at lower
                                                                  rate (say, long term
                                                                  capital gains). In case
                                                                  of company, firm or
                                                                  local authority, the
                                                                  penalty      shall     be
                                                                  computed @ 20% of
                                                                  under-reported LTCG
                                                                  whereas in case of
                                                                  other taxpayers, the
                                                                  penalty      shall     be
                                                                  computed @ 30% of
                                                                  under-reported LTCG.
                                                                  Further, benefit of
                                                                  slab rate shall also not
                                                                  be       available     to
                                                                  individual/HUF
                                                                  taxpayers.

                                                                  Hence,      to   ensure
                                                                  parity         between
                                                                  company/firm / local
                                                                  authority and other
                                                                  taxpayers,     it     is
                                                                  recommended that the
                                                                  tax      should      be
                                                                  computed on slab rate
                                                                  and/or lower rates as
                                                                  applicable to nature of
                                                                  under-reported
                                                                  income.
    28.4       96        270A       Order to specify the          It is suggested that 59
                                    specific   clause   of        suitable amendments
                                    under-reported     or         be     introduced    or
                                    misreported    income         alternatively
                                    for levy of penalty           administrative
                                    under section 270A            instructions may be
                                                                  issued so that each
                                                                  order contains the
                                                                  specific fact of either
                                                                  misreported income or

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 22
                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions              Page
             No                                                                            No
                                                                  under-reported income
                                                                  or both along with the
                                                                  mention of specific
                                                                  clause      of     section
                                                                  270A(2)/(9)        against
                                                                  each
                                                                  disallowance/addition.
                                                                  Such measures would
                                                                  act as a suitable
                                                                  control mechanism in
                                                                  the      absence         of
                                                                  recording                of
                                                                  satisfaction to initiate
                                                                  penalty      proceedings
                                                                  and would also enable
                                                                  assessee to opt for
                                                                  proposed           section
                                                                  270AA providing for
                                                                  immunity from penalty
                                                                  and prosecution in
                                                                  case income is not
                                                                  misreported.
      28.5     96        270A       Clarification when tax        It is suggested that 60
                                    increases due to re-          suitable     clarification
                                    characterisation    of        may        be       issued
                                    income      under    a        regarding the situation
                                    different    head   of        when tax amount is
                                    income but assessed           increased due to rate
                                    income     equals  the        increase (on account
                                    returned income               of, say, change of head
                                                                  of income from long
                                                                  term     capital      gain
                                                                  income to profits and
                                                                  gains of business or
                                                                  profession or income
                                                                  from other sources)
                                                                  although the returned
                                                                  income and assessed
                                                                  income are exactly
                                                                  same.
      28.6     96        270A       Mere making of a              It is suggested that 61
                                    claim which is not            proposed section 270A
                                    sustainable in law            may       be      suitably
                                    would not tantamount          amended        so      that
                                    to           furnishing       penalty        is       not
                                    inaccurate particulars        automatically
                                    for attracting levy of        attracted for merely
                                    penalty                       making of a claim
                                                                  which         is        not
                                                                  sustainable in law.
29.           108        281B       Provisional                   Need for clarification 61

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                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions                 Page
             No                                                                               No
                                    attachment            of      regarding reasons for
                                    property- Treatment of        depositing the amount
                                    amount realized by            in the personal deposit
                                    invoking           bank       account of authority
                                    guarantee-                    and not to refund the
                                    Clarification required        same to the taxpayer.

30.           193       Chapter     The             Income                                    62
                          IX        Declaration Scheme,
                                    2016- Issues to be
                                    addressed
      30.1    193       Chapter     Clarity on definition of      It is recommended to        62
                          IX        the term `declarant'          clarify whether non-
                                    [Clause 179(a) of the         residents who fulfil the
                                    Finance Bill, 2016]           other              stated
                                                                  conditions in clause
                                                                  180(1) are also allowed
                                                                  to avail opportunity
                                                                  under the scheme.
      30.2    193       Chapter     Impact of receipt of          As per the proposed         62
                          IX        notice, which bears no        scheme,               the
                                    reference    to     the       declaration cannot be
                                    undisclosed     income        made by a person who
                                    sought to be declared,        has received a notice
                                    on availment of this          under section 142 or
                                    scheme                        143(2) or 148, etc. It is
                                                                  possible     that     the
                                                                  notice      bears      no
                                                                  reference      to     the
                                                                  undisclosed       income
                                                                  which is sought to be
                                                                  declared. It may be
                                                                  considered       whether
                                                                  eligibility should be
                                                                  extended to a case
                                                                  where the declared
                                                                  income does not bear
                                                                  any nexus with the
                                                                  notice.
      30.3    193       Chapter     Immunity from other           Immunity      may      be   63
                          IX        Acts                          granted under other
                                                                  laws, such as SEBI,
                                                                  IPC etc.
      30.4    193       Chapter     No scrutiny or enquiry        It is recommended           63
                          IX        in      relation    to        that             suitable
                                    declarations filed by         clarification be made
                                    the taxpayer                  in the scheme itself to
                                                                  avoid any ambiguity.
      30.5    193       Chapter     Non-applicability  of         Under clause 193(e)(i),     63
                          IX        scheme in cases where         notice issued under
                                    notice under section          section 142 or sub-

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                             Page 24
                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions                  Page
             No                                                                                No
                                    142 or section 143(2) section (2) of section
                                    is issued               143 may be deleted as
                                                            no prior satisfaction is
                                                            recorded and mere
                                                            issue of notice cannot
                                                            be taken as non-
                                                            declaration of income
                                                            as held by judicial fora
                                                            in the past.
31.           198       Chapter     The      Direct    Tax                           65
                          X         Dispute      Resolution
                                    scheme(DRS), 2016 -
                                    Issues to be addressed

      31.1    199       Chapter     Clarification in case         Clarification is needed      65
                          X         where        appeal     is    with regard to the
                                    pending as on 29th            availment of the Direct
                                    February, 2016 but            Tax               Dispute
                                    decided/adjudicated           Resolution       Scheme,
                                    upon before the date          2016 in cases where
                                    of filing of declaration      appeal is pending as
                                                                  on 29th February,
                                                                  2016                   but
                                                                  decided/adjudicated
                                                                  upon before the date
                                                                  of filing of declaration
                                                                  under the said scheme
                                                                  by the assessee.
      31.2    199       Chapter     Declaration       of    tax   The provision for levy       66
                          X         payable                       of 25% penalty in case
                                                                  where disputed tax is
                                                                  more than rupees ten
                                                                  lakh      should        be
                                                                  dropped from clause
                                                                  199 of the Bill.
      31.3    199       Chapter     Benefit of this scheme        The proposed scheme          67
                          X         should       not     be       should cover appellate
                                    restricted to CIT(A)          forums [Commissioner
                                                                  (Appeals),     Tribunal,
                                                                  HC, SC], either at the
                                                                  instance of taxpayer or
                                                                  at the behest of tax
                                                                  authority.     If     this
                                                                  provision is extended
                                                                  to all such appeals,
                                                                  pending         litigation
                                                                  before all such judicial
                                                                  authorities will get
                                                                  reduced.
      31.4    199       Chapter     Clarification      is         Clarification is needed      67
                          X         required with regard          with regard to this

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                              Page 25
                            The Institute of Chartered Accountants of India


S. No.       Clause Section         Particulars                   Suggestions             Page
             No                                                                           No
                                 to applicability of this scheme's applicability
                                 scheme        in       all in all retrospective
                                 retrospective cases        cases pending before
                                                            any authority
      31.5    199       Chapter Issues pertaining to In order to encourage 68
                           X     `Tax     Arrears'    and taxpayers       to    avail
                                 `Specified Tax' and DRS, there is a need
                                 issue to common to for clarity in respect of
                                 `Tax     Arrears'    and certain issues which
                                 `Specified Tax'.           have been dealt with
                                                            in some detail in this
                                                            memorandum.
32.                              Income Computation It is suggested that 71
                                 and           Disclosure applicability of ICDS
                                 Standards       (ICDSs)- be postponed until the
                                 Need                   for concerns of taxpayers
                                 postponement of date are                   suitably
                                 of application             addressed.
                          Suggestions On International Taxation
33.            53       115JB    Applicability           of It is suggested that:     74
                                 Minimum        Alternate
                                 Tax (MAT) on foreign (a)           a        suitable
                                 companies ­ Benefit amendment may be
                                 may be extended to made providing that
                                 foreign      companies foreign          companies
                                 having       permanent having           permanent
                                 establishment        and establishment in India
                                 covered     under     the and covered under the
                                 presumptive           tax presumptive            tax
                                 regime in India            regime may be kept
                                                            outside the purview of
                                                            MAT.

                                                                  (b)     in    order   to
                                                                  avoid any controversy,
                                                                  it may be clarified that
                                                                  in case of foreign
                                                                  companies having PE
                                                                  / Place of Business in
                                                                  India, the computation
                                                                  of book profits should
                                                                  be based on India
                                                                  profits and not global
                                                                  profits.
34.            85       206AA       Exemption         from        It is suggested that 75
                                    requirement          of       this amendment be
                                    furnishing PAN under          treated               as
                                    section   206AA      to       clarificatory.
                                    certain non-residents
                                    ­ Request to treat the
                                    amendment            as

         Post-Budget Memorandum ­ 2016 (Direct Taxes)                           Page 26
                            The Institute of Chartered Accountants of India


S. No.      Clause Section          Particulars                   Suggestions              Page
            No                                                                             No
                                    clarificatory
35.                                 New Chapter VIII of           The      proposal     to 75
                                    the Finance Bill, 2016        introduce levy in the
                                    - Equalisation Levy-          present form may be
                                    Issues to be addressed        reconsidered.
                                                                  Particularly, after 1
                                                                  April 2017, GAAR will
                                                                  ensure that artificial
                                                                  avoidance of taxable
                                                                  presence is not likely
                                                                  to      remain       tax
                                                                  protected for the non-
                                                                  residents.
36.                                 Country By Country ­          It is suggested that the 76
                                    Transfer        Pricing:      applicability of the
                                    Deferral of application       said    provisions    be
                                    for facilitating better       postponed      by   one
                                    understanding       and       year.
                                    implementation




         Post-Budget Memorandum ­ 2016 (Direct Taxes)                            Page 27
                   The Institute of Chartered Accountants of India


           POST BUDGET MEMORANDUM ­ 2016
                             C. Detailed Suggestions

1.     Paragraph E of Part III to the First Schedule ­­ Proposed
       reduction of 1% in rate of taxation in case of company
       assessees with total turnover/gross receipts of upto Rs. 5
       crore ­ Reduction in rate may be made applicable to
       Firms/ Limited Liability Partnerships also

The Finance Bill, 2016 has proposed a tax rate of 29% of total
income to (domestic) company assessees provided its total turnover
or the gross receipts in the previous year 2014-15 does not exceed
five crore rupees. This proposed reduction in corporate tax rate is a
step in the direction of     implementing the proposal in Finance
Minister's Budget Speech during the Union Budget 2014-15 on
10th July, 2014 wherein he had indicated reduction in rate of
corporate tax along with gradual phasing out of deductions &
exemptions.

It may be noted that the rate of tax applicable to firms including
limited liability partnerships is 30%. Most of the deductions and
exemptions where phasing out has been proposed by provision of
sunset clause as per the Finance Bill, 2016 are applicable to both
companies as well as firms/LLPs.        Therefore, the benefit of
reduction of 1% in rate of tax may be passed on to such assessees
as well. Further, if the proposed rate of 29% is also made
applicable to firms and LLPs, it would facilitate ease of doing
business in any form and not particularly restrict such facility to
the small corporates.

Further, it may be noted that firms and LLPs are also incorporated
under a statute and are subject to certain compliance
requirements as provided in the Partnership Act, 1932 and Limited
Liability Partnership Act, 2008, respectively.

It is also suggested that the prescribed turnover of Rs 5 crore may
be considered for previous year 2015-16, being the previous year
immediately preceding the P.Y.2016-17, relevant to A.Y.2017-18.

Suggestion
     It is suggested that the benefit of reduction of rate of tax to
     29% of total income for small domestic companies may also be

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       extended to firms and Limited Liability Partnerships as well
       since most of the deductions and exemptions phased out as
       proposed by sunset clause of Finance Bill, 2016 are applicable
       to both companies as well as firms/LLPs and so as to provide
       a level playing field amongst these forms of business.

       Further, the limit of Rs 5 crore for determining the eligibility to
       avail the reduced rate may be with reference to P.Y.2015-16,
       being the previous year immediately preceding the current
       previous year, namely, P.Y.2016-17, relevant to A.Y.2017-18.

2.     No provision in the Finance Bill, 2016 to give effect to
       the proposal contained in para 127 of Hon'ble Finance
       Minister speech to reduce the period of holding for
       availing benefit of long-term capital gains in case of
       unlisted companies from three to two years


The Honorable Finance Minister, in para 127 of his Budget Speech
[Union Budget 2016-17] proposed that the period for getting benefit
of long term capital gain regime in case of unlisted companies is
proposed to be reduced from three to two years.

However, there is no proposal in the Finance                  Bill, 2016 to give
effect to the reduction in the period of holding.             This appears to be
only an inadvertent omission. An appropriate                  provision may be
incorporated to give effect to the said proposal              before passing the
Finance Bill, 2016.

Suggestion
     Appropriate provision to reduce the period of holding from
     three to two years for availing benefit of long-term capital
     gains in case of unlisted companies may be incorporated in
     line with the proposal contained in the Budget Speech.

3.     Clause 7(a)(ii) ­ New clause (12A) of section 10 ­ Proposed
       40% exemption for withdrawal from National Pension
       System (NPS) by any employee ­ Benefit to be extended
       to withdrawals by any person and not employees alone


The Finance Bill, 2016 has proposed to insert new clause (12A) in
section 10 which provides that any payment from National Pension
System (NPS) Trust to an employee on account of closure or his

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opting out of the pension scheme referred to in section 80CCD, to
the extent it does not exceed forty percent of the total amount
payable to him at the time of closure or his opting out of the
scheme, shall be exempt from tax. This is a very welcome proposal.
In this context, it is noteworthy that contribution to NPS can be
made by self-employed tax payers too. It is not restricted only to
salaried employees. However, the new clause providing for
exemption refers to withdrawals from NPS by an employee only.
Therefore, the language of the proposed clause may be amended to
provide for exemption in respect of withdrawals from NPS by an
individual, who may be a salaried employee or a self-employed
person.

Suggestion
     It is suggested that the proposed clause (12A) of section 10
     providing for exemption of 40% of payment from the NPS Trust
     to "an employee" on closure of account or opting out of
     pension scheme, may be modified to allow such exemption to
     payment from the NPS Trust to "an individual", since
     exemption under the said clause is available in respect of
     withdrawals from NPS by self-employed individuals also.

       In effect, the substitution of the words "an employee" in the
       said clause by "an individual" would help to bring within its
       fold, exemption to self-employed individuals as well.

4.     Para 167 of Finance Minister's speech ­ Section 14A ­
       Amendment in Rule 8D proposed ­ Further amendment
       required in section 14A so that the said section is not
       made applicable to dividend income exempt under
       section 10(34) since the same has been subject to
       dividend distribution tax in the hands of the company

An important issue on section 14A which needs to be addressed, is
the applicability of the said section to dividend income which is
exempt under section 10(34). The said issue is also raised in the
Report of the Income Tax Simplification Committee headed by
Justice R V Easwar where it is acknowledged that dividend under
the prevailing scheme suffers economic taxation on account of levy
of DDT on the company.




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The report clearly conveys that the dividend income which suffers
economic taxation in the form dividend distribution tax should be
kept out of the purview of section 14A.

Suggestion
     It is suggested that the provisions of section 14A may not be
     made applicable to dividend income exempt under section
     10(34) since it has already suffered an economic tax in the
     form of dividend distribution tax. Likewise, section 14A may
     not be made applicable to any other income which has been
     subject to economic tax like dividend. The said change may
     be brought by insertion of a suitable proviso in this regard.

5.     Clause 15 ­ Section 35 ­ Weighted Deduction for
       contribution to Scientific Research and expenditure on
       scientific research to be phased out ­ Weighted
       deductions to be continued for providing impetus to
       scientific research and development in India

In respect of contribution to approved scientific research
association, approved university, college or other institution,
contribution to an approved scientific research company,
contribution to an approved research association or university or
college or other institution to be used for research in social science
or statistical research, any sum paid to a National Laboratory or a
specified person for the purpose of approved scientific research
programme, expenditure incurred by a company, engaged in the
business of Bio-technology or in the business of manufacture or
production of any article or things on in-house research and
development facility as specified in the above section, weighted
deduction ranging from 125% to 200% is allowed.

It is proposed in the Bill that in cases where the weighted
deduction is currently more than 150%, the same is proposed to be
reduced to 150% with effect from P.Y.2017-18 and 100% with
effect from P.Y.2020-21. Further, in cases where the weighted
deduction is less than 150%, it is proposed to be reduced to 100%
from P.Y.2017-18.
Suggestion
     Scientific research is the lifeline of business in all countries of
     the world. Indian residents are paying huge sums by way of
     technical services, fees to foreign technicians to upgrade their

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       products and give the customers what latest technology gives
       globally. Like make in India, ease of doing business and
       encouragement to start up initiatives of the government,
       innovation & scientific research initiative should be given
       equal weightage.
       If In-house research is encouraged, outgo on account of FTS
       will reduce and this will help indigenous businesses to grow.
       Withdrawal of weighted deduction in respect of scientific
       research expenditure will be a retrograde step.

       Therefore, it is suggested that weighted deductions to various
       modes of Scientific Research expenditure allowed at present to
       be continued.

6.     Clause 17 - Section 35AC- Deduction in respect of
       Expenditure on Eligible Projects to be withdrawn ­
       Deduction to continue to provide impetus to rural sector
       and weaker sections of the economy

Any expenditure incurred on any project or scheme for promoting
the social and economic welfare of the society or for the upliftment
of the public, shall be allowed 100% deduction on such
expenditure. Rule 11K of the Income-tax Rules, 1962 provides the
list of projects which are eligible for deduction under section 35AC
of the Act.

The projects as mentioned in Rule 11K are for the development of
the economically and socially weaker section of the society.

It is proposed in the Bill that no deduction shall be available on
any expenditure incurred on certain eligible social development
project or scheme from AY 2018-19 and onwards.

Corporates contribute huge sums for this cause under the CSR
schemes. The whole initiative for the rural development and the
upliftment of the poor may take a backseat, if no deduction is
allowable in computing the income.

Suggestion
     The expenditure incurred on eligible projects or schemes are
     for the development of the backward and weaker sections
     thereby focusing on development of rural areas.

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       Further, all the projects are approved by the National
       Committee which is set up by the Central Government to
       ensure that the funds are utilized for the said purpose.

       Therefore, this deduction which is serving the purpose for
       which it was enacted so well, should be continued to be
       allowed.

7.     Clause 25 and 26 ­ Section 44AB ­ Consequential
       amendments due to amendment proposed in section
       44AD - Clarification for assessees with gross receipts
       exceeding one crore rupees but less than two crore
       rupees regarding maintenance of books of account


The Finance Bill, 2016 has proposed an amendment to section
44AD, by increasing the threshold limit there under from "one
crore rupees" to "two crore rupees", thereby providing relaxation
from the requirement of maintaining books of accounts for eligible
businesses with total turnover or gross receipts in the previous
year not exceeding an amount of two crore rupees.

Correspondingly, clause (a) of section 44AB requires every person
carrying on business to get his accounts of such previous year
audited by an accountant if his total sales, turnover or gross
receipts as the case may be in business exceed or exceeds one
crore rupees. There is no amendment proposed in the said clause
(a) of section 44AB.     Resultantly, there appears to be some
inconsistency between the provisions of section 44AD.

Suggestion
     It is therefore suggested that clause (a) of section 44AB be
     appropriately modified to increase the threshold limit
     specified thereunder from rupees one crore to rupees two
     crore, so as to avoid any ambiguity in interpreting the true
     intent of law regarding maintenance of books of account and
     audit of the same where the total turnover, gross receipts
     exceed rupees one crore but does not exceed rupees two
     crore.

 8.    Clause 26 ­ Section 44AD ­ Proposed deletion of proviso
       to sub-section (2) providing for deduction of interest and

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       remuneration paid to partners by firm from the
       presumptive income under section 44AD ­ Proviso to
       remain to avoid genuine hardship to small and medium
       firms
The amendment proposes to disallow deduction of expenditure in
the nature of salary, remuneration, interest paid to the partner as
per section 40(b) out of presumptive income. This amendment
would hit small and medium firms, especially running family
businesses.      Taxing the entire income of the firm, without
deduction for partner's salary/interest paid within the permissible
limits set out in section 40(b), at flat rate of tax at 30% may hit the
small and medium firms badly and adversely affect their business.
This would be against the government's objective of facilitating ease
of doing business.
It is pertinent to mention here that the same issue had crept in the
past as well. While introducing presumptive income for firms in the
Finance Bill 1994, initially there was no provision providing for
deduction of interest and remuneration to firm assessees. However,
the said proviso was introduced vide Finance Act 1997, thereby
giving effect to the true intent of the law, and that too with
retrospective effect from 01-04-1994.

Suggestion:
     For facilitating ease of doing business by small firms and
     removing the genuine hardship of having to pay higher taxes
     on their presumptive income on account of the proposed
     denial of deduction in respect of remuneration paid to
     partners within the limits set out in section 40(b), the proviso
     to section to 44AD(2) may be retained. Similarly, separate
     deduction may be allowed for professional firms as well in
     respect of remuneration paid to partners under the proposed
     new section 44ADA.

9.     Clause 27 ­ Proposed section 44ADA providing for special
       provision for computing profits and gains of profession
       on presumptive basis ­ Issues and concerns arising there
       from to be addressed


The Finance Bill, 2016 has proposed insertion of a new section
44ADA providing for special provision for computing profits and
gains of profession on presumptive basis. This measure would


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definitely help the specified professionals in payment as well as
compliances under the income-tax law.

9.1 Threshold limit of Rs 50 lakhs may be increased
The sub-section (1) of the proposed provision provides that:

    "Notwithstanding anything contained in sections 28 to 43C, in
    the case of an assessee, being a resident in India, who is
    engaged in a profession referred to in sub-section (1) of section
    44AA and whose total gross receipts do not exceed fifty
    lakh rupees in a previous year, a sum equal to fifty per
    cent. of the total gross receipts of the assessee in the
    previous year on account of such profession or, as the case may
    be, a sum higher than the aforesaid sum claimed to have been
    earned by the assessee, shall be deemed to be the profits and
    gains of such profession chargeable to tax under the head
    "Profits and gains of business or profession".

The threshold limit of Rs 50 lakhs appears to be low.
Consequently, this provision may not achieve the intended
objective of providing relief to professionals in the small and
medium segment. Even the Income Tax Simplification Committee
headed by Justice R V Easwar recommended a threshold limit of
Rs 1 crore. This appears to be a more justifiable limit considering
the present economic conditions prevailing in the country.

Suggestion
       It is suggested that the threshold limit of Rs 50 lakh may be
       raised appropriately so that a sizable percentage of
       professionals in the small and medium segment are covered
       under the said provisions; which would ultimately lead to the
       achievement of stated objective of introducing the new
       provision.


9.2 Rate of estimated tax @ 50% too high

The rate of 50% appears to be on the higher side and may cause
very high tax incidence on such professionals particularly since the
scheme is intended to cover professionals with low gross
receipts/total turnover resulting in low margins due to nature of
work and high competition. This high rate may cause a lot of


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professionals not to opt for this proposed scheme thereby defeating
the ultimate objective of introducing this provision.

Considering the above reasons, the profit @ 50% is difficult to
achieve specially for intended professionals with low gross
receipts/total turnover. Also, the Income Tax Simplification
Committee headed by Justice R V Easwarji has recommended the
rate of 33.33% of the receipts as the income from profession.

Suggestion
     It is suggested that the estimated rate of income @ 50% of the
     total gross receipts may be reduced appropriately considering
     the high cost of providing the services by specified
     professionals specially the small tax payers having income
     from profession.


10.     Clause 28 ­ Section 47(xiiib) - Conversion of company
       into LLP ­ Clarification required relating to additional
       condition

LLP is a preferred form of organisation for smooth conduct of
business. Accordingly, section 47(xiiib) provides for an exemption
enabling smooth conversion, subject to compliance with the
conditions. There was a case for making the exemption more liberal
by relaxing the turnover limit which is one of the present
conditions. However, conversion will become all the more difficult
as a result of an additional condition which will deny exemption in
a case where the company was possessed of total assets worth Rs.
5 crores in any of the 3 years.

Without prejudice to the above, provision be made prospective to
apply to conversions initiated on or after 1st April 2016 so as to
protect cases of conversion which have already been initiated
before 31st March 2016 but accomplished post March 2016.

The expression "value of total assets appearing in the books of
accounts" is not defined and may create certain interpretational
issues such as whether status of assets is to be seen on balance
sheet date or even one day's presence during the year will be
considered if asset no longer exists with the assessee as on balance
sheet date. Also, whether `Miscellaneous Expense' as an item
reflected on balance sheet will constitute an asset, treatment of

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advance tax paid shown on asset side (with corresponding
provisions for tax on liability side), etc. are the other issues which
need to be addressed.

Suggestion
     1. In view of the above, it is recommended that the condition of
     asset base being less than Rs. 5 crores be rationalised.

       2. Provision may apply prospectively to conversion proposals
       initiated on or after 1 April 2016.

       3. Also, the scope of the term `value of total assets as
       appearing in the books of accounts' be clarified to provide
       certainty and reduce litigation .

11.    Clause 30 ­ Section 50C - Option for adopting stamp
       duty value on date of agreement ­ Amendment to be
       treated as clarificatory in nature

In relation to computing capital gains tax liability on transfer of
land or building, proposed amendment gives an option for
considering the stamp duty value as on date of agreement instead
of stamp duty value on date of registration, subject to part or whole
of the consideration being received by way of account payee cheque
or bank draft or ECS through bank account on or before the date
of agreement. The proposed amendment in section 50C is in line
with the similar provision already existing in section 43CA. This
provision was, therefore, long due to be incorporated in section
50C. The incorporation of similar provision in section 50C would
alleviate the genuine hardship faced by the taxpayers. It is
suggested that the amendment may be treated as clarificatory in
nature since it conveys the real intent of law to ensure equity in tax
treatment vis-à-vis section 43CA.

Suggestion
     The amendment may be treated as clarificatory in nature.
     Alternatively, a circular may be issued to achieve the same
     result in pending assessments or appeals.


12.    Clause 40 ­ Section 80-IAB ­ Phasing out of incentive
       where development of SEZ begins on or after 1st April,


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       2017 - Phasing out to be in respect of SEZs notified on
       or after 1st April, 2017

In relation to section 80-IAB, providing for profit-linked incentive
for development of SEZ, proposed plan for phase out of incentives/
deduction prescribes a sunset date of 1 April 2017 (FY 2017-18)
w.r.t commencement of development. Determination of when
development has commenced could become extremely subjective
and litigation prone.

Suggestion
     Since the qualifying period of deduction starts from year of
     notification of SEZ, the phase out may also be with respect to
     SEZs notified on or after 1 April 2017 instead of currently
     proposed phase out with respect to         commencement of
     development on or after 1 April 2017.


13.    Clause 42 ­ Phasing out of incentive under section 80-IB
       in respect of production of mineral oil and natural gas, if
       the specified activity commences on or after 1.4.2017 -
       Phasing out may be with reference to acquisition of new
       blocks and commencing discovery process in respect of a
       block already acquired

Sub-section (9) of section 80-IB, provides, inter alia, deduction of
100% of the profits for a period of seven consecutive assessment
years to an undertaking if it begins commercial production of
mineral oil on or after 1 April, 1997 and the provision applies to
blocks licensed under a contract awarded up to 31st March, 2011
or if it is engaged in commercial production of natural gas blocks
licensed under NELP VIII and begins commercial production of
natural gas on or after 1 April, 2009.

The Finance Bill, 2016 proposes not to allow the deduction to an
undertaking which begins commercial production of mineral oil or
natural gas on or after 1st April, 2017.

In this regard, it is noteworthy that many companies have acquired
blocks under the scheme eligible under section 80IB(9) by the
dates specified in the section. It is well known that the discoveries
in the blocks acquired take a very long time and the explorers have
to conduct discovery exercises for many years before they are

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successful in obtaining commercial production. Those who invested
in the blocks rightly believed that the deduction will be allowed if
the blocks were acquired under the eligible scheme and the
Government intends to allow the deduction for seven years from
the year in which commercial production begins.

The announcement of withdrawal of deduction for the assessees
commencing commercial production on or after 1 April, 2017 will
put the investors of the blocks to a disadvantage.

Suggestion
     The    sunset    clause    may    be    with    reference    to
     acquisition of new blocks and for commencing discovery
     process in the block already acquired. The sunset clause may
     not be made applicable for commencing commercial
     production of mineral oil or natural gas in the eligible blocks
     in which discovery has already commenced before 1 April,
     2017.

14.    Clause 41 and 49 ­ Section 80-IAC and 115BA ­ Special
       incentives to start-ups ­ Issues to be addressed

        14.1 Definition of "eligible start-up" to include
        Partnership Firm and Limited Liability Partnership

The Finance Minister vide his Budget Speech, 2016 had made the
following statement about incentivizing start-ups in line with the
Make in India scheme:

"124. Startups generate employment, bring innovation and are
expected to be key partners in Make in India programme. I propose
to assist their propagation through 100% deduction of profits for 3
out of 5 years for startups set up during April 2016 to March 2019."

In this regard, clause (ii) of Explanation to proposed section 80-IAC
provides that "eligible start-up" means a company engaged in
eligible business which fulfills certain conditions.

The Finance Bill, 2016 has thus, extended the beneficial provisions
of start-ups only to Companies whereas the Start-up scheme of
Department of Industry Policy & Promotion for Ministry of
Commerce & Industry defines the term Start ­ up as follows:


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"Startup means an Entity, incorporated or registered in India not
prior to five years, with annual turnover not exceeding INR 25 crore
...."

Where, the term Entity means Private Limited Company (under
The Companies Act, 2013) or a Registered Partnership Firm (under
The Indian Partnership Act, 1932) or Limited Liability Partnership
(under The Limited Liability Partnership Act, 2008)"

Suggestion
    In light of above observations it is suggested that clause (ii) of
    Explanation to proposed section 80IAC be amended to define
    "eligible start-up" in line with the Start-up scheme where, the
    term entity includes Private Limited Company (under The
    Companies Act, 2013) or a Registered Partnership Firm (under
    The Indian Partnership Act, 1932) or Limited Liability
    Partnership (under The Limited Liability Partnership Act, 2008)
    so as to provide ease of running of business to startup firms
    and LLP also..

      14.2 Benefit of 100% deduction from the year in which
      the eligible start-up commences its business

Sub-section (2) of proposed section 80-IAC reads as follows:

"(2) The deduction specified in sub-section (1) may, at the option of
the assessee, be claimed by him for any three consecutive
assessment years out of five years beginning from the year in which
the eligible start-up is incorporated."

If the benefit of deduction is provided from the year in which the
eligible start-up is incorporated it would result in much avoidable
creation of new companies and encourage the formation of various
paper/shell companies. To avoid such mis-ultilisation of the
incentive, the benefit may be made available from the year of
"commencement of business".

Suggestion
     It is suggested that sub-section (2) of proposed section 80IAC
     be appropriately amended to give the benefit of 100%
     deduction from the year in which the eligible start-up
     commences its business as against "year of incorporation" to
     avoid creation of paper/shell companies.
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        14.3 Profit linked holiday for start-ups

Profit linked holiday for start-ups will not provide any meaningful
benefit to start ups since most of them do not make profits in
initial years.

Also, the condition that turnover of such start up should not
exceed Rs. 25 Crores till 2020-21 is prone to different
interpretations. The intention seems to be to convey that a start-up
which had lesser turnover in any one or more year may be
considered as an eligible start-up. This may, however, be wrongly
interpreted to mean that the exemption will be denied to a start-up
which is able to secure the turnover limit in any of the years. This
may discourage the start-ups from expanding itself. There is also
uncertainty whether the exemption secured in the earlier year will
be forfeited if the turnover of the start-up reaches 25 crores in a
later year.

Most start-ups may not have meaningful income in the initial
period. There could be loss incurred in the initial period.

Suggestions
     I.    In order to encourage start-ups, it is recommended that
     no turnover limit be prescribed.

       II.    Alternatively, instead of profit linked deduction, start-
       ups may also be provided concessions in other aspects,
       illustratively, longer period for carry forward of loss, removing
       restriction under section 79, annual advance tax, annual
       compliance of TDS statements, etc.

15.    Clause 43 - New Section 80-IBA - Tax holiday to housing
       projects ­ Issues to be addressed

Section 80-IBA provides for 100% deduction of the profits of an
assessee developing and building affordable housing projects if the
housing project is approved by the competent authority before 31st
March, 2019 subject to certain conditions. The concerns arising
from these conditions are as follows:

      Built-up area definition to be linked to clause (e) of sub-
section (2) which specifies maximum size of residential unit: To
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qualify for deduction, as per sub-section (2), size of residential unit
in metro cities should not exceed 30 sq. m. and in other than
metro cities should not exceed 60 sq. m. However, sub-section (2)
does not draw reference to definition of "built-up area" given in
sub-section (6), which provides the manner of measuring size of
residential unit. In absence of a specific reference to "built-up
area", ambiguity arises on the manner in which size of residential
unit should be measured to decide eligibility.

       Grammatical error in definition of "residential unit": The
definition reads as: `"residential unit" means an independent
housing unit with separate facilities for living, cooking and sanitary
requirements, distinctly separated from other residential units
within the building, which is directly accessible from an outer door
or through and interior door in a shared hallway and not by
walking through the living space of another household.' The
reference to "and interior door" appears to be grammatically
incorrect and may be rectified to read as "an interior door". This
makes the definition unambiguous and clear.

       Completion period of 3 years: To qualify for deduction, as per
sub-section (2), the project should be completed within a period of
3 years from the date of approval by competent authority. The
period of 3 years is too short and may be unachievable for large-
scale projects. Considering the time lag involved in obtaining
regulatory approvals or due to factors beyond control of the
developer, the period may be extended to 5 years consistent with
proposed amendment enhancing time period in construction of
self-occupied property to 5 years to claim interest under Section
24(b).

Suggestion
     It is suggested that -
             (a) The definition of built-up area in clause (a) to sub-
                 section (6) be linked to clause (e) of sub-section (2)
                 which specifies maximum size of residential unit;
             (b) The words "and interior door" in the definition of
                 "residential unit" be replaced with "an interior door"
                 to convey the real intent
             (c) The period within which project has to be completed
                 may be extended from three years to five years from
                 the date of approval by the competent authority.


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  16.     Clause 48 ­ Section 112(1)(c) - Long-term capital gains
          on shares of a company, not being a company in which
          public are substantially interested, to be eligible for
          concessional rate of tax @10% - Amendment to be
          made effective retrospectively

Section 112(1)(c)(iii) was introduced in the year 2012 to extend the
beneficial rate of tax at the rate of 10 percent, on long-term capital
gains (which was earlier only available to Foreign Institutional
Investors) to other non-resident investors including Private
Equity Investors.

It is now proposed to amend Section 112(1)(c)(iii) of the Act to
replace the word `unlisted securities' with `unlisted securities or
shares of a company not being a company in which the public are
substantially interested' with effect from FY 2016-17.

While proposing the amendment, it has been stated in the
Memorandum explaining the Finance Bill, 2016 that under the
existing provisions of Section 112(1)(c)(iii) of the Act, a view was
taken by some of the Courts that shares of a Private Company do
not constitute `Securities' under SCRA.

The amendment has been proposed to clarify that the section was
introduced with an intention to extend the benefit to LTCG arising
on shares of a company, being a company in which the public are
not substantially interested (i.e. private company) as well.

However the amendment is proposed to be applicable from AY
2017-18 onwards.

Although this amendment is proposed as a clarificatory
amendment to the existing section 112(1)(c)(iii) of the Act, to clarify
that the benefit of the section extends to private company as
well, the language of the proposed section purports as if the
amendment has been brought prospectively, with effect from AY
2017-18.

In case this amendment (though clarificatory in nature), would
apply prospectively, with effect from AY 2017-18, it would tend to
jeopardise the tax position adopted by the non-resident assessee
prior to April 1, 2016 i.e. who have been paying tax at the rate of
10 percent on long term capital gains on transfer of shares in a
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Private Company with effect from April 1, 2013 in conformity with
the intention of the law, when it was originally enacted.

As the intention of legislature is clearly to clarify the existing law,
amendment to the section with prospective effect would adversely
impact the non-residents, who have already undertaken the
transactions of sale of shares in a private company in the last few
years, with an understanding that this section applies to them.

Suggestion
  In the light of the aforesaid, following alternative modes have
  been suggested:

       a) The amendment to section 112(1)(c)(iii) as proposed in
          Finance Bill 2016 should be made retrospective with effect
          from the year in which the amendment in this section was
          introduced i.e. with retrospective effect from April 1, 2013;
          or

       b) A clarificatory circular may be issued by the Central Board
          of Direct Taxes clarifying that since the amendment is only
          clarificatory in nature it will take effect from April 1, 2013
          i.e. AY 2013-14 and not AY 2017-18 as proposed in the
          Finance Bill, 2016; or

       c) Alternatively, rather than inserting phrases to carry out
          requisite amendment within the sub-clause (c)(iii) to section
          112(1), an Explanation may be added after the said clause
          clarifying that for the purposes of this clause unlisted
          securities shall include shares of a company not being a
          company in which the public are substantially interested.

17.    Clause 50 ­ New Section 115BBDA ­ Dividend received
       by resident individuals, HUFs and firms receiving
       dividend in excess of Rs.10 lakh to be subject to tax @
       10% in their hands ­ Issues to be addressed

       17.1 Clarification required in respect of amount of
       dividend sought to be taxed under this section

The Finance Bill, 2016 has proposed to insert new section
115BBDA providing for taxation of dividends received from
domestic companies in the hands of the specified resident
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assessees being an individual, Hindu undivided family or a firm, at
the rate of 10%. The proposed section would be applicable in case
the specified assessee's total income includes any income
exceeding ten lakh rupees, by way of dividends declared,
distributed or paid by a domestic company.
However, there appears to be an ambiguity regarding the amount
on which proposed tax would be levied, i.e. on the dividend amount
in excess of ten lakh rupees or the whole of dividend amount
received.
The confusion has arisen due to difference in language used in
Memorandum explaining the Provisions of Finance Bill, 2016 and
the Budget Speech as well as the language used in section
115BBDA in the Finance Bill, 2016.

Suggestion
     It is suggested that section 115BBDA be amended to reflect
     the true legislative intent stated in the Explanatory
     Memorandum. The amendment may be effected in the
     following manner by adding the words "received in excess
     of Rs.10 lakh" in clause (a) of sub-section (1) after the words
     "income by way of such dividends" and before the words "at
     the rate of ten per cent"


       17.2 Consequence of the new levy- Triple taxation
The proposal to tax dividend in the hands of the recipient results in
economic triple taxation viz. once as corporate tax on profits,
secondly as DDT in hands of the company and thirdly as tax on
dividends. The economic tax ultimately borne by resident
shareholders may be as high as 54%.

Suggestion:
     It is recommended that new levy amounting to third level
     taxation on profits may be done away with. Alternatively, the
     earlier system of taxation of dividend, prior to 1997, namely,
     tax in the hands of the shareholder can be re-introduced and
     levy of Dividend Distribution Tax in the hands of the company
     may be removed.

18.    Clause 52 ­ New Section 115BBF ­ Concessional rate of
       tax @ 10% on income from patent ­ Issues to be
       addressed

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       18.1 Benefit may be extended to other intellectual
       property rights


The Finance Bill, 2016 has proposed a new section 115BBF to tax
royalty income derived from worldwide exploitation of patents
developed and registered in India@ 10%.

It is a welcome proposal and would greatly boost the research and
innovation environment in the country. However, the proposed
provision provides the benefit of reduced rate of tax to only royalty
income derived from patents subject to specified conditions. This
may partly achieve the intended objective of the government behind
introduction of this proposal i.e. to encourage indigenous research
& development activities and to make India a global R & D hub,
research is the driver of innovation and innovation provides a
thrust to economic growth.

The current income tax law treats the other intellectual rights like
any know-how, copyright, trade-mark, license, franchise or any
other business or commercial right of similar nature or information
or technique likely to assist in the manufacture or processing of
goods or provision for services in the same vein as patent. Hence,
there appears to be no reason not to extend the benefit of proposed
section 115BBF to income from other intellectual property rights.

In particular, it needs mention that jurisdictions like Ireland,
Luxemburg extend benefit by specifically covering software within
the list of qualifying assets though; commercially it enjoys
protection under Copyright Act and not under Patent Act.

Suggestion
     It is suggested that the benefit of concessional rate of tax @
     10% of income by way of royalty in respect of a patent
     developed and registered in India be also extended to other
     intellectual property rights like know-how, copyright, trade-
     mark etc.


       18.2 Benefit restricted to `true and first inventor of the
       invention': Benefit may be extended to assignee of the
       true and first inventor in respect of the right to make an
       application for a patent


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The benefit of proposed provision is restricted to `true and first
inventor of the invention'. As per proposed provision, even a person
who is jointly registered with `true and first inventor' should be
`true and first inventor'.

In view of following features under the Patent law, the benefit of the
provision may be denied to firms/LLPs/companies who register the
patents jointly with true and first inventor who may be an
employee even though they may have incurred significant
expenditure for development of the patent and they are first
economic owners of such patent.

Under the Patents Act, following persons can apply for patent (a) a
person claiming to be true and first inventor of the invention (b) an
assignee of the true and first inventor in respect of right to make
an application and (c) legal representative of a deceased person
who immediately before his death was entitled to apply.

It is also settled under the Patent Act that a company or firm
cannot claim to be `true and first inventor'. They can only apply as
assignee of true and first inventor.

Similarly, whether an invention made by employee should belong
to employer depends upon contractual relations, express or
implied. It is possible that, absent any contractual obligation, an
employee may apply for an invention in his own name even though
he developed the invention in the course of employment and by
using employer's resources.

Suggestion
     It is, hence, recommended that the condition of joint patentee
     also being `true and first inventor' be omitted. If the intent is to
     allow benefit only to first person to register patent, the phrase
     `being the true and first inventor of the invention' used in
     context of joint person may be substituted with the phrase
     `being the assignee of the true and first inventor in respect of
     the right to make an application for a patent'.

     18.3 Benefit may be extended to capital gains arising on
     sale of patented products

The taxpayer may exploit its Intellectual Property by outright
transfer which has no differential impact merely because for one
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assessee the amount is assessable as business income whereas for
other it is assessable as capital gains income. There is no reason to
exclude amount which is chargeable as capital gains in the hands
of the taxpayer.

Suggestion
     It is recommended that, in line with BEPS Action 5, in addition
     to royalty income, this concessional regime should be
     extended to income on sale of patented products also.

     18.4 Extension of benefit to royalty income earned from
     inventions for which patents are applied under Patents
     Act 1970 but registration is awaited

The commercial exploitation of invention starts even before it is
formally registered as a `patent' under the Patents Act. The Patents
Act recognises that even the right to apply for patent can be
assigned. As per the proposed provision, royalty from a patent
which is `registered' alone will qualify for the new regime. If royalty
income is earned when patent application is filed but registration is
awaited, there may be denial of the benefit.

Suggestion
     It is recommended that the concessional tax regime be
     extended to royalty income earned from patents which are
     applied for and awaiting registration as well.

     18.5     Other Issues which need to be addressed

Some of the conditions for availing the benefit of concessional tax
regime is that the patent should be developed and registered in
India, the patentee should be a resident and income should be in
the nature of royalty.

Suggestions
     To make the regime truly meaningful and comparable to the
     regimes which exist in other jurisdictions, its scope will need
     to be extended to cover or clarify the following:

   a. Clarify that condition of developed and registered in India is
      fulfilled once the qualifying taxpayer gets the patent developed
      under his control and direction while some part of expenditure
      may be incurred outside India or some part of R&D activity
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       (say, not more than a certain percentage, like 20%) may be
       outsourced to any other agency which works as per the
       direction and control of the taxpayer.

   b. Clarify that consideration received for settling infringement
      disputes is also an alternative form of royalty which qualifies
      for the benefit.

   c. To provide an option to the taxpayer to opt out of the regime if
      the expenditure and allowances admissible in computation of
      royalty income is likely to result in net taxation below the
      regime prescribed rate.

   d. Since almost all comparable jurisdictions extend benefit                 to
      non-resident permanent establishment which develops                      IP
      under the circumstances comparable to those under which                  IP
      is developed by the resident. The benefit may be extended                to
      non-resident having permanent establishment in India.

   e. In case of a business reorganisation in the form of merger,
      demerger etc., the successor entity and in case of death of the
      patent owner, its legal heir/inheritor of the patent may be
      considered as eligible to claim the benefit provided such
      successor/legal heir satisfies the condition of being a resident
      of India.

19.    Clause 56 ­ Section 115QA - Rules to be prescribed for
       determining the amount received by the company for
       issue of shares ­ Rules to be applicable for buy-back
       effected on or after 01.06.2016

As per the proposed amendment to Explanation (ii) to section
115QA(1), (to be effective from 1st June 2016), consideration
received by company on issue of shares to be bought back is to be
determined as per the Rules to be prescribed. There is lack of
clarity as to cut-off date for applicability of these rules. An issue
arises as to whether these rules can be applied only for buy- back
of shares taking place after 1st June 2016, or whether the same
can be applied even for buy-back of shares prior to 1st June 2016.

Suggestion
   a. It is suggested that a cut-off date for applicability of rules may
      be prescribed. It is recommended that it should be explicitly
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       provided that the rules, once notified, shall be applicable only
       for computing consideration received on issue of shares in
       respect of buy back which takes place on or after 1 June
       2016.

   b. Further, necessary provision should be incorporated so that
      the cost paid for intermediate transfers between the
      shareholders post issue of share by the company is reduced
      for the purpose of calculating the buy-back tax.

20.    Clause 59-Section 115TCA- Tax on income from
       Securitisation Trust ­ Tax Treatment in respect of
       distributions in April and May 2016 to be clarified

The Finance Bill, 2016 proposes to transition securitisation trusts
from distribution tax regime to complete pass through regime (with
TDS on distributions). However, the cut-off date between old and
new regime is not clear. Distribution Tax applies for distributions
upto 31 May 2016 whereas new regime for complete-pass through
(with TDS) applies from A.Y. 2017-18. This raises ambiguity on
whether distributions made between April, 2016 to May, 2016 are
covered under old regime or new regime.

Suggestion
     The new regime should be made applicable for distributions
     on or after 1 June 2016

21.    Clause 60 ­ Proposed Sections 115TD to 115TF ­Special
       provisions relating to tax on accreted income of certain
       trusts and institutions ­ Issues to be addressed


As per the intent expressed in Explanatory Memorandum, new
Chapter XII-EB is proposed to be inserted to provide for levy of
additional income tax in case of conversion into, or merger with,
any non-charitable form or on transfer of assets of a charitable
organisation on its dissolution to a non-charitable institution.
However, sub section (3) deems such conversion to have taken
place if registration granted to a trust under section 12AA is
cancelled. The process of `conversion' includes a case where
registration of charitable trust is cancelled under section 12AA.
There may be host of grounds including inadvertent defaults of
non-compliance with section 13(1) which can be a ground for

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invoking cancellation under section 12AA. This neither indicates
intent to convert property into a non-charity nor a case where the
charitable objects are abandoned. In fact, the order cancelling
registration under section 12AA is appealable and there is a
possibility of reversal of such order at the appellate stage.

Further, sub section (5) requires payment of tax within fourteen
days of the cancellation of registration under section 12AA, which
may cause hardship in genuine cases. There are a number of
judgements where the orders of cancellation of registration have
been struck down subsequently in appellate proceedings. In such
circumstances, requiring the trust to pay the tax and interest,
when an appeal is pending, may not be justifiable.

The levy of exit tax may result in double taxation in cases where a
whole or part of the amount, may have been assessed to tax in
earlier years. For instance, trust may have suffered tax on account
of non-compliance of provisions of section 11 or section 13.

Accordingly, the amount on which tax has been levied in an earlier
year should not be included once again while computing accreted
income for levy of exit tax.


Suggestions
   a. The provisions of Chapter XII-EB be appropriately aligned with
      the intent expressed in the Explanatory Memorandum i.e., to
      levy exit tax only in case of voluntary wind-up of activities
      or dissolution or merger with charitable/non-charitable
      institutions or conversion of charitable institution into
      non-charitable institution.
   b. Without prejudice to generality of the above suggestion, it is
      suggested that, in case of cancellation of registration under
      section 12AA, the payment of tax should be stipulated within
      fourteen days from the disposal of the appeal, if any filed
      against the cancellation order. Accordingly, the proposed
      section 115TD (5) be reframed to include the following:

       "The principal officer or the trustee of the trust or the
       institution, as the case may be, and the trust or the institution
       shall also be liable to pay the tax on accreted income to the
       credit of the Central Government within fourteen days from,--


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              (i)      the date the order for disposing of appeal is
                       received by the assessee in case where the
                       relevant cancellation order is the subject matter of
                       an appeal to the Appellate Tribunal under section
                       253."

   c. The amount on which tax has been levied in an earlier year
      due to non-compliance of the provisions of section 11 to 13
      should not be included once again while computing accreted
      income for levy of exit tax, since the same would result in
      double taxation.

22.    Clause 65 - Section 139(4) and 139(5) ­ Time limit for
       filing belated return reduced and enabling provisions for
       revising belated return introduced - Reference to return
       in response to section 142(1) to be included in Sections
       139(4) and 139(5)





Section 139(4) provides that a person who has not furnished a
return within the time allowed to him under sub-section (1), or
within the time allowed under a notice issued under sub-section
(1) of section 142, may furnish the return for any previous year at
any time before the expiry of one year from the end of the relevant
assessment year or before the completion of the assessment,
whichever is earlier.

Section 139(5) provides that if any person, having furnished the
return under sub-section (1), or in pursuance of a notice issued
under sub-section (1) of section 142 discovers any omission or
any wrong statement therein, he may furnish a revised return at
any time before one year from the end of the relevant assessment
year or completion of assessment, whichever is earlier.


Clause 65 of the Finance Bill, 2016 has proposed to substitute
section 139(4) & 139(5) as follows:

       "(4) Any person who has not furnished             a return within the time
       allowed to him under sub-section (1),             may furnish the return
       for any previous year at any time                 before the end of the
       relevant assessment year or before                the completion of the
       assessment, whichever is earlier.";


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       "(5) If any person, having furnished a return under sub-section
       (1) or sub-section (4), discovers any omission or any wrong
       statement therein, he may furnish a revised return at any time
       before the expiry of one year from the end of the relevant
       assessment year or before the completion of the assessment,
       whichever is earlier.";

       Reference to return filed in response to section 142(1) is
       missing in new sub-section (4) and sub-section (5) of section
       139.

       As per the Explanatory Memorandum to the Finance Bill,
       2016, the return which can be revised under section 139(5)
       also includes a return furnished in response to notice issued
       under sub-section (1) of section 142. However, reference to
       notice under section 142(1) does not find place in the new
       sub-section (5) in the Finance Bill, 2016.


Suggestion
  It is suggested that-
       (i) Reference to sub-section (1) of section 142 may be
           reinstated in new section 139(4) i.e., enabling provision to
           be made for filing of belated return in response to notice
           under section 142(1).

       (ii) Section 139(5) may be amended to provide for revision of
            return filed in response to notice under section 142(1), in
            line with the intent expressed in the Explanatory
            Memorandum.

23.    Clause 66­Section 143(1) ­ Increase in scope of
       "Incorrect claim apparent from any information in the
       return" ­ New sub-clause (iv) to be redrafted to include
       specific reference to report under section 44AB

The Finance Bill, 2016 has proposed to bring amendment by
inserting sub-clause (iv) to sub-section (1) of section 143 for
disallowing expenditure indicated in the "audit report" but not
taken into account in computing the total income in the return.

Since disallowance of expenditure is expressly and exhaustively
covered in the format of report under section 44AB, sub-clause (iv)

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needs to be appropriately redrafted to include specific reference to
the report under section 44AB.

Suggestion
     It is suggested that sub-clause (iv) may be appropriately
     reworded to disallow expenditure indicated in the report of
     audit to be furnished under section 44AB but not taken into
     account in computing total income in the return.

24.    Clause 81 ­ Section 194LBB ­ Tax to be deducted at rates
       in force where the payee is a non-resident - Relief from
       tax withholding obligation of AIF        in respect of
       distribution of exempt income may be provided

Section 194LBB which provides for TDS on distributions by
category I and II AIFs, now requires deduction of tax at rates in
force where the payee is a non-resident. There is no exemption
from requirement to deduct tax even in respect of distribution of
exempt income like dividend or exempt LTCG. This leads to cash
trap for both residents and non-residents on exempt income.

Suggestion
     Appropriate amendment may be made to exclude distribution
     of exempt income from scope of section 194LBB.

25.    Clause 86 ­ Section 206C - TCS on sale of motor vehicles
       of value above Rs. 10 lakhs- Enabling provision for filing
       of declaration by buyer for non-applicability of TCS in
       case of use of motor vehicle for own transportation
       business may be inserted

TCS levy may have cascading impact in terms of compliance.
Compliance may be needed by each seller, including the
manufacturer, distributor and the dealer. The definition of `buyer'
excludes a buyer in retail sale of motor vehicle purchased by him
for `personal consumption'. However, the scope of such `personal
consumption' is not clear whether it includes use for business
purpose like transport, leasing or provision to employees as car
perquisite for official & personal use.

It is true that section 206C(1A) provides opportunity to buyer (who
is not a buyer in retail sale of motor vehicle for `personal
consumption') to furnish declaration for avoiding TCS but such
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declaration can be given only if the motor vehicle is to be used for
the purposes of manufacturing, processing or producing any article
or thing or for the purpose of generation of power and not for
trading purpose. On a plain reading of the provision, the
declaration cannot be given if the motor vehicle is to be used in
transport business or for transport purpose and/or leasing and/or
provision to employees.

Suggestion
     It is suggested to introduce an enabling provision for filing of
     declaration by buyer for non-applicability of TCS in case of use
     of motor vehicle for own transportation business. To safeguard
     the interests of Revenue, such facility may be provided only if
     buyer furnishes his PAN.


26.    Clause 87 and 89 ­ Section 211 and 234C ­Advance tax
       to be paid in one instalment on or before 15th March by
       assessees opting for presumptive taxation under section
       44AD- Similar benefit may be extended to assessees
       opting for section 44ADA

The Finance Bill, 2016 has proposed to amend section 211 by
substituting sub-section (1) and providing, inter alia, that an
eligible assessee in respect of eligible business referred to in section
44AD opting for computation of profits or gains of business on
presumptive basis, shall be required to pay advance tax of the
whole amount in one installment on or before 15th March of the
financial year.

The said benefit is not proposed in the newly introduced section
44ADA providing for presumptive taxation scheme for
professionals. Extension of onetime payment of advance tax on or
before 15th March of the Previous Year would further incentivize the
professionals to opt for the presumptive taxation. It would also
bring the assessees opting for section 44AD and 44ADA on the
same footing as regards the payment of advance tax is concerned.

The extension of the said benefit would also require consequential
amendment in section 234C in line with amendment proposed in
clause (b) of sub-section (1) there under regarding assessees opting
for section 44AD.


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Suggestion
     It is suggested that section 211(1) be suitably amended so as
     to include section 44ADA within its ambit in the manner
     similar to section 44AD as proposed in sub-section (1)(b) in the
     Finance Bill, 2016.

       Further, consequential amendment may also be made in
       section 234C in line with amendment proposed in clause (b) of
       sub-section (1) regarding assessees opting for section 44AD.


27.    Clause 88 ­ Section 220(2A), 273A, 273AA ­ Time limit
       for disposing waiver applications provided - Consequence
       of not passing the order within the time limit to be spelt
       out
Provision incorporated in sections 220, 273A and 273AA requiring
disposal of wavier applications within twelve months of receipt of
application. However, there is no specific provision to address the
consequences, if authority does not pass waiver order within
stipulated period.

Suggestion
     The time limit may be redundant unless there is a specific
     provision for consequences in case of failure to pass the
     waiver order within prescribed time limit. Hence, it may be
     provided that, if the Principal Commissioner/ Commissioner
     fails to pass the order within the time limit, interest, penalty
     etc. should be deemed to be waived.


28.    Clause 96- New section 270A to be inserted to provide for
       levy of penalty in case of under reporting income and
       misreporting of income- Issues to be addressed

       28.1 Penalty order under section 270A be made an order
       appealable before Commissioner (Appeals) under section
       246A

The Finance Bill, 2016 has proposed new section 270A providing
for penalty in case of under-reporting and misreporting of income.
As per the proposed provisions in the Finance Bill, 2016, the said
penalty order under section 270A has not been made appealable
under section 246A i.e., no appeal would lie against the penalty
order under section 270A before the first appellate authority i.e.,
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Commissioner (Appeals). Although an amendment has been
proposed in section 253 providing for appeal to Tribunal against
such penalty order, no such amendment has been proposed in
section 246A.

In a case where the said penalty order is imposed by an Assessing
Officer below the rank of Commissioner, it is desirable that an
appeal may be filed against the same to Commissioner (Appeals). It
may be noted that the penalty order under the existing section 271
is an appealable order under section 246A. There appears to be an
inadvertent omission in not including an order under section 270A
as an order appealable before Commissioner (Appeals) under
section 246A.

Suggestion
     It is suggested that section 246A may be suitably amended so
     as to provide that penalty order under section 270A passed by
     Assessing Officer below the rank of Commissioner may be
     made appealable under section 246A before Commissioner
     (Appeals).

     28.2 Insertion of reference to section 270A(8) under
     section 273AA

Section 270A(8) provides for levy of penalty of 200% in cases of
misreporting of income. It is pertinent to note that Section 273A of
the Income-tax Act, 1961 provides for reduction/ waiver of penalty
involving cases falling under clause (c) of sub-section (1) of
section 271 where penalty upto 300% of tax ought to be
evaded. However, there is no provision in section 273A for wavier
of penalty imposed under section 270A. This appears to be an
unintended omission.

It may also be noted that the proposed section 270AA has enabled
an assessee to make an application for immunity from penalty &
prosecution for cases involving under reported income under
section 270A. Similar remedy is not available for cases of
misreporting of income.

Suggestion
  It is suggested that section 273A may be amended to include
  reference to Section 270A (8) i.e., mis-reporting of income under
  its purview.
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     28.3     Penalty for under-reporting of income

There are certain concerns arising out of the provisions of new
section 270A, due to which it is likely that the implementation may
not yield the desired result and fresh litigation is likely to arise
while interpreting the new provision.
Suggestion
       Without prejudice thereto, with regard to the newly introduced
       methodology of levying penalty, the following suggestions
       may be considered.

                  By way of express requirement, the Assessing
                  Officer may be required to initiate the proceedings
                  prior to or concurrently with the closure of
                  assessment proceedings. Unless this is done, there
                  may be initiation of penalty several years after the
                  assessment proceedings are completed. The time
                  limit under section 275(c) is, unfortunately, linked
                  with the date of initiation of proceedings.

                  Unlike Explanation 3 of section 271(1)(c), in the
                  proposed provision, where return of income is not
                  furnished, penalty will be calculated with reference
                  to tax on income assessed without considering the
                  impact of tax deducted or advance tax paid by
                  taxpayer. For example, in case of a person who is not
                  required to furnish return of income under section
                  115A(5), tax may have been paid, but, as per new
                  methodology, the whole of the income, as assessed,
                  may be considered as unreported income. Such
                  would also be the case in a situation where there is
                  no revenue loss since the whole of the tax was
                  already paid up and yet, the return may not have
                  been furnished.

                  There may be some concern on resolution of the
                  formula specified in the section if, intimation under
                  section 143(1)(a) is not available. It may be good to
                  clarify that, in such a case, returned income will be
                  the substituted basis.


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                  If immunity is granted u/s. 270A, the immunity
                  holds valid against initiation of prosecution u/s.
                  276C. The reference may also be made to section
                  276CC which can be invoked in a case where there
                  is failure to furnish return of income.

                  As per proposed section 270A(10), the tax payable
                  on under-reported income shall be amount of tax
                  calculated (a) in the case of company, firm or local
                  authority, on under-reported income as if the under-
                  reported income were the total income and (b) in case
                  of any other assessee, at the rate of 30% on under-
                  reported income. This provides iniquitous results
                  when under-reporting is of income chargeable at
                  lower rate (say, long term capital gains). In case of
                  company, firm or local authority, the penalty shall be
                  computed @ 20% of under-reported LTCG whereas in
                  case of other taxpayers, the penalty shall be
                  computed @ 30% of under-reported LTCG. Further,
                  benefit of slab rate shall also not be available to
                  individual/HUF taxpayers.

                  Hence, to ensure parity between company/firm /
                  local authority and other taxpayers, it is
                  recommended that the tax should be computed on
                  slab rate and/or lower rates as applicable to nature
                  of under-reported income.

     28.4 Order to specify the specific clause of under-
     reported or misreported income for levy of penalty under
     section 270A

The newly proposed section 270A has done away with the undue
discretion in the hands of Assessing Officer by imposing penalty at
the rate of either 50% or 200% depending on whether the income is
under reported or misreported. Certain controls may be required in
the effective implementation of the proposed section.

In order to reduce the practice of Assessing Officers treating every
concealed income as misreported as well as the fact that the new
section does not require recording of satisfaction before imposition
of penalty proceedings (as was required under the erstwhile section
271), it is desirable that a suitable control mechanism may be put
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in place. Certain measures like making it mandatory for the
Assessing Officers to mention in the Order that every disallowance
or addition be specified as either under-reported or misreported.

Further, measures like specifying the exact clause from sub-
section (2) or (9) of section 270A ,in case of under-reporting or
misreporting of income respectively in the order would go a long
way in reducing disputes and litigation. The said measures would
also make it clear to the assessee in time whether he could opt for
immunity from penalty and prosecution under the proposed
section 270AA in case order specifies that he has not misreported
the income.

Suggestion
     It is suggested that suitable amendments be introduced or
     alternatively administrative instructions may be issued so that
     each order contains the specific fact of either misreported
     income or under-reported income or both along with the
     mention of specific clause of section 270A(2)/(9) against each
     disallowance/addition. Such measures would act as a
     suitable control mechanism in the absence of recording of
     satisfaction to initiate penalty proceedings and would also
     enable assessee to opt for proposed section 270AA providing
     for immunity from penalty and prosecution in case income is
     not misreported.

        28.5 Clarification when tax increases due to re-
        characterisation of income under a different head of
        income but assessed income equals the returned income

Another issue in this regard is that proposed section 270A is not
providing clarity in a situation when assessed income is
determined to be equal to returned income during the assessment
proceedings but tax amount increased due to change/increase in
tax rate. This may happen when a certain income returned by an
assessee as a long term capital gain but the said income is
assessed as income from other sources thereby leading to increase
in tax amount. At present, the different clauses under the sub-
section (2) and (9) of proposed section 270A does not cover the said
situation. It is not clear whether the said increase in tax amount
would be treated as under-reported income or misreported income.

Suggestion
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       It is suggested that suitable clarification may be issued
       regarding the situation when tax amount is increased due to
       rate increase (on account of, say, change of head of income
       from long term capital gain income to profits and gains of
       business or profession or income from other sources) although
       the returned income and assessed income are exactly same.

       28.6 Mere making of a claim which is not sustainable in
       law would not tantamount to furnishing inaccurate
       particulars for attracting levy of penalty

Scope of penalty under proposed section 270A has been widened
and it would now include within its scope, claims made by the
assessee but disallowed by the Assessing Officer.       Where no
information given in the return is found to be incorrect or
inaccurate, and the assessee has disclosed all material facts
relevant for assessment, he cannot be held guilty of furnishing
inaccurate particulars. This principle of law has been settled by
the Apex Court ruling in Reliance Petro Products' case. Therefore,
mere making of a claim which is not sustainable in law would not
tantamount to furnishing inaccurate particulars for attracting levy
of penalty. However, such cases are now proposed to be included
within the ambit of under reported income under the new section
270A and penalty would be attracted@50%.

Suggestion
     It is suggested that proposed section 270A may be suitably
     amended so that penalty is not automatically attracted for
     merely making of a claim which is not sustainable in law.


29.    Clause 108 ­ Section 281B - Provisional attachment of
       property- Treatment of amount realized by invoking bank
       guarantee- Clarification required.


Section 281B empowers Assessing Officer to invoke bank
guarantee wholly or in part if demand raised on the assessee is not
paid within time limit provided in the demand notice served. Very
wide powers are conferred upon Assessing Officer. Mere non-
payment within notice period will empower Assessing Officer to
invoke bank guarantee. There is no clarity on the situation where
the application for stay of demand is pending before Assessing


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Officer or any higher authority or in case of automatic stay on
payment of 15% demand.

The section provides that the amount collected by invoking bank
guarantee is to be adjusted against demand payable and surplus, if
any, to be deposited in personal deposit account of the
Commissioner or Principal Commissioner in the branch of
prescribed banks. Given that section 281B(2) provides for
maximum period of attachment to be 2 years from the date of
attachment or 60 days from the date of assessment order,
whichever is later, reasons for depositing the amount in the
personal deposit account of authority and not to refund the same
to the taxpayer is not clear.

Suggestion
       It is recommended to clarify the aforementioned issues
       through appropriate amendments/circulars.

30.    Chapter IX of the Finance Bill 2016 - The Income
       Declaration Scheme, 2016- Issues to be addressed

       30.1 Clarity on definition of the term `declarant' [Clause
       179(a) of the Finance Bill, 2016]:

As per clause 179(1), declarant means a person making declaration
under clause 180(1). Clause 180(1) provides that any person can
make a declaration in respect of income chargeable to tax under
the Act subject to fulfilment of some conditions. However, Finance
Minister in Budget Speech stated that the scheme will be open to
domestic taxpayers.

Suggestion:
     It is recommended to clarify whether non-residents who fulfil
     the other stated conditions in clause 180(1) are also allowed to
     avail opportunity under the scheme.

       30.2 Impact of receipt of notice, which bears no
       reference to the undisclosed income sought to be
       declared, on availment of this scheme:

Clause 193(e)(i) provides that the Income Declaration Scheme
shall not apply in relation to any undisclosed income chargeable to

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tax under the Act where notice under sections 142/ 143(2)/ 148/
153A/ 153C has been issued in respect of an assessment year.

Suggestion:
     As per the proposed scheme, the declaration cannot be made
     by a person who has received a notice under section 142 or
     143(2) or 148, etc. It is possible that the notice bears no
     reference to the undisclosed income which is sought to be
     declared. It may be considered whether eligibility should be
     extended to a case where the declared income does not bear
     any nexus with the notice.

       30.3 Immunity from other Acts:

Clause 189 provides that declaration under Income Declaration
Scheme will not be used as evidence against the declarant for any
proceeding under the Act and Wealth tax Act. Clause 187 provides
immunity from Benami Transactions Prohibition Act, subject to
conditions.

Suggestion
     Immunity may be granted under other laws, such as SEBI, IPC
     etc.

       30.4 No scrutiny or enquiry in relation to declarations
       filed by the taxpayer:

The Finance Minister has, in his Budget Speech, stated that no
scrutiny or enquiry will be made in respect of the declarations.
However, no such provision has been made in Finance Bill 2016. A
notable concern is whether taxpayer will be called upon to explain
source of income / assets forming part of the declaration.

Suggestion:
     It is recommended that suitable clarification be made in the
     scheme itself to avoid any ambiguity.

       30.5 Non-applicability of scheme in cases where notice
       under section 142 or section 143(2) is issued
Para 160 of the Budget Speech 2016 reads as follows:
       "160. I propose a limited period Compliance Window for
       domestic taxpayers to declare undisclosed income or income

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       represented in the form of any asset and clear up their past
       tax transgressions by paying tax at 30%, and surcharge at
       7.5% and penalty at 7.5%, which is a total of 45% of the
       undisclosed income. There will be no scrutiny or enquiry
       regarding income declared in these declarations under the
       Income Tax Act or the Wealth Tax Act and the declarants will
       have immunity from prosecution. Immunity from Benami
       Transaction (Prohibition) Act, 1988 is also proposed subject to
       certain conditions. The surcharge levied at 7.5% of
       undisclosed income will be called Krishi Kalyan surcharge to
       be used for agriculture and rural economy. We plan to open
       the window under this Income Disclosure Scheme from 1st
       June to 30th September, 2016 with an option to pay amount
       due within two months of declaration."


As per sub-clause (e) of clause 193 of the Finance Bill 2016, the
provisions of this scheme shall not apply in relation to any
undisclosed income chargeable to tax under the Income-tax Act
for any previous year relevant to an assessment year prior to the
assessment year beginning on the 1st day of April, 2017--
  (i) where a notice under section 142 or sub-section (2) of
      section 143 or section 148 or section153A or section 153C
      of the Income-tax Act has been issued in respect of such
      assessment year and the proceeding is pending before the
      Assessing Officer; or
  (ii) where a search has been conducted under section 132 or
       requisition has been made under section 132A or a survey
       has been carried out under section 133A of the Income-tax
       Act in a previous year and a notice under sub-section (2) of
       section 143 for the assessment year relevant to such
       previous year or a notice under section 153A or under
       section 153C of the said Act for an assessment year relevant
       to any previous year prior to such previous year has not been
       issued and the time for issuance of such notice has not
       expired; or
  (iii) where any information has been received by the competent
        authority under an agreement entered into by the Central
        Government under section 90 or section 90A of the Income-
        tax Act in respect of such undisclosed asset.




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       Non-applicability of the scheme in cases where notice under
       section 142 or section 143(2) has been issued does not seem
       to be justified as there is no requirement to record prior
       satisfaction before issuance of notice in such cases.

Suggestion
     Under clause 193(e)(i), notice issued under section 142 or
     sub-section (2) of section 143 may be deleted as no prior
     satisfaction is recorded and mere issue of notice cannot be
     taken as non-declaration of income as held by judicial fora in
     the past.

31.    Clause 198 ­ New Chapter X of the Finance Bill 2016-The
       Direct Tax Dispute Resolution scheme, 2016 - Issues to
       be addressed

       31.1 Clarification in case where appeal is pending as on
       29th February, 2016 but decided/adjudicated upon
       before the date of filing of declaration

The Hon'ble Finance Minister, vide his Budget Speech, Union
Budget 2016 had said the following about proposed Direct Tax
Dispute Resolution Scheme, 2016. The extract of his Speech is
given below:

       "162.Litigation is a scourge for a tax friendly regime and
       creates an environment of distrust in addition to increasing the
       compliance cost of the tax payers and administrative cost for
       the Government. There are about 3 lakh tax cases pending
       with the 1st Appellate Authority with disputed amount being
       5.5 lakh crores. In order to reduce this number, I propose a
       new Dispute Resolution Scheme (DRS)

The said scheme would be applicable to "tax arrear" in respect of
appeal(s) pending before the Commissioner of Income-tax (Appeals)
or the Commissioner of Wealth-tax (Appeals) as on 29.02.2016.
"Tax Arrear" has been defined as the amount of tax, interest or
penalty determined under the Income-tax Act or the Wealth-tax
Act, 1957 in respect of such appeal(s). The pending appeal could be
against an assessment order or a penalty order.

As per clause 198 of the Finance Bill 2016, ``specified tax'' means a
tax--
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(i)     the determination of which is in consequence of or validated
        by any amendment made to the Income-tax Act or the
        Wealth-tax Act with retrospective effect and relates to a
        period prior to the date on which the Act amending the
        Income-tax Act or the Wealth-tax Act, as the case may be,
        received the assent of the President; and

(ii)    a dispute in respect of such tax is pending as on the 29th
        day of February, 2016;

This scheme is a welcome step however a clarification is needed
with regard to the availment of the Direct Tax Dispute Resolution
Scheme, 2016 in cases where appeal is pending as on 29th
February, 2016 but decided/adjudicated upon before the date
of filing of declaration under the said scheme by the
assessee.

Suggestion
        It is suggested that clarification is needed with regard to the
        availment of the Direct Tax Dispute Resolution Scheme, 2016
        in cases where appeal is pending as on 29th February, 2016
        but decided/adjudicated upon before the date of filing of
        declaration under the said scheme by the assessee.

       31.2 Clause 199­ Declaration of tax payable

As per clause 199 of the Finance Bill 2016, the declarant under the
scheme would be required to pay-

(a) tax and interest,--
       (i)   in a case where the disputed tax does not exceed ten
             lakh rupees, the whole of the disputed tax and the
             interest on disputed tax till the date of assessment or
             reassessment, as the case may be; or

        (ii)   in any other case, the whole of disputed tax, twenty-
               five per cent of the minimum penalty leviable and
               the interest on disputed tax till the date of
               assessment or reassessment, as the case may be;




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(b) penalty, twenty-five per cent of the minimum penalty leviable
and the tax and interest payable on the total income finally
determined.

The issue is with regard to levy of penalty when the disputed tax
is more than rupees ten lakh. There is no logic in levying such
a penalty as cases above rupees ten lakh involves question of
law so automatic penalty shall not be leviable in such cases.

Suggestion
     The provision for levy of 25% penalty in case where disputed
     tax is more than rupees ten lakh should be dropped from
     clause 199 of the Bill.

     31.3 Benefit of this scheme should not be restricted to
     CIT(A)

Clause 199 read with clause 198(h) of the Finance Bill 2016
provides that declaration can be filed for settlement of disputed
taxes only in respect of an appeal pending before CIT(A). There
is no reason for restricting this benefit to appeal pending
before the first appellate authority.

Suggestion
     The proposed scheme should cover appellate forums
     [Commissioner (Appeals), Tribunal, HC, SC], either at the
     instance of taxpayer or at the behest of tax authority. If this
     provision is extended to all such appeals, pending litigation
     before all such judicial authorities will get reduced.

     31.4 Clarification is required with regard to applicability
     of this scheme in all retrospective cases

Clause 199 of the Bill relates to settlement of disputed taxes levied
due to retrospective amendment in the Income-tax Act, 1961 and
Wealth-tax Act, 1947. In such cases only tax is payable and no
interest or penalty is payable.

It appears that this provision is made with a view to settle the
disputed taxes levied due to retrospective amendment made in
section 9 by the Finance Act, 2012.



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Suggestion
     Clarification is needed with regard to this scheme's
     applicability in all retrospective cases pending before any
     authority

     31.5 Issues common to `Tax Arrears' and `Specified Tax'

   a) Adjustment of past refunds due to declarant - If any
      refunds are pending for the prior assessment years, DRS
      should enable adjustment of past refunds due against the
      amount determined payable under DRS instead of requiring
      the taxpayer to pay afresh.

   b) Refund of penalty or interest already paid earlier - DRS
      empowers designated authority to waive penalty or interest
      in certain circumstances. Taxpayer may have paid penalty or
      interest in the past due to coercive measures to recover
      outstanding demand. If immunity or waiver is granted for
      penalty or interest due to resolution of underlying tax
      dispute under DRS, DRS should provide for refund of any
      penalty or interest which taxpayer may have already paid in
      the past.

   c) Adjustment of past dues against tax or interest ­ A
      suitable clarification is required on whether the amounts
      already paid against outstanding demand up to date of
      declaration should be first adjusted towards outstanding tax
      or interest.

   d) Instalment facility - Taxpayer may be granted facility to pay
      the arrears in instalments in genuine cases at the discretion
      of designated authority. If there is failure to pay as per
      schedule, Taxpayer may claim benefit of scheme to the extent
      of arrears discharged by him. Alternatively, the benefit may
      be rolled back in full and refund may be granted; giving him
      the opportunity to pursue matter in appeal.

   e) Where scheme to be availed only for part of the issues:

                      It is quite possible that, by way of a compromise,
                      the taxpayer may also have to give up, amongst
                      the issues of some controversial nature, the
                      additions on which he may be very strong on
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                      merits. Requiring such an assessee to
                      necessarily deposit and bear and admit penalty
                      @25% of minimum penalty is not considered to
                      be fair. The provision is based on a pre-
                      judgement of the issue against the taxpayer. We
                      suggest that the collection may be restricted to
                      disputed tax and interest levy, as specified in the
                      provision.

                      In cases where a number of issues are disputed
                      in a single appeal pending before CIT(A) (or
                      ITAT/HC/SC, in case of `specified tax'),
                      clarification is needed as to whether the taxpayer
                      can opt for partial compromise by resolving some
                      of the issues under DRS while continuing to
                      litigate on the other issues.

                      If penalty or interest has been levied on multiple
                      issues and Taxpayer has filed a declaration only
                      in respect of some of the issues in appeal, a
                      clarification is required as to whether or not the
                      benefit of immunity or waiver, as the case may
                      be, would extend to all the issues in appeal. If
                      the immunity is available only on part of the
                      issues which are resolved consequent to
                      payment of taxes under DRS, the Taxpayer
                      should be allowed to keep the appeal alive and
                      agitate the other grounds in appeal.

   f) Resolution of dispute between Designated Authority and
      declarant ­ Clarification is required as to the remedy
      available in case the Designated Authority determines
      amount payable by the declarant at a figure different from
      amount worked out by declarant.

   g) Rejection of declaration - DRS should mandate Designated
      Authority to provide declarant sufficient opportunity of being
      heard before rejecting the declaration.

   h) Amendment of order ­ Clarification is required as to
      whether the Designated Authority can amend or rectify the
      order certifying the amount payable under DRS, without
      giving an opportunity of being heard.
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   i) Vicarious liability - In case of a declarant who is a
      company, it may be clarified that immunity extends to
      persons having vicarious liability (for e.g. directors).

Issues pertaining to `Tax Arrears'

a) Coverage of penalty disputes ­ An issue which needs to be
   addressed is whether settlement of dispute for penalty is
   restricted only to cases of concealment penalty or whether the
   same extends to other penalties as well. Another issue pertains
   to the quantum of amount payable under DRS, in the latter
   case. These issues have to be suitably addressed.

b) Coverage of TDS disputes: Clarification is needed as to
   whether appeal against an order under section 201 can be
   settled under DRS as well as the manner in which the amount
   payable under scheme in such a case is to be determined.

c) Impact on quantum appeal if penalty dispute is settled: In
   case of standalone settlement of penalty appeal, taxpayer is
   liable to pay tax and interest payable on total income finally
   determined in addition to pay 25% of minimum penalty leviable.

   The issue under consideration is whether quantum appeal
   pending before Tribunal will become academic and be liable to
   be withdrawn. If not, the position as regards refund of taxes in
   case Tribunal decides quantum appeal in favour of Taxpayer
   needs to be clarified.

   Further, the status of department appeal filed to Tribunal
   against CIT(A) order in quantum matter which is pending on the
   date of settling penalty matter is another issue which needs to
   be addressed. Consequent issue is whether payment of tax and
   interest would be with respect to amount determined in order
   giving effect to order of CIT(A).

Issues pertaining to `Specified Tax'

a) Expanding scope to department appeal - If taxpayer succeeds
   at lower appellate level and gets refund; department appeal
   pending before higher appellate authority as of 29 February
   2016 cannot be settled by Taxpayer under DRS. Taxpayer may
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   be interested in such cases because chances of succeeding at
   higher appellate level are low (due to retrospective amendment)
   and there is immunity from interest and penalty under DRS.

b) Waiver of interest - In the context of `specified tax' which
   grants waiver of interest, a clarification is required as to the
   kind of `interest' which can be waived. Interest may have been
   levied under sections 234B and 220(2). As Taxpayers should be
   insulated from all effects of retroactive amendments, ideally, the
   scheme should empower designated authority to waive interest
   levied under section 234B as well as 220(2).

c) Consequential effect - If dispute on `specified tax' is settled
   under DRS, DRS may provide clarity on whether consequential
   relief would be available by granting deduction of expenditure
   under section 40(a)(i) or 40(a)(ia). The consequential relief may
   extend to interest and penalty to the extent relating to
   disallowance of expenditure.

   Suggestion
     In order to encourage taxpayers to avail DRS, there is a need
     for clarity in respect of these issues.

32.    Income Computation and Disclosure Standards (ICDSs)-
       Need for postponement of date of application
Last year, the Income Computation and Disclosure Standards
(ICDSs) were notified via Notification No. 32/2015, dated
31.03.2015. The said Notification has come into force with effect
from 1st April, 2015, and hence is applicable to the assessment
year 2016-17 and subsequent assessment years. These standards
are applicable to the computation of income under the heads
"Profits and gains of business or profession" and "Income from
other sources". The preamble states that if there is any conflict
between the provisions of the Act and the ICDS, the latter will
prevail.

The standards contradict with the provisions of the Act and also
the decisions of High Courts and Supreme Court on the basis of
interpretation of provisions.




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ICDSs does not recognize the universally-accepted accounting
principle such as `prudence', materiality etc. Many settled positions
have undergone a change.

The concept of "prudence" as per Accounting Standard is that
anticipated profits are not recognized but known losses & liabilities
are provided on best estimate basis. However, as per ICDSs, any
expected loss shall not be recognized unless specifically required by
any other provisions of ICDSs (viz. marked to market losses on
foreign exchange fluctuations).

ICDSs leads to accelerated recognition of income and, as a result,
front-loaded tax payouts. For example, taxpayers earning income
by way of bank interest, interest on securities/bonds/deposits etc.
may have to recognize income on a "time basis" under the
provisions of ICDS IV. Earlier, income was recognized only when it
became due.

ICDS introduces new concepts which have been left undefined, for
instance, `reasonable cause' for change in accounting policy or
`reasonable certainty' for recognition of provisions and contingent
assets. These are highly subjective and hence prone to different
interpretations.

Taxpayers are already grappling with regulatory changes of the
Companies Act, 2013, Ind-AS and the proposed GST. The
Assessees and Industry should be allowed more time to deal with
another change of this nature. Even Income Tax Simplification
Committee headed by Justice R V Easwar felt that many of the
provisions of the ICDSs are capable of generating a legal debate
about which at present there is no clarity.

Although it has been clarified that ICDS are only for computation
of income and not for maintenance of books of accounts, the
deviations between ICDSs and Accounting Standards are such that
they require detailed computation and reconciliation which may, in
effect necessitate maintenance of separate records for tax
purposes.

ICAI feels that maintenance of separate records for tax purposes,
creates confusion, interpretation issues, multiplicity of records and
additional compliance burden which may outweigh the gains to be
obtained by the application of ICDSs. It has also been felt by the
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Income Tax Simplification committee that ICDSs deal only with the
method of accounting and at best, it brings timing difference on
recognition of expenditure or income as compared to the books of
account. Therefore, a detailed study of the implications of the
ICDSs is necessary before it is implemented. Further, the Income
Tax Simplification Committee also recommended that the
implementation of the ICDS be deferred by making a suitable
amendment under section 145(2).

Suggestion
       It is suggested that applicability of ICDS be postponed until
       the concerns of taxpayers are suitably addressed.




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         Suggestions relating to International Taxation

33.    Clause 53 ­ Section 115JB - Applicability of Minimum
       Alternate Tax (MAT) on foreign companies ­ Benefit may
       be extended to foreign companies having permanent
       establishment and covered under the presumptive tax
       regime in India


The Ministry of Finance has clarified that foreign company not
having a permanent establishment in India will be exempt from
MAT. An appropriate amendment has been proposed to be made in
the Act in section 115JB in this regard.

The Income-tax Act, 1961 contains various provisions which
provides for presumptive tax regime for non-residents (for example
Section 44BB).

Under the presumptive tax regime, foreign companies pay tax at
lower rate. Such foreign companies do form permanent
establishment in India even when their activities are confined to
the areas specified in the presumptive tax provisions. If such
foreign companies are subjected to MAT, the purpose for which the
beneficial concessional tax rate regime has been introduced is
specified in the relevant sections would be defeated.

MAT levy may be restricted to India profits

Companies not having PE or Place of Business in India are
proposed to be eligible for absolute exclusion from MAT levy.
However, in relation to foreign companies with presence in India,
who may or may not have separate India specific accounts, issue
may arise whether book profits should be computed based on
global profits or only with regard to India profits.

Suggestion
     It is suggested that
     (a)     a suitable amendment may be made providing that
             foreign companies having permanent establishment in
             India and covered under the presumptive tax regime
             may be kept outside the purview of MAT.
     (b)     in order to avoid any controversy, it may be clarified
             that in case of foreign companies having PE / Place of
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              Business in India, the computation of book profits
              should be based on India profits and not global profits.


34.    Clause 85 ­ Section 206AA - Exemption from
       requirement of furnishing PAN under section 206AA to
       certain non-residents ­ Request to treat the amendment
       as clarificatory


The Hon'ble Finance Minister has, in para 176 of his Budget
Speech [Union Budget 2016-17] stated that non-residents without
PAN are currently subjected to a higher rate of TDS. Hence, he
proposed to amend the relevant provision to provide that on
furnishing of alternative documents, the higher rate will not apply.

The said beneficial provision appears to be clarificatory in nature
and hence, may be given effect to since the inception of section
206AA.

Suggestion
     It is suggested           that    this    amendment         be   treated   as
     clarificatory.


35.    New Chapter VIII of the Finance Bill, 2016 - Equalisation
       Levy-Issues to be addressed


The Finance Bill, 2016 has proposed to insert a new Chapter VIII
titled "Equalisation Levy" in the Finance Bill, 2016 to provide for an
equalisation levy of 6% of the amount of consideration for specified
services received or receivable by a non-resident not having
permanent establishment ('PE') in India, from a resident in India
who carries out business or profession, or from a non-resident
having permanent establishment in India. In other words, the
finance Bill, 2016 proposes a levy of 6% on consideration paid or
payable by an Indian resident carrying on business or profession,
or by an Indian permanent establishment of a non-resident to a
non-resident not having a permanent establishment in India, for
providing specified online advertisement services.
Certain issues arising from the same are as below:
       The responsibility for payment is cast on resident payer to
       deduct and deposit the levy. Interest and penalty have been
       proposed for delay or failure of compliance. This would
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       involve additional cost of compliance to Indian businesses. It
       is an indirect levy.

       The equalization levy is proposed to be a separate levy under
       the Finance Bill, 2016 and will not be part of the Income-tax
       Act, 1961. This results in defeating the option available to a
       non-resident of choosing the more beneficial option between
       the Treaty and the Income-tax Act, 1961.

       Also, the non-resident may not be able to claim tax credit of
       this levy in his country of residence, if the DTAA allows
       foreign tax credit in respect of tax paid under the Act and not
       in respect of similar taxes paid which are outside the ambit
       of the Income-tax Act, 1961. It is recommended that the
       provision be withdrawn or be enacted under Act.


Suggestion
     In view of the issues detailed above, it is suggested that the
     proposal to introduce levy in the present form may be
     reconsidered. Particularly, after 1 April 2017, GAAR will
     ensure that artificial avoidance of taxable presence is not
     likely to remain tax protected for the non-residents.


36.    Country By Country ­ Transfer Pricing: Deferral of
       application for facilitating better understanding and
       implementation


The Finance Bill, 2016 has proposed to provide a specific reporting
regime in respect of CbC reporting and also the master file. It is
also proposed to include essential elements in the Act while
remaining aspects can be detailed in rules. The elements relating to
CbC reporting requirement and matters related to it are proposed
to be included through amendment of the Act in various relevant
sections.

Understanding the implications of these provisions and effective
implementation of the same will require a lot of efforts on the part
of the tax payers as well as Transfer Pricing Officer/Assessing
Officers. Also, the CBDT will be required to come out with detailed
rules and format to implement these provisions.



Post-Budget Memorandum ­ 2016 (Direct Taxes)                         Page 76
                   The Institute of Chartered Accountants of India


Suggestion
     It is suggested that the applicability of the said provisions be
     postponed by one year.


                                        X-X-X-X




Post-Budget Memorandum ­ 2016 (Direct Taxes)                         Page 77

 
 
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