India: Round Up Of The Union Budget 2016

In addition to the highlights of the Budget-2016 in our previous issue of Newsletter Vol. IX, Issue III, another round-up of the same is briefed below:

A. Proposals under Direct Taxation laid for promoting Economic Growth:

1. It has been proposed to provide that the noncompete fee received/receivable in relation to not to carry out any profession will be chargeable to tax as an income from business or profession.

2. Where a trust or institution Registered u/s 12AA of the Income-tax Act ceases to be charitable organization, the amount of net asset as on date of such conversion which represents the income accreted to the trust over a period of time shall be charged to an additional income-tax at the maximum marginal rate. Similarly, if on dissolution a charitable trust or institution does not transfer all its assets within one year of dissolution to another charitable organization, the amount of accreted income to the extent not transferred shall be subject to this levy of additional income-tax.

3. The buyback of shares by a company shall mean purchase of its own shares in accordance with relevant provisions of the Companies Act and that the distributed income shall mean, the consideration paid on buyback of shares as reduced by the amount received by the company for issue of such shares to be determined in the prescribed manner.

4. It has been proposed to amend section 139 of the Income-tax Act so as to provide that,-

i. A person shall be required to furnish his return of income if this total income during the previous year without claiming exemption under section 10(38) exceeds the maximum amount which is not chargeable to tax.

ii. A person, who has not furnished a return for any previous year by the due date, may furnish the same before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. He may also revise such return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

iii. A return furnished in response to a notice issued under section142 (1) of the Income-tax Act cannot be revised.

5. Also, the proposal of amending the provisions of the following sections has been proposed:

  • Section 211 of the Income-tax Act to provide that the number of installments and due dates for payment of advance tax in the case of individuals, HUFs, firms, etc. shall be the same as is applicable to companies. It was also proposed that the taxpayer eligible for presumptive taxation scheme under section 44AD of the Income-tax Act shall pay whole amount of advance tax in one installment on or before the 15th March of the financial year.
  • Section 253 of the Income-tax Act has been proposed to be subject to amendment to provide that no appeal shall be filed by the Income-tax Department against the direction of the Dispute Resolution Panel.
  • Section 254 of the Income-tax Act to reduce the time limit for rectifying an order passed by Appellate Tribunal from 4 years to 6 months.
  • Section 281B of the Income-tax Act to provide for revocation of attachment of property in cases where assessee furnishes a Bank Guarantee from a scheduled bank of an amount not less than the fair market value of such property or of an amount sufficient to protect the interest of revenue.
  • Section 147 of the Income-tax Act to provide that a case may be reopened by the Assessing Officer on the basis of information culled out from the data base by the Directorate of Systems indicating that income has escaped assessment.

6. As a step forward in digitization of processes of the Income-Tax Department, it has been decided to provide that notices and documents may be issued by the income tax authorities in electronic form also.

7. With a view to reduce litigation and to collect taxes at the earliest point of time the scope of adjustment has been expanded that can be done at the time of processing of return under sub- Section 143(1) of the Income-tax Act. It has also been proposed that before making an assessment u/s 143(3) of the Act, a return shall be processed u/s 143(1) of the Act.

B. Indirect Taxation

1. Tax proposals- reducing litigation and providing certainty in taxation: Amendment proposed in CENVAT Credit Rules, 2004, to improve credit flow, reduce the compliance burden and associated litigation, particularly those relating to apportionment of credit between exempted and non-exempted final products/services. The amendments in these rules will also enable manufactures with multiple manufacturing units to maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units.

2. Incentivizing domestic value addition under 'Make in India', facility of payment of service tax being extended on receipt basis to 'One Person Company' (OPC) came with effect from 01.04.2016.

3. In order to bring about ease of doing business, with effect from 01.04.2016, number of returns for central excise assessee, above a certain threshold, is being reduced, from 27 to 13, i.e. one Annual and 12 Monthly Returns. The annual return will also have to be filed by service tax assessees, above a certain threshold, taking total number of returns to three in a year for them.

4. Chief Commissioners of Central Excise are being instructed to file application for withdrawing prosecution in cases involving duty less than rupees five lakh and pending for more than fifteen years.

5. The amendment has been brought under the Prevention of Money Laundering Act, 2002, The Smugglers And Foreign Exchange Manipulators (Forfeiture Of Property Act, 1976 And Narcotics Drugs And Psychotropic Substances Act, 1985. Under this, the three Tribunals established under these Acts shall be merged and the Appellate Tribunal established under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the appellate Tribunal for hearing the appeals against the orders made under all these three Acts.

6. Section 14A under the Foreign Exchange Management Act [FEMA], 1999 has been inserted to incorporate provisions contained under the Second Schedule appended to the Income-tax Act, 1961, so as to empower an officer not below the rank of Assistant Director to recover arrears of penalty under the FEMA 1999 by exercising the powers conferred under the Income-tax Act, 1961.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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