Suggestions of ICAI considered in the Notice of amendments to Finance Bill, 2013 as Introduced in Lok Sabha
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
2. 10(4)(ii), Even after repeal of "Foreign The ICAI, in its earlier Pre-Budget This suggestion has been
10(4B) Exchange Regulation Act, Memorandum, had suggested that considered and a new clause
etc. 1973", the Income-tax Act, 1961 the words "Foreign Exchange (3A) has been inserted in the
continues to make a reference Management Act, 1999" should be Finance Act, 2013 for
to the said Act in many of its substituted in place of "Foreign substitution of the expression
sections, for example, section Exchange Regulation Act, 1973". "Foreign Exchange Management
10(4)(ii), 10(4B), etc. Act, 1999" in place of "Foreign
Exchange Regulation Act, 1973"
at all places in the Income-tax
Act, 1961
4. 43(5) The CTT is proposed to be Appropriate amendments may be This suggestion has been
introduced in a limited way by made in section 43(5) to exclude considered by inserting sub-
insertion of Chapter VII in the an eligible transaction in respect clause (e) in section 43(5) and
Finance Bill, 2013. The Finance of commodity derivatives from the Explanation 2 to exclude an
Minister, in his budget speech, definition of "speculative eligible transaction in respect of
had clarified that trading in transaction". commodity derivatives from the
commodity derivatives will not definition of "speculative
be considered as a speculative transaction".
transaction. However, no
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
amendment was proposed to
this effect by the Finance Bill,
2013 in section 43(5) defining a
speculative transaction.
Consequently, in the absence of
specific exclusion provision in
section 43(5), characterisation
of commodity derivative
transactions (including those
which are subject to CTT) would
be governed by the existing
provisions and they run the risk
of being treated as speculative
transactions, unless established
by the taxpayer to be for
hedging purpose.
5,6, 7 and 8 90 & 90A Section 90A(4) provides that The provision that a TRC is This suggestion has been
treaty benefit will not be "necessary but not sufficient" had led considered and sub-sections (4)
available to any Non Resident to uncertainty amongst investors. and (5) of sections 90 and 90A
unless he furnishes TRC from There were apprehensions of roving have been amended.
the Government of his country enquiries from Tax Authority which
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
of residence containing such can hamper confidence of taxpayers Sub-section (4) of sections 90
particulars as may be and can mar investment climate of and 90A has been amended to
prescribed. the country. substitute the words "a certificate
The proposed amendment containing such particulars as
may be prescribed of his being a
The Finance Bill, 2013 proposed contradicts CBDT Circular no 789
resident" with the words "a
to insert sub-section (5) in dated 13 April 2000 which clarifies
certificate of his being a
sections 90 and 90A to provide that "wherever a Certificate of
that TRC shall be a necessary Residence is issued by the Mauritian resident".
but not a sufficient condition for Authorities, such Certificate will Therefore, a certificate issued
claiming any relief under a constitute sufficient evidence for by the Government of a
DTAA. accepting the status of residence as Foreign State would constitute
well as beneficial ownership for proof of tax residency, without
applying the DTAC accordingly". any further conditions
The existing provision of obtaining regarding furnishing of
TRC is itself burdensome for a Non prescribed particulars therein.
Resident taxpayer. Every Non
Resident needs to undertake Sub-section (5) of sections 90
additional compliance as the present and 90A which provided that
provision does not provide for any TRC shall be a necessary but not
threshold limit beyond which TRC a sufficient condition for claiming
may be made compulsory. any relief under a DTAA has
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
The hardship compounded further as been substituted to provide that
the said TRC needs to be obtained in the assessee referred to under
the form and manner prescribed by section 90(4) shall also provide
the Indian income-tax authorities. such other documents and
Such a request may or may not be information, as may be
entertained by the Foreign prescribed.
Government.
Further, there was an apprehension
that the Non Resident taxpayer
would be compelled to obtain TRC
before the stage of payment itself,
but for which DTAA benefit may be
denied.
In this background, incorporating the
condition of TRC being "necessary,
but not sufficient" would make the
payer more hesitant than ever.
The Finance Minister had clarified
by way of Press Release dated 1st
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
March 2013 that the TRC issued by
the Government of a Foreign State
would be accepted as evidence of
tax residency and the tax
authorities cannot go behind the
TRC to question the residential
status.
The ICAI had suggested that the
clarification issued by way of
Press release should, in fact, be
part of the statute in order to
overcome the difficulties
mentioned above.
14. 194-IA Tax is proposed to be Since this provision requires Sub-section (3) has been
deducted@1% on consideration deduction of tax by the transferee, inserted in section 194-IA to
for transfer of immovable it presupposes that the transferee provide that provisions of section
property, other than agricultural should have a TAN. This may 203A (i.e. obtaining TAN) shall
land. However, no tax is to be cause genuine hardship to those not apply to a person required to
deducted if the consideration for transferees who do not possess a deduct tax in accordance with
transfer of immovable property TAN. Further, it would be an the provisions of section 194-IA.
additional burden to require such
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
is less than Rs.50 lakhs. persons to apply for and obtain
TAN for a single transaction.
It was, therefore, suggested that a
simple challan for one-time
remittance of tax by the
transferee/payee be prescribed
and such remittance may be made
within a prescribed time after
payment of the last installment.
Such a remiitance may be made a
pre-condition for registration of
property in the name of the
transferee. This would dispense
with the need for obtaining TAN
and at the same time, ensure
garnering of revenue at an early
point of time. The PAN of the
transferor and transferee should
be required to be quoted on the
challan so that the transferor can
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
take credit of tax deducted and
remitted.
19. 206AA Section 194LC, inserted by the Though the provision provides for Sub-section (7) has been
read with Finance Act, 2012, provides for concessional rate of tax @ 5%, in inserted in Section 206AA to
194LC a concessional rate of absence of PAN of the Non Resident provide that the provisions of
withholding tax @ 5% on lender, section 206AA mandates section 206AA shall not apply in
payments to non-residents in a withholding at higher rate of 20%. respect of payment of interest on
case where an Indian Company This is perceived to be onerous long term infrastructure bonds,
borrows money in foreign considering that section 115A as referred to in section 194LC,
currency from a source outside envisages exemption from filing to a non-resident, not being a
India either under a loan return for the Non Resident where company, or to a foreign
agreement or by way of issue of tax is deducted by the borrower and company.
long-term infrastructure bonds. paid to the Government. Hence,
obtaining PAN for the sole purpose
of avoiding adverse impact of section
206AA results in an empty formality.
Therefore, ICAI had suggested
that payment of interest under
Serial No. of Section Existing/Proposed provision Suggestion Given by ICAI Suggestions considered
Notice of of the of the Income-tax Act, 1961
amendments Income-
as tax Act,
introduced 1961
in Lok
Sabha
section 194LC should be excluded
from the scope of Section 206AA
and Non Resident lenders should
not be required to obtain PAN in
India to avail lower rate of tax
under section 194LC.
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