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Suggestions of ICAI considered in Notice of amendments to Finance Bill, 2013 as passed by Lok Sabha
May, 04th 2013
         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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