Government discussing suggestions of stakeholders to modify Direct Tax Code: FM

Saturday, November 7, 2009 12:54 AM By Livemail


PIB Press Release No BSC/KP/366/09, dated 5-11-2009

Government would make all efforts to meet the aspirations and expectations of the taxpayers and the corporate sector before finalisation of the Direct Tax Code.  The next steps in this  direction  would  be taken only after a comprehensive review of the draft Direct Tax Code by taking on board the suggestions received.  This was stated by the Finance Minister, Shri  Pranab Mukherjee while addressing the first newly constituted Parliamentary Consultative Committee attached  to his ministry  here yesterday.  He said we are trying to bring the new taxation regime, which can last for another 50 years.  Therefore, our endeavor is to see that new taxation system should include the basic features and time tested procedures of existing act, which have survived judicial security over the years, he added.

Shri Mukherjee said that he has started discussions within the Central Board of Direct Taxes on the suggestions received so far.  The outcome of the discussion would be used for modifying the proposals contained in the draft Direct Tax Code.

The Finance Minister said while the initial reaction has been very encouraging, more detailed examination and interaction with stakeholders is throwing up some areas of concern.  On the basis of interactions with the stakeholders, Government  has identified nine critical areas for further detailed examination.  These relate to  (i) The concept of Minimum Alternative Tax (MAT) based on gross assets;  (ii) Capital Gains Taxation in the case of non-residents; (iii) The Income Tax Act and the Double Taxation Avoidance Agreement (DTAA); (iv) General Anti-Avoidance Rule (GAAR); (v) Issues relating to effective management control and taxation of foreign companies in India; (vi) Taxation of charitable organizations;  (vii) Shift from EEE to EET taxation system;  (viii)Taxation of income from house property in case of Self-Occupied Property (SOP) by the individual; and (ix) Taxation in case of salaried class employees.

Shri. Mukherjee informed the meeting that the draft Tax Code has following new features:

(i)         The rate of slabs for personal income tax in the case of individuals are as under:

 Rs. 1.6 lakh to Rs. 10 lakh                    10%

Rs. 10 lakh to Rs. 25 lakh                     20%

More than Rs. 25 lakh  30%

This proposed slab rates for personal Income Tax would put more money in the hands of consumers;

 (ii)        The rate for Corporate tax for companies is 25%;

 (iii)       Proposal for advance pricing agreement in respect of arm's length in relation to an international transaction.  The Advance Pricing Agreement (APA) will provide certainty in cross border transactions with taxpayer and it will facilitate in investments in India.  Industry has been demanding for introduction of APA in India for quite some time.  This proposal is in line with the best global practices adopted by many countries across the globe.

 (iv)         Rationalization of deductions and exemptions for streamlining the administrative processes and also to reduce the rent seeking behavior and

 (v)        Proposal for General Anti Avoidance Rules (GAAR) to check the treaty misuse by the third party residents.

Shri. Mukherjee said that it has been our endeavour to incorporate the best practices prevailing across the globe and to use innovative methods for attaining equity—vertical and horizontal, ensure growth with sustainability, create stable fiscal eco-system and have well regulated free markets in the Draft Tax Code. We want to present the stakeholders with a tax regime which is simple and broad based leading to lowering of tax rates, better tax compliance, reduced litigation certainty and stability in taxation system, added the Finance Minister.

The meeting was attended by S/Shri Shantaram Naik, Rahul Bajaj, Rajeev Chandrasekhar, Sabir Ali, Mukut Mithi, Rajeev Shukla, N.K. Singh, and Tariq Anwar - members of  Rajya Sabha  and  S/Shri Narahari Mahato,  Partap Singh bajwa,  Bhausaheb Rajaram,  Vijay Inder Singla, Mukesh B. Gadhvi, Arvind Kumar Chaudhary  Natubhai Gomanbhai Patel,  Suresh C. Angadi,  Prabhat Singh Chauhan, T.R. Ballu, and  Smt. Rajkumari Ratna Singh - member of Lok Sabha.  Minister of State for Finance Shri  S.S. Palanimanickam, Revenue Secretary, Expenditure Secretary, Disinvestment secretary and  other senior officers the ministry attended the meeting..

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CIT vs. Dr. P. S. Pasricha (Bombay High Court)

Friday, November 6, 2009 5:59 PM By Livemail

S. 54 relief allowable even if new house purchased from borrowed funds

 

S. 54 provides that if an assessee has LTCG on transfer of a residential house and he purchases or constructs a residential house within the specified period then the amount appropriated towards the new house shall be deducted from the LTCG. The assessee sold a house and used the sale proceeds to buy commercial property. Subsequently (but within the specified period) he borrowed funds and purchased a new house. The AO denied deduction u/s 54 on the ground that the new house had been purchased out of borrowed funds and not out of the consideration received for the old house. On appeal, the Tribunal and High Court upheld the claim on the ground that s. 54 merely required the purchase of the new house to be within the specified period. The source of funds for the purchase was irrelevant.


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ITAT Special Bench judgement on indexed cost

5:46 PM By Livemail

DCIT vs. Manjula Shah (ITAT Mumbai Special Bench)


Indexed cost of gifted assets has to be determined with reference to previous owner

 

The assessee transferred a capital asset which was received by her by way of gift on 1.2.2003. The previous owner had acquired the capital asset on 29.1.1993. In computing capital gains, the assessee claimed that the indexed cost of acquisition had to be worked out by taking the date of acquisition by the previous owner. The AO rejected the claim though the CIT (A) accepted it. On appeal by the Revenue, the issue was referred to the Special Bench. HELD by the Special Bench:

 

(i) Explanation (iii) to s. 48 defines the term "indexed cost of acquisition" to mean the amount which bears to the cost of acquisition the same proportion as the …. Cost Inflation Index for the first year in which the asset was held by the assessee …" A literal reading of the provision suggests that one has to go by the year in which the asset was held by the assessee. However, this would be inconsistent with the scheme of the Act as reflected in the definition of "short-term capital asset" in Expl. 1(b) to s. 2 (42A) which provides that the period for which the asset was held by the previous owner also has to be taken into account. It is not logical that the cost of acquisition and the period of holding is determined with reference to the previous owner and the indexation factor is determined with reference to the date of acquisition by the assessee. Such an interpretation will lead to absurdity and unjust results and defeat the purpose of the concept of 'indexed cost of acquisition'. In accordance with the principles of purposive interpretation of statutes, Expl. (iii) to s. 48 has to be read to mean that the indexed cost of acquisition has to be computed by taking into account the period for which the asset was held by the previous owner.

 

Kishore Kanugo 102 ITD 437 (Mum) is reversed while Meena Devgan 117 TTJ 121 (Kol) and Pushpa Sofat 81 ITD 1 (Chd) (SMC) are approved.

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{Ca+Cma+Cs Friends} RE: Donation by Charitable trust out of India

Monday, November 2, 2009 9:07 PM By Livemail

 

Dear Friends,
 
Further to below mentioned quarry, as per proviso to section 11(1)(c) of IT act, 1961, "provided that the Board by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income"
 
Members are requested to kindly share the special or general order issued by CBDT in respect of proviso to section 11(1)(c) of the IT Act, 1961 or the list of countries to whom donation can be made by a charitable or religious trust and same shall be treated as application of the income of the trust for the objects of the that trust.
 

With best regards,

CA  brajesh agarwal

09818623388 (m)

 


From: Brajesh Agarwal
Sent: Wednesday, September 16, 2009 2:05 PM

Dear Friends,

 

Under section 11 of the Income tax act, if a charitable trust make a donation to another charitable in India trust then the amount of donation is treated as application of funds.

 

However if a charitable trust in India donates to another charitable trust outside India, then whether such donation shall also be treated as application of funds or not.

 

Members are requested to share their views on the above together with decided case law, notification of circular which support their views.

 

With best regards,

CA  brajesh agarwal

09818623388 (m)

 

 

 

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