P.C. Parwal ,FCA

1
MAJOR
By Finance Bill 2013 At Jaipur Branch of ICAI On
04.05.2013
Presented By P.C. Parwal ,FCA Email
pparwal_at_kalanico.com Cell 98298-88804
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WE OPEN UP NOW TO THE MAJOR AMENDMENTS BY THE
FINANCE BILL, 2013
The Finance Bill is passed by Lok Sabha on
30.04.2013. It is also passed by Rajya Sabha but
assent of President is awaited It contains
amendments in 44 sections, substitution of
2sections, insertion of 7 new sections 3
chapters omission of 1 chapter section (58
AMENDMENTS IN ALL)
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MAJOR AMENDMENTS

• Investment in new Plant or Machinery
• Transactions relating to Immovable Property
• - Amendment in the definition of Capital Asset
• - Special provision for FVOC for transfer of
  assets other than capital
• assets in certain cases
• - Taxability of immovable property received
  for inadequate consideration
• - Deduction of tax at source on transfer of
  certain immovable property
• other than agricultural land
• - No Wealth Tax on Agricultural Land
• Disallowance of certain fee, charge, etc. in the
  case of State Government
• Undertakings
• Deduction in respect of interest on loan taken
  for residential house
• property
• Special Provisions relating to Tax on Distributed
  Income of Domestic
• Company for Buy-Back of Shares
• Application of seized assets u/s 132B
• ROI filed without payment of self- assessment tax
  to be treated as
• defective return
• Tax Residency Certificate

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• Investment in new Plant or Machinery
• New section 32AC inserted w.e.f. A.Y. 14-15
• Applicable on assessee, being a company, engaged
  in the business of manufacture or production of
  any article or thing.
• Acquires and installs new asset after 31.03.2013
  but before 01.04.2015
• Aggregate amount of actual cost of such new
  assets exceeds Rs. 100 crore,
• Deduction shall be allowed as under-

A.Y. 2014-15 15 of the actual cost of new asset acquired and installed, if the aggregate amt. of actual cost of such new asset exceeds Rs. 100 crores
A.Y. 2015-16 15 of the actual cost of new asset acquired and installed, as reduced by the amount of deduction allowed above, if any.

• NEW ASSET means
• - any new PM, other than ship or aircraft
  but doesnt include used PM
• - any PM, installed in any office premises
  or any residential accommodation, including
  accommodation in nature of guest house
• - any office appliances including computers
  or computer software
• - any vehicle or
• - any PM, the whole of actual cost of
  which is allowed as deduction (by way of
  depreciation or otherwise) in computing the
  income under the head PGBP of any P.Y.

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• Where any new asset acquired and installed is
  sold or otherwise transferred
• except in connection with amalgamation or
  demerger-
• - within a period of 5 years from the date of
  its installation,
• - deduction allowed in respect of such new
  asset, deemed to be the income of assessee
  chargeable under the head PGBP
• - in the P.Y. in which such new asset is sold
  or otherwise transferred,
• - in addition to taxability of gains, arising
  on account of transfer of new asset.
• Restriction not to be applied in case of
  amalgamation or demerger but shall continue to
  apply to amalgamated company or resulting
  company.

Analysis- It is an incentive allowable in
computing income from business. It would not go
to reduce the cost of asset for claiming
depreciation) How the word acquired
installed is to be interpreted Whether new PM
would include civil structure Where PM is
acquired installed but not put to use within
the prescribed time, would benefit available
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Amendment in the definition of Capital Asset

• The existing sec. 2(14)(iii) provides that
  capital asset does not include agricultural land
  in India, not being land situate (a) in any
  area which is comprised within the jurisdiction
  of municipality or cantonment board and which has
  a population of not less than 10,000 or (b) in
  any area within such distance not being more than
  8kms from the local limits of municipality or
  cantonment board as specified by CG by
  notification.
• Sec. 2(14)(iii)(b) amended w.e.f A.Y. 14-15 as
  under-
• The distance is to be measured aerially
  (shortest aerial distance) not by approach
  road. The amendment is made to overrule the
  judgment in case of CIT Vs. Satinder Pal Singh 33
  DTR 281 (PH)
• Instead of referring to the notification of CG,
  for cities distance, following three categories
  has been provided if the agricultural land is
  situated therein, it would be a capital asset

In case of municipality or cantonment board having population between Aerial Limits
From 10,001 to 1,00,000 Upto 2 Kms
From 1,00,001 to 10,00,000 Upto 6 Kms
Exceeding 10,00,000 Upto 8 Kms
Similar amendment made in item B of proviso (ii)
of cl. (c) of sec. 2(1A) of IT Act
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Issues

• In which of the following case, agricultural land
  would be considered as capital asset
• Land situate within Municipality, population lt
  10,000
• Land situate within Municipality, population gt
  10,000
• Land situate outside Municipality, population lt
  10,000
• Land situate outside Municipality, population gt
  10,000
• Land situate within 8 kms of Municipality (prior
  to amendment)
• How the taxability with reference to population
  is to be determined where a particular
  village/Khasra of the land partly falls within
  the limit of 2/6/8 kms partly falls beyond this
  limit
• Whether the word or used between clause (a) and
  clause (b) is to be interpreted as and to
  ascertain whether a particular agricultural land
  is a capital asset or not

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Special provision for full value of consideration
for transfer of assets other than capital assets
in certain cases  

• Presently section 50C does not apply to transfer
  of immovable property, held by the transferor as
  stock-in-trade.
• New section 43CA inserted w.e.f. A.Y. 14-15
• Where the consideration received or accruing on
  transfer by an assessee
• - of an asset (other than capital asset),
  being land or building or both
• - is less than the stamp duty value,
• - then, the value so adopted or assessed or
  assessable shall be deemed to be the
• FVOC for the purposes of computing income
  under the head PGBP.
• Provisions of sec. 50C(2) 50C(3) shall apply
  for determination of value
• Amendment made various judgments of High Court
  holding that sec. 50C isnt
• applicable to business asset, nugatory CIT
  Vs. Thiruvengadam Investments
• Pvt. Ltd. 320 ITR 345 (Mad.)
•  
• If there is a time gap between the date of
  agreement and date of registration
• - then the stamp duty value may be taken as on
  the date of the agreement for
• transfer not as on date of registration of
  such transfer.
• - Exception shall apply only in a case where
  amount of consideration or a part
• thereof has been received by any mode other
  than cash on or before the date of
• agreement for transfer of asset
•  

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Issues in Sec. 43CA

• Whether section 43CA would apply where sales is
  already recorded but sale deed is now executed
• Where after the date of agreement, amount is
  received in cash, which value would be adopted by
  stamp authority. Whether as on the date of
  agreement or as on the date of transfer
• Whether benefit of sub section 3 will be denied
  even if a token amount is received in cash before
  the date of agreement, though the major amount is
  received by cheque
• If the real consideration is lower than the
  stamp valuation, can assessee require the AO to
  refer the matter to Departmental Valuation
  Officer
•  

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Taxability of immovable property received for
inadequate consideration 

• As per existing provisions of sec. 56(2)(vii)(b),
  where any immovable property is received by an
  individual or HUF without consideration and the
  stamp duty value of which exceeds Rs.50,000/-,
  stamp duty value of such property would be
  charged to tax in the hands of the individual or
  HUF as Income from other sources.
•  Sub Clause (b) substituted w.e.f. A.Y. 14-15 to
  cover a situation of inadequate
• consideration.
• Where an individual or HUF receives any immovable
  property
• - for a consideration, which is less than the
  stamp duty value of the property by
• an amount exceeding Rs.50,000/-,
• -stamp duty value of such property as exceeds
  such consideration
• - shall be chargeable to tax as income from
  other sources.
• If there is a time gap between the date of
  agreement and date of registration
• - then the stamp duty value on the date of the
  agreement may be taken
• - Exception shall apply only in a case where
  amount of consideration or a part
• thereof has been paid by any mode other
  than cash on or before the date of
• agreement for transfer of such immovable
  property
• This provision was also introduced by FA 2009 but
  withdrawn w.r.e. by FA 2010

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• Deduction of tax at source on transfer of certain
  immovable property other than agricultural land
• New section 194IA inserted w.e.f. 01.06.2013
• Any person, being a transferee (other than person
  referred in sec. 194LA)
• - responsible for paying to a resident
  transferor
• - any sum by way of consideration
• - for transfer of an immovable property (other
  than agricultural land)
• - shall at the time of credit of such sum to
  account of transferor or at the time of
• payment of such sum in cash or cheque or
  draft or by any other mode,
• whichever is earlier
• - deduct tax _at_1 of such sum
• No deduction shall be made where the
  consideration for transfer of an
• immovable property is less than Rs. 50 lacs
• Provisions of sec. 203A (Tax deduction account
  number) shall not apply
• Immovable property means any land (other than
  agricultural land) or any
• building or part of a building
• Agricultural land means agricultural land in
  India, not being a land situated in
• any area referred in item (a) (b) of sec.
  2(14)(iii)

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• ANALYSIS
• With section 43CA, 56(2)(vii)(b), 50C 194IA,
  all transaction of immovable properties, should
  be at value adopted/assessed/assessable by stamp
  authorities
• If there is variation between actual
  consideration value as per stamp authority
• Buyer of property is Individual/HUF
• (a) buyer of property would be taxed u/s
  56(2)(vii) whether purchased as capital
• asset or stock in trade
• (b) seller of property would be taxed u/s 43C
  if its is stock in trade and u/s 50C
• if it is a capital asset
• Buyer of property is a firm or a company
• Sec. 56(2)(vii) would not apply
• Transferee is to deduct tax at source _at_1 where
  consideration is Rs. 50 lacs or
• more
• The meaning of agricultural land for the purpose
  of sec. 194IA is different than

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• No Wealth Tax on Agricultural Land
• Definition of urban land in Explanation (b) to
  sec. 2(ea) of WT Act, 1957 is amended in line
  with the amendment in sec. 2(14)(iii).
• It is further clarified that land classified as
  agricultural land in the record of the govt.
  used for agricultural purpose will not be treated
  as an asset u/s 2(ea).
• These amendment are with retrospective effect
  from A.. 93-94
• As per amended provisions, following lands will
  not be chargeable to WT
• - Land classified as agricultural land used
  for agricultural purpose
• - Land on which construction of building is not
  permissible under law
• - Land occupied by any building constructed with
  approval of authority
• - Unused land held for industrial purpose upto 2
  years from the date of its
• acquisition
• - Land held as stock in trade for a period of 10
  years from the date of its
• acquisition

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• Disallowance of certain fee, charge, etc. in the
  case of State Government Undertakings
• New sub clause (iib) in section 40 inserted
  w.e.f. 14-15
• Any amount
• - paid by way of royalty, license fee, service
  fee, privilege fee, service charge or
• any other fee or charge, by whatever named
  called, which is levied exclusively
• on, or
• - which is appropriated, directly or
  indirectly, from,
• a State Government undertaking, by the State
  Government
• - shall not be allowed as deduction for the
  purposes of computation of income of
• such undertakings under the head PGBP.
• State Government undertaking includes-
• - a corp. established by or under any Act of
  the SG
• - a co. in which more than 50 of the paid-up
  equity share capital is held by SG.
• - a co. in which more than 50, of the
  paid-up equity share capital held by the
• entities referred above (whether singly or
  taken together)
• - a co. or corp. in which SG has right to
  appoint the majority of directors or to
• control the management or policy decisions,
  directly or indirectly, including by
• virtue of its shareholding or management
  rights or shareholders agreements or

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Deduction in respect of interest on loan taken
for residential house property

• New section 80EE inserted w.e.f. A.Y. 14-15
• Deduction allowed to an individual of interest
  payable on loan taken by him
• from any financial institution
• for the purpose of acquisition of a residential
  house property.
• Deduction is restricted to Rs. 1 lacs.
• Where interest payable in A.Y. 14-15 is less than
  Rs. 1 lacs, the balance amount
• would be allowed in A.Y. 15-16
• Deduction would be allowed only if
• - Loan has been sanctioned between 01.04.2013
  to 31.03.2014
• - Amount of loan sanctioned does not exceed
  Rs. 25 lacs
• - Value of residential house property does not
  exceed Rs. 40 lacs
• - Assessee does not own any residential house
  property on the date of sanction
• of loan
• Where deduction for interest is allowed in this
  section, deduction shall not be
• allowed in respect of such interest under any
  other provision of the Act for the
• same or any other A.Y.

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• Financial Institution means-
• - a banking company to which the Banking
  Regulation Act, 1949 applies
• - any bank or banking institution referred to
  in sec. 51 of that Act
• - a hosing finance company
• Hosing Finance Company means-
• - a public company formed or registered in
  India
• - with main object of carrying on the
  business of providing long term finance
• - for construction or purchase of house in
  India for residential purposes
• (Analysis If interest paid on SOP is Rs. 2.50
  lacs, Rs. 1.50 lacs can be claimed u/s 24
  balance Rs. 1 lacs u/s 80EE)

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Special Provisions relating to Tax on Distributed
Income of Domestic Company for Buy-Back of
Shares

• At present, sec. 115O provides for levy of DDT.
  Consequently dividend received by shareholders is
  exempt u/s 10(34).
• Consideration received by shareholder on buy back
  of shares by co. is not treated as dividend but
  is taxed as capital gain u/s 46A. Unlisted
  companies to avoid tax, resort to buy back of
  shares as same is either not taxed because of
  indexation benefit or taxed at lower rate.
• New Chapter XII-DA inserted w.e.f. 01.06.2013
  (Sec. 115QA to sec. 115QC)
• In addition to income tax chargeable in respect
  of TI of domestic co. for any A.Y.
• - any amt. of distributed income by the co.
• - on buy back of unlisted shares from a
  shareholder shall be charged to tax and
• - such co. shall be liable to pay additional
  inc. tax _at_20 on distributed income
• Distributed income means the consideration
  paid by the co. on buy back of
• shares as reduced by the amt. which was
  received by the co. for issue of such
• shares
• Even if no income tax is payable by a domestic
  co. on its TI, tax on distributed
• income shall be payable by such co.
• Tax on distributed income by the co. shall be
  treated as final payment of tax in
• respect of said income no further credit
  shall be claimed by co. or by any
• other person in respect of amt. of tax so
  paid

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• Where the principal officer of domestic co.
  co. fails to pay whole or any part of
• tax on distributed income within time allowed
  i.e. 14 days, he or it
• - shall be liable to pay interest _at_1 for
  every mth. or part thereof on amt. of tax
• for the period of default
• - shall be deemed to be an assessee in default
  in respect of amt. of tax payable by
• him or it
• - all the provisions of this Act for
  collection recovery of income tax shall apply
• New clause (34A) in sec. 10 inserted w.e.f. A.Y.
  14-15
• - income arising to the shareholders in
  respect of such buy back by the company
• would be exempt
• - where the company is liable to pay the
  additional income-tax on the buy-back
• of shares.
• (Analysis The effect of section is that the tax
  which was payable after indexation as capital
  gain would now be taxed at flat rate of 20)

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• Application of seized assets u/s 132B
• Section 132B(1)(i) provide that seized assets may
  be adjusted against any existing liability under
  the IT Act, WT Act, Expenditure-tax Act, Gift-tax
  Act and Interest-tax Act and the amount of
  liability determined on completion of assessment
  pursuant to search, including penalty levied or
  interest payable in connection with such
  assessment and in respect of which such person is
  in default or deemed to be in default
• Explanation 2 inserted w.e.f. 01.06.2013
• - for removal of doubts
• - that existing liability doesnt include
  advance tax payable
• Therefore, seized cash can't be adjusted against
  advance tax
• Amendment being clarificatory will have
  retrospective effect.
•  
•  

• Return of Income filed without payment of self-
  assessment tax to be treated as defective return
• Clause (aa) inserted in Explanation to sec.
  139(9) w.e.f. 01.06.2013
• ROI shall be regarded as defective unless tax
  together with interest, if any,
• payable in accordance with provisions of
  section 140A, has been paid on or
• before the date of furnishing of the return.

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• Tax Residency Certificate
• To get the benefit of DTAA, sec. 90(4) 90A(4)
  inserted by FA12 makes submission of TRC as a
  condition for availing the benefit of agreements.
• Finance Bill 2013 proposed to amend these
  section w.r.e.f. A.Y. 13-14 to provide that
  submission of a tax residency certificate is a
  necessary but not a sufficient condition for
  claiming benefits under the agreements
• Provision proposed removed
• In sub sec. (4) of sec. 90, for the words a
  certificate containing such particulars as may be
  prescribed, of his being a resident, the words
  a certificate of his being a resident shall be
  substituted
• Sub sec. (5) inserted to provide that assessee
  shall also provide such other documents
  information as may be prescribed
•  
•  

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• Speculative Transaction
• New Clause (e) inserted in proviso to sec. 43(5)
  w.e.f. A.Y. 14-15
• Provides that an eligible transaction in respect
  of trading in commodity
• derivatives carried out in a recognized
  association shall not be deemed to be a
• speculative transaction
• Commodity Derivative shall have the same
  meaning as assigned to it in
• Chapter VII of FA 2013
• Commodity Derivative means-
• -A contract for delivery of goods which is not a
  ready delivery contract
• -A contract for differences which derives its
  value from prices or indices of prices
• (a) of such underlying goods (b) of related
  service rights such as warehousing
• freight (c) with reference to weather
  similar events activities having a
• bearing on the commodity sector
• Recognized Association means a recognized
  association as referred in clause
• (j) of sec. 2 of Forward Contracts (Regulation)
  Act, 1952 which fulfils such
• condition as may be prescribed and as is
  notified by CG for this purpose.

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THANK YOU Presented by P.C. Parwal ,FCA 5th
Floor, Milestone Building, Tonk Road,
Jaipur E-mail pparwal_at_kalanico.com Cell
98298-88804