Sec.68 Presently the section provides that
where the assessee does not provide/or provides unsatisfactory
explanation to any sum credited in the books of the assessee for
any previous year, then the sum so credited may be charged to
income tax as income of the previous year. Now, the following two
provisos are proposed to be inserted:
(i) Where the assessee is a Pvt. Ltd. Co. and the sum credited
consists of share application money, share premium, share capital
etc., any explanation provided by the assessee shall be deemed to
be unsatisfactory unless
(a) The person in whose name the credit appears offers
explanation of the nature and source of the sum,
(b) The AO finds such explanation satisfactory.
(ii) This shall not apply to Venture Capital Funds.
DOUBLE TAX AVOIDANCE AGREEMENTS (DTAA)
DTAA Overridden By GAAR: Sec. 90
Sec. 90(2A): Sec. 90(2) provides that where
both, the provisions of Income-tax Act, 1961 and DTAA, are
applicable to an assessee, the assessee may choose the provisions
which are more beneficial to him. This clearly meant that if an
assessee chose, the provisions of DTAA could prevail over the
provisions of the tax act.
However, a new sub-Sec. (2A) is proposed to be inserted whereby
GAAR provisions contained in chapter X-A of the Act will be
applicable regardless of the fact that such provisions are not
beneficial to the assessee. Therefore, the GAAR provisions would
prevail over the provisions of the DTAA.
Such provisions would in a large way impact the non-residents
enjoying the treaty benefits, specifically from countries such as
Mauritius, Singapore, Cyprus etc and may subsequently affect FDI
Certificate of residence to get benefit under the treaty
Sec. 90(4): The proposed new sub-Sec. (4),
w.e.f. 1st April, 2013 provides that a non resident will be
entitled to claim relief under the provisions of DTAA only if a
certificate of residency is obtained by the assessee from the
Government of the country of residence.
These provisions will complicate the procedure and are
unnecessary as in any case a certificate of residency would not be
taken to be the conclusive proof of residence to avoid GAAR
provisions, in order to enjoy the benefit of the treaty.
Similar amendments as above are also to be made to Sec.
90(A)(2A)and Sec. 90A(4) which give power to specified association
to enter into DTAAs.
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Cummins Inc. is a foreign company, rendering services in respect of desktop/laptop software license and internet mail facilities to its Indian associated enterprises, i.e. CIL and CSSL which were paying IT charges provided by the taxpayer.
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