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Domestic Tax Policy

Articles, Domestic Tax Policy, Income Tax

REVISED GUIDELINES FOR STAY OF DEMAND AT THE FIRST APPEAL STAGE(PRESS RELEASE DT.03.03.16)

Under the revised guidelines, where the outstanding demand is disputed before Commissioner (Appeals), the Assessing Officer shall grant stay of demand till disposal of first appeal on payment of 15%of the disputed demand.

Any deviation from the standard pre-payment of 15% either requested by the assessee or by the Assessing Officer, shall be decided by the administrative Principal Commissioner or Commissioner, who after considering all relevant facts, shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.

In case the assessee is still aggrieved after the required stay of demand is granted, he may approach to the administrative Principal Commissioner or Commissioner for a review of decision of the Assessing Officer

Articles, Domestic Tax Policy, Income Tax

Certain Transfers to be Void – Sec 281

Situation:

  • Where, during the pendency of any proceeding under this Act or after the completion thereof, but
  • before the service of notice under rule 2 of the Second Schedule,
  • any assessee:
    • creates a charge on, or
    • parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of,
    • any of his assets in favour of any other person,
  • such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise :

Exception:

However, such charge or transfer shall not be void if it is made—

(i)  for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee ; or

(ii)  with the previous permission of the Assessing Officer.

Threshold limit: This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds Rs 5,000 and the assets charged or transferred exceed Rs 10,000 in value.

Note: “Assets” means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee.

 

By

Divakar Vijayasarathy

Articles, Domestic Tax Policy, Income Tax

Taxation of Income of Securitisation Trusts (SIF)

Chapter XIIEA- Sec 115TCA

Taxation of Income Investor – fund enjoys pass through status

Investment income is exempt for a fund u/s 10(23DA)

As applicable for the investor
Nature of Income Same nature and in the same proportion in the hands of the investor as it is for the securitisation trust
Applicability of distribution tax There shall be no distribution tax on incomes distributed by an investment fund
Deemed distribution of income Any investment income of the investment fund, if not paid or credited to the investor shall be deemed to have been credited to the account of the investor on 31st March of the previous year in which he is entitled to receive
Furnishing information to the investor In prescribed Form within prescribed time
Furnishing information to the Principal Commissioner /CIT In prescribed Form within prescribed time

 Note:

Securitisation trust means a trust being a:

  • “Special purpose distinct entity” as defined in Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and regulated under the said regulations; or
  • “Special Purpose Vehicle” as defined in, and regulated by, the guidelines on securitisation of standard assets issued by the Reserve Bank of India, which fulfils such conditions, as may be prescribed.
  • “Trust” set up by a securitisation company or a reconstruction company formed for the purposes of Securitisation and Reconstruction of Financial assets and Enforecement of Security Interest Act 2002 or in pursuance of any guidelines or directions issued for the said purposes by the Reserve Bank of India.

Any income which has been included in total income of the investor in a previous year, on accrual basis, shall not be included in the total income of such person in the previous year in which such income is actually paid to him by the investment fund

Articles, Domestic Tax Policy, Income Tax

Relief to certain charitable institutions or funds in respect of certain dividends

Chapter XVIII- Sec 236A

Eligibility for Relief – Sec 236A(1)

  • Where 75% of the share capital of any company is
  • throughout the previous year
  • beneficially held by an charitable institution which is exempt u/s 11,
  • credit shall be given to the institution or fund against the tax, if any, payable by it,
  • of a sum calculated u/ss (2),
  • in respect of its income from dividends (other than dividends on preference shares) and
  • where the amount of credit so calculated exceeds the tax, if any, payable by the said institution or fund, the excess shall be refunded.

Quantum of tax credit – Sec 236A(2)

Tax credit = Tax payable by Co* Dividends received by trust/ Total dividends distributed by Co

Permissible Modes of Investment by a Charitable Trust – Sec 11(5) read with Rule 17C

(i) investment in savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government;

(ii) deposit in any account with the Post Office Savings Bank;

(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank).

(iv) investment in units of the Unit Trust of India

(v) investment in any security for money created and issued by the Central Government or a State Government;

(vi) investment in debentures issued by, or on behalf of, any company or corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government;

(vii) investment or deposit in any public sector company:

Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,—

(A) such investment made in the shares of such company shall be deemed to be an investment made under this clause for a period of three years from the date on which such public sector company ceases to be a public sector company;

(B) such other investment or deposit shall be deemed to be an investment or deposit made under this clause for the period up to the date on which such investment or deposit becomes repayable by such company;

(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and which is eligible for deduction u/s 36(1)(viii);

(ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction u/s 36(1)(viii)

(ixa) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India.
(x) investment in immovable property.
Explanation.—”Immovable property” does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;
(xi) deposits with the Industrial Development Bank of India

(xii)        any other form or mode of investment or deposit as may be prescribed in Rule 17C:

(i)   investment in the units issued under any scheme of the mutual fund referred u/s 10(23D)
(ii)   any transfer of deposits to the Public Account of India
(iii)   deposits made with an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;
(iv)   investment by way of acquiring equity shares of a depository
(v)   investment made by a recognised stock exchange in the equity share capital of a company:

(A)    which is engaged in dealing with securities or mainly associated with the securities market;

(B)    whose main object is to acquire the membership of another recognised stock exchange for the prescribed purpose and

(C)    in which at least fifty-one per cent of equity shares are held by the investor and the balance equity shares are held by members of such investor;]

(vi)         investment by way of acquiring equity shares of an incubatee by an incubator.

(vii)        investment by way of acquiring shares of National Skill Development Corporation;]

(viii)       investment in debt instruments issued by any infrastructure Finance Company registered with the Reserve Bank of India

(ix)         investment in “Stock Certificate” as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015

Articles, Domestic Tax Policy, Income Tax

Taxation of Alternate Investment Funds (AIF)

Chapter XIIFB- Sec 115UB

Taxation of Income Nature of Income Taxable Entity/Person Rate of tax
Investment income Investor – fund enjoys pass through status

Investment income is exempt for a fund u/s 10(23FBA)

As applicable for the investor
Business income Investment fund If fund is a company or firm – rates as per Finance Act

 

Any other case – maximum marginal rate

Loss (prior to Sec 10(23FBA) –          such loss shall be allowed to be carried forward and it shall be set-off by the investment fund in accordance with the provisions of Chapter VI; and

–          the investor shall not be eligible to set off such loss

Applicability of distribution tax There shall be no distribution tax on incomes distributed by an investment fund
Deemed distribution of income Any investment income of the investment fund,if not paid or credited to the investor shall be deemed to have been credited to the account of the investor on 31st March of the previous year in which he is entitled to receive
Furnishing information to the unitholder/investor On or before 30th June in Form 64C
Furnishing information to the Principal Commissioner /CIT On or before 30th Nov in Form 64D

 

Note:

“Investment fund” means any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992)

Any income which has been included in total income of the investor in a previous year, on accrual basis, shall not be included in the total income of such person in the previous year in which such income is actually paid to him by the investment fund

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