By TIOL News Service

NEW DELHI, DEC 21, 2013: WITH the year ending in a few days, the CBDT has come out with the highlights of the steps taken by the CBDT in the last one year.

Following specific legislative measures have been taken over a period of time, namely:-

a. Transactions in immovable properties are usually undervalued and underreported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, Tax Deduction at Source (TDS) at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds Rs.50 lakhs, has been introduced. However, agricultural land is exempt from this provision.

b. Closely held companies, which receive funds from shareholders, are required to prove the source of money in the hands of such shareholders for the sum to be accepted as genuine credit. Also, s hare premium received by a company, not being a company in which the public are substantially interested (subject to certain exceptions), from a resident person in excess of the fair market value may be liable to tax.

c. In order to curb the practice of introducing unaccounted money provision has been made in the Income-tax Act, 1961 to tax unexplained credits, money, investment, expenditure, etc., at the maximum marginal rate i.e., 30% plus surcharge and cess as applicable (rather than at the marginal tax rate of the individual after allowing basic exemption of Rs. 2 lakhs) and that no deduction in respect of any expenditure or allowance shall be allowed in computing deemed income under the said sections of the Income-tax Act.

d. It is now mandatory for every resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India to file a return of income giving details of the foreign assets, irrespective of the fact whether such resident taxpayer has taxable income or not.

e. Penalty provisions on undisclosed income found during the course of a search have been strengthened. Prosecution mechanism has also been strengthened under the Income-tax Act by – ( i ) providing for constitution of Special Courts for trial of offences; (ii) application of summons trial for some of the offences under the Act to expedite prosecution proceedings as the procedures in a summons trial are simpler and less time consuming; and (iii) providing for appointment of public prosecutors.

f. A new tax called commodities transaction tax (CTT) is levied on taxable commodities transactions entered into recognised commodity exchanges/associations. The new tax is levied @ 0.01 per cent on the seller on sale of commodity derivatives.

g. With a view to attract investment in long term infrastructure bonds in foreign currency, the rate of tax on interest paid to non-resident investors who invest in such bonds during the period 1.07.2012 to 30.06.2015 has been reduced from 20 percent to 5 percent. The rate of tax has also been reduced on interest paid during a two year period starting 1 st June, 2013 to 31.05.2015 to a Foreign Institutional Investor (FII) or a Qualified Foreign Investor (QFI) in respect of investment in rupee denominated corporate bonds of an Indian company and Government securities.

h. In order to encourage repatriation of funds from overseas companies, a concessional rate of tax of 15 percent has been introduced for the period 01.04.2011 to 31.03.2014 on dividend received by an Indian company from its foreign subsidiary. Further, the Indian company shall not be liable to pay dividend distribution tax on the distribution to its shareholders of that portion of the income received from its foreign subsidiary subject to fulfilment of certain conditions.

i. In order to facilitate financial institutions to securitise their assets through a special purpose vehicle, Securitisation Trust has been exempted from income tax. Tax shall be levied only at the time of distribution of income by the Securitisation Trust at the rate of 30 percent in the case of companies and at the rate of 25 percent in the case of an individual or HUF. No further tax will be levied on the income received by the investors from the Securitisation Trust.

j. Considering the shortage of skilled manpower in the manufacturing sector and to generate employment, weighted deduction have been provided at the rate of 150 per cent of expenditure incurred on skill development in manufacturing sector in accordance with specified guidelines. Similarly weighted deduction of 150 per cent has also been provided on expenditure incurred for agri -extension project in order to facilitate growth in the agriculture sector.

While the Government has successfully implemented the above mentioned provisions as part of the taxation regime, in case of the following two legislative issues, the Government has already taken various steps and both are moving towards their finality:

The Direct Taxes Code Bill, 2010

Direct Taxes Code Bill, 2010 was introduced in Lok Sabha on 30 th August, 2010 during the Monsoon Session, 2010 of the Parliament. Lok Sabha had referred the Bill to the Standing Committee on Finance for its examination/consideration. The Standing Committee submitted its report (49 th Report) to the Speaker, Lok Sabha on 9 th March, 2012. Having considered the recommendations of the Committee, a note for the Cabinet for withdrawal of DTC Bill, 2010 and introduction of DTC Bill, 2013 was sent on 20 th August, 2013 to the Cabinet Secretariat for placing it before the Cabinet. Approval of the Cabinet is awaited.

The Benami Transactions (Prohibition) Bill, 2011

The Government has introduced a new Bill, namely the Benami Transactions (Prohibition) Bill, 2011 (Bill No. 56 of 2011) in Parliament ( Lok Sabha ) on 18 th August, 2011. This Bill proposes to replace the existing Benami Transactions (Prohibition) Act, 1988. The Bill was referred to the Standing Committee on Finance by Lok Sabha for examination. The Report has been submitted by the Standing Committee in June, 2012. The Report is being examined in the Ministry in light of the recommendations of the Standing Committee. Amendment(s), if any, will be placed before the Parliament for its consideration.