Budget 2012 2013 Analysis


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Budget 2012-13

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Budget 2012 2013 Analysis

  1. 1. adding value with quality and commitmentIndiaBudget 2012 Analysis www.taxpertpro.com www.taxpertpro.com/budget2012
  2. 2. INDEX:. Introduction 2 Chapter 1 3 Direct Tax Chapter 2 9 Indirect Tax Chapter 3 15 International Tax Chapter 4 23 Sector InitativeThis publication is intended as a service to clients and to provide clients with the details of the Budget proposals for the year 2012-13.It has been prepared for general guidance on matters of interest only, and does not constitute professional advice. No person should act upon the information contained in thispublication without obtaining specific professional advice. Further information and assistance may be obtained from any of the offices listed in the publication. No representation orwarranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, Taxpert Professionals , its members, employees andagents accept no liability, and disclaim all responsibility, for the consequences of any person acting, or refraining to act, in reliance on the information contained in this publication or forany decision based on it.© 2012 Taxpert Professionals Private Limited. All rights reserved. Taxpert Professionals.
  3. 3. IntroductionFor Indian economy, recovery was interrupted this year due Some important changes in the Income Tax Act,1961 isto intensification of debt crises in Euro zone, political rationalization of tax deduction at source and tax collectionturmoil in Middle East, rise in crude oil price and earthquake at source provisions, an attempt by Government to curb thein Japan. GDP is estimated to grow by 6.9 per cent in 2012- generation and circulation of Black money by introducing13, after having grown at 8.4 per cent in preceding two the tax on unexplained share premium account, wideningyears. India however remains front runner in economic of tax base .growth in any cross-country comparison. Monetary andfiscal policy response for better part of past 2 years aimed at Government has further evolved its approach to divestmenttaming domestic inflationary pressure. Growth moderated of Central Public Sector Enterprises by allowing them a leveland fiscal balance deteriorated due to tight monetary playing field vis-à-vis the private sector in respect ofpolicy and expanded outlays. Twelfth Five Year Plan to be practices like buy backs and listing at stock exchanges. Coallaunched with the aim of "faster, sustainable and more India Limited advised to sign fuel supply agreements withinclusive growth". Five objectives identified to be addressed power plants, having long-term PPAs with DISCOMs andeffectively in ensuing fiscal year. If India can build on its getting commissioned on or before March 31, 2015.Foreconomic strength, it can be a source of stability for world 2012-13, `30,000 crore to be raised through disinvestmenteconomy and a safe destination for restless global capital. Legislative ReformsThe Union budget 2012-13 comes in background of 6.9% ofeconomic growth in GDP with manufacturing and services Ÿ ·Official amendment to "The Pension Fund Regulatorysector continuing to be twin engines of growth. With and Development Authority Bill, 2011", "The Bankingelection looming in the horizon loss of congress in state Laws (Amendment) Bill, 2011" and "The Insurance Lawelections this budget was not expected to be very bold (Amendment) Bill, 2008" to be moved in this session.anyways. · Ÿ Various Bills proposed to be moved in the BudgetWith a planned expenditure for 2012- 13 at INR 5,21,025 session of the Parliament to take forward the process ofCrore higher than Budgeted expenditure for 2011-12 by financial sector legislative reforms.18% the government intends to achieve inclusive growththrough its proposals. Ÿ Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.A very welcome step is introduction of General AntiAvoidance rules and Advance pricing Agreements. Ÿ DTC rates proposed to be introduced for personalAlthough the implementation of major reforms like GST income tax.and DTC have been again deferred yet the introduction ofGAAR and APAs indicates the willingness of government tomove towards international mechanism. 2 Taxpert Professionals Private Limited • India Budget 2012
  4. 4. Chapter 1Direct Taxes3 Taxpert Professionals Private Limited • India Budget 2012
  5. 5. Direct Tax Ÿ ·Section 80C of the Income-tax Act provides that inThe proposals in the Union Budget 2012-2013 have major computing the total income of an assessee, being anelements relating to lowering the burden on individual tax, individual or an HUF, a deduction of up to one lakhstreamlining tax administration processes, enhancing rupees for life insurance premia. The existing provisionsresearch and development, lowering cascading effect of contained in section 80C (3) provide that the deductionDDT and introduction of GAAR and APAs, enhancing the for life insurance premium shall be allowed for only soscope of international transaction. much of any premium or other payment made on an insurance policy as is not in excess of 20% of the actualPersonal Taxation capital sum assured.Individual, Hindu Undivided Family, Association of Persons, Ÿ ·It is proposed to amend the provisions to provide thatBody of Individuals, Artificial Juridical Person the deduction for life insurance premium as regards insurance policies issued on or after 1st April, 2012 shallThe rates of income-tax in the case of Individual or Hindu be allowed for only so much of the premium payable asUndivided Family or Association of Persons or Body of does not exceed 10% of the actual capital sum assured.Individuals, whether incorporated or not, or every artificialjuridical person is as follows: - Ÿ ·It is proposed to amend deduction under Section 80D to include any payment made uptp Rs. 5000/- by anMonetary Limits (2011 – 2012) Monetary Limits (2012 – Tax Rates 2013) assessee on account of preventive health check-up ofUpto Rs.1,80,000*/1,90,000** Upto Rs. 2,00,000*** Nil self, spouse, dependant children or parents(s).Rs.1,80,001/1,90,001 to Rs. 5,00,000 Rs. 2,00,001 to Rs.5,00,000 10%Rs.5,00,001 to Rs.8,00,000 Rs.5,00,001 to Rs.10,00,000 20%Above Rs.8,00,001 Above Rs.10,00,001 30%*Stands for Individual Man**Stands for Individual Women*** Exempted slab rate applicable to both men and womenThe basic exemption limit for Senior Citizens is same asINR 2,50,000ŸExemption has been given to Senior citizens not havingbusiness/professional income from payment of advance tax.Ÿ·Reduction of the eligible age for senior citizens for certaintax reliefs from from sixty-five years of age to sixty years forthe purposes of application of various tax slabs and rates oftax under the Income Tax Act, 1961ŸA new section have been introduced Section 80TTA underwhich a deduction up to an extent of ten thousand rupees inaggregate shall be allowed to individual or a Hinduundivided family, in respect of any income by way of intereston deposits (not being time deposits) in a savings account.ŸUnder the existing provisions contained in section 10(10D)of the Income-tax Act, any sum received under a lifeinsurance policy, including the sum allocated by way ofbonus on such policy, is exempt. For this purpose, it isnecessary that the premium payable for any of the yearsshall not exceed 20% of the actual capital sum assured. It isproposed to reduce the threshold of premium payable to10% of the actual capital sum assured from 20% of the actualcapital sum assured. 4 Taxpert Professionals Private Limited • India Budget 2012
  6. 6. Direct Tax Measures to Prevent Generation and Circulation of Unaccounted MoneyCorporate Sector Taxation In the present budget, it is, proposed to amend section 68 ofThe rates of income tax in case of Company, Co – Operative the Act to provide that the nature and source of any sumsocieties, Firms, Local authorities are same as rate applicable credited, as share capital, share premium etc., in the books offor the Assessment year 2012 – 2013 a closely held company shall be treated as explained only if the source of funds is also explained by the assesseeEducation Cess: company in the hands of the resident shareholder.For assessment year 2012-13, the “Education Cess on In order to curb the practice of laundering of unaccountedincome-tax” and “Secondary and Higher Education Cess money by taking advantage of basic exemption limit, it ison income-tax” shall continue to be levied at the rate of two proposed to tax the unexplained credits, money,per cent. and one per cent. investment, expenditure, etc., which has been deemed as income under section 68, section 69, section 69A, sectionSurcharge: - 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed toThe existing surcharge of five per cent in case of a domestic provide that no deduction in respect of any expenditure orcompany shall continue to be levied. In case of companies allowance shall be allowed to the assessee under anyother than domestic companies, the existing surcharge of provision of the Act in computing deemed income under thetwo per cent shall continue to be levied on the total Income said sections.Exceeding INR 1Crore. Effective from: - 1st April 2013;Alternate Minimum Tax Widening Tax Base:Under the existing provisions of the Income-tax Act,Minimum Alternate Tax (MAT) and Alternate Minimum Tax Following provisions has been introduced to widen the tax(AMT) are levied on companies and limited liability base:partnerships (LLPs) respectively. I) TDS should be deducted from payment of remuneration toProvision of AMT have been made applicable of all person the director;other than Company where the Adjusted Total Income ofsuch person exceed twenty lakh rupees. ii) The seller of bullion and jewellery shall collect tax at the rate of 1% of sale consideration from every buyer of bullionThese amendments will take effect from 1st April 2013 and jewellery if sale consideration exceeds two lakh rupees; iii) TDS @ 1% on consideration amount should be deducted on transfer of immovable property if value of consideration exceeds: - (a) Fifty lakh rupees in case such property is situated in a specified urban agglomeration ; or; b)Twenty lakh rupees in case such property is situated in any other area. Share premium in excess of the fair market value to be treated as income It is proposed to insert a new clause in section 56(2).According to it if the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income tax under the head “Income from other sources. Further the source of income should also be explained by the investors Effective from: 1st April 2013 5 Taxpert Professionals Private Limited • India Budget 2012
  7. 7. Direct Tax Turnover or gross receipts for audit of accounts and presumptive taxationTax Incentive for funding of certain infrastructure sectors Threshold limit of total sales,Section 115A of the Income Tax Act provides that anyinterest income received by any non-resident from the Business turnover or gross receipts increased from 60 Lakhs to 1 CroreGovernment or an Indian concern shall be taxable at the rateof 20% on the gross amount of such interest income. The Threshold limit of total sales,interest income received by a non-resident from a notifiedInfrastructure Debt Fund (IDF) is taxable at a reduced rate of Profession turnover or gross receipts increased from 15 Lakhs to 25 Lakhs5% on gross amount of such interest income.Effective from: 1st July 2012Weighted deduction for scientific research and Effective Date :- 1st April, 2013.development Relief from long-term capital gains tax on transfer ofUnder the existing provisions of Section 35(2AB) of the residential property if invested in a Manufacturing small orIncome-tax Act, a company is allowed weighted deduction medium enterpriseat the rate of 200% of expenditure (not being in the nature ofcost of any land or building) incurred on approved in-house New section 54GB has been inserted, the Government hadresearch and development facilities. These provisions are announced National Manufacturing Policy (NMP) in 2011,not applicable in respect of any expenditure incurred by a one of the goals of which is to incentivize investment in thecompany after 31st March, 2012. Small and Medium Enterprises (SME) in the manufacturing sector. It is proposed to insert a new section 546B so as toIn order to incentivize the corporate sector to continue to provide rollover relief from long term capital gains tax to anspend on in-house research, it is proposed to amend this individual or an HUF on sale of a residential property (housesection to extend the benefit of the weighted deduction for or plot of land) in case of re-investment of sale considerationa further period of five years i.e. up to 31st March, 2017. in the equity of a new start-up SME company in the manufacturing sector which is utilized by the company forEffective from: - 1st April, 2013 the purchase of new plant and machinery.Weighted deduction for expenditure incurred on The relief would be available in case of any transfer ofagricultural extension project residential property made on or before 31st March, 2017New section 35CCC has been introduced because, Effective from 1st April, 2013agricultural extension services play a critical role inenhancing the productivity in the agricultural sector. Inorder to incentivize the business entities to provide better Reduction in the rate of Securities Transaction Tax (STT)and effective agriculture extensive services, it is proposed toinsert a new provision in the Income-tax Act to allow Section 98 defines the Securities Transaction Tax (STT) onweighted deduction of 150% of the expenditure incurred on transactions in specified securities . It is proposed to reduceagricultural extension project. The agricultural extension STT in Cash Delivery segment from the existing 0.125% toproject eligible for this weighted deduction shall be notified 0.1%. The proposed new rates along with details of old ratesby the Board in accordance with the prescribed guidelines. are given in the following table.Effective from:- 1st April, 2013Weighted deduction for expenditure for skilldevelopmentNew section 35 CCD has been introduced to encourage theprivate sector to set up their own institutions, thegovernment will provide weighted standard deduction of Sl.No. Nature of taxable securities Payable by Existing Rates % Proposed rates%150% of the expenditure (other than land or building) transactionincurred on Public Private Partnership (PPP) project for skill 1 Delivery based purchase of equity Purchaser 0.125 0.1development in the ITIs in manufacturing sector in separate shares in a company/ units of anfacilities in coordination with NSDC. equity oriented fund entered into through a recognized stock exchange in India. 2 Delivery based sale of equity Seller 0.125 0.1 shares in a company / units of an equity oriented fund entered into through a recognized stock exchange in India.6 Taxpert Professionals Private Limited • India Budget 2012
  8. 8. Direct Tax Provisions relating to Venture Capital Fund (VCF) or Venture Capital Company (VCC). Extant Provision : Section 10(23FB) grants exemption in respect of income of such VCF/VCC in case investment is made by such VCC/VCF in unlisted shares of a domestic company, i.e. a Venture Capital Undertaking (VCU) in nine specified business. Section 115U ensures that income, in the hand of the investor through VCF/VCC is taxed in like manner and to the same extent as if the investment was directly made by investor in the VCU. Further, TDS provisions are not applicable to any payment made by the VCF to its investor and payment by VCC to the investor is exempted from Dividend Distribution Tax (DDT).The working of VCF, VCC or VCU are regulated by SEBI and RBI. (I) The venture Capital undertaking shall have same meaning as provided in relevant SEBI regulations and there would be no sectoral restriction. (ii) Income accruing to VCF/ VCC shall be taxable in the hands of investor on accrual basis with no deferral. (iii) VCF/ VCC shall be required to deduct TDS while payment to investors. Effective from: - 1st April, 20137 Taxpert Professionals Private Limited • India Budget 2012
  9. 9. Direct Tax Disallowance of business expenditure on account of non- deduction of tax on payment to resident payeeDeduction in respect of capital expenditure on specifiedbusiness A related issue to the above is the disallowance under section 40(a)(ia) of certain business expenditure like interest,It is proposed to include three new businesses* along with commission, brokerage, professional fee, etc. due to non-the existing businesses** as “specified business” for the deduction of tax. It has been provided that in case the tax ispurposes of the investment-linked deduction under section deducted in subsequent previous year, the expenditure shall35AD, namely:- be allowed in that subsequent previous year of deduction.(a) setting up and operating an inland container depot or a In order to rationalize the provisions of disallowance oncontainer freight station notified or approved under the account of non-deduction of tax from the payments madeCustoms Act, 1962 (52 of 1962); to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the(b) bee-keeping and production of honey and beeswax; and nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an(c) setting up and operating a warehousing facility for assessee in default under section 201(1)on account ofstorage of sugar. payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that theThe dates of commencement of the “specified business” assesse has deducted and paid the tax on such sum on theare detailed in section 35AD (5). It is proposed that the date date of furnishing of return of income by the resident payee.of commencement of operations for availing investmentlinked deduction in respect of the three new specified These beneficial provisions are proposed to be applicablebusinesses shall be on or after 1st April, 2012. only in the case of resident payee.*100% deduction of capital expenditure under section 35AD Effective from 1st April, 2013of the Income Tax Act**150% deduction of capital expenditure under section Fee and penalty for delay in furnishing of TDS/TCS35AD of the Income Tax Act Statement and penalty for incorrect information in TDS/TCS StatementEffective from : 1st April, 2013 In order to provide effective deterrence against delay in furnishing of TDS statement, it is proposed –RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS)AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS (I) to provide for levy of fee of Rs.200 per day for late furnishing of TDS statement from the due date of furnishingDeemed date of payment of tax by the resident payee of TDS statement to the date of furnishing of TDS statement. However, the total amount of fee shall not exceed the totalUnder the existing provisions of Chapter XVII-B of the amount of tax deductible during the period for which theIncome-tax Act, a person is required to deduct tax on certain TDS statement is delayed, andspecified payments at the specified rates if the paymentexceeds specified threshold. In case of non-deduction of tax (ii) to provide that in addition to said fee, a penalty rangingin accordance with the provisions of this Chapter, he is from Rs.10,000 to Rs.1,00,000 shall also be levied for notdeemed to be an assessee in default under section 201(1) in furnishing TDS statement within the prescribed time.respect of the amount of such non-deduction. In order to discourage the deductions to furnish incorrectHowever, section 191 of the Act provides that a person shall information in TDS statement, it is proposed to provide thatbe deemed to be assessee in default in respect of non/short a penalty ranging from Rs.10,000 to Rs.1,00,000 shall bededuction of tax only in cases where the payee has also levied for furnishing incorrect information in the TDSfailed to pay the tax directly. Therefore, the deductor cannot statement.be treated as assessee in default in respect of non/shortdeduction of tax if the payee has discharged his tax liability. Consequential amendment is proposed in section 273B so that no penalty shall be levied if the deductor proves thatThe date of payment of taxes by the resident payee shall be there was a reasonable cause for the failure.deemed to be the date on which return has been furnishedby the payer. Effective from 1st July, 2012Amendments on similar lines are also proposed to be madein the provisions of section 206C relating to TCS for clarifyingthe deemed date of discharge of tax liability by the buyer orlicensee or lessee.Effective from 1st July, 2012.8 Taxpert Professionals Private Limited • India Budget 2012
  10. 10. Chapter 2Indirect Taxes9 Taxpert Professionals Private Limited • India Budget 2012
  11. 11. Indirect TaxCentral Excise DutyCentral Excise Duty Rate: Other Products: The standard rate of Central Excise Duty has been enhanced The duty rates of the following products have beenfrom 10% to 12% ad valorem. rationalized:.Product wise Analysis ŸCigarettes and Biris; ŸPan Masala; ŸGutkha; Sr. Item Name Current Proposed Chewing Tobacco; No. Basic Basic Excise Excise ŸZarda Scented Tabacco and unmanufactured tobacco in Rate Rate pouches; 1. Packaged cement manufactured in ŸReadymade Garments, made up articles and textiles; a mini cement plant: (1) of retail sale price not exceeding 10% ad 6% ad ŸFootwear Rs. 190 per 50 KG bag OR of per ton valorem valorem + ŸPrecious metals and jewellery; retail sale price not exceeding Rs. 120 PMT ŸChassis of automobiles and parts of electric/ hybrid vehicles; 3800/- (2) of retail sale price exceeding Rs. 10% ad 6% ad ŸShips, vessels and dredgers, and; 190/- per 50 KG bag or of per ton RSP valorem + valorem + ŸCrude petroleum not exceeding Rs. 3800/- Rs. 30 PMT 120 PMT 2. Packaged cement manufactured in a Complete exemption from excise duty has been providing plant other than a mini cement plant- for the following products: (1) of retail sale price not exceeding 10% ad 12% ad Rs. 190/- per 50 KG bag or of per ton valorem + valorem + retail sale price not exceeding Rs. 80 PMT Rs. 120 ŸSpecified raw materials viz. stainless steel tube and wire, 3800/- PMT ŸCobalt chromium tube; (2) of retail sale price exceeding Rs. 10% ad 12% ad ŸHayness Alloy-25; 190 per 50 KG bag or of per ton Retail valorem + valorem + Sale Price not exceeding Rs. 3800/- Rs. 160 Rs. 120 ŸPolypropylene mesh required for manufacture of Coronary PMT PMT stents/ coronary stent system and artificial heart valve on actual user basis. 3. Cement, not cleared in packed form 10% ad 12% ad valorem valorem ŸRefills and inks in bulk packs (not meant for retail sale) used for 4. Cement Clinker 10% ad 12% ad manufacture of pens of value not exceeding ` 200 per piece; valorem + valorem ŸIntraocular lens Rs. 200 PMT Sr. Item Name Current Proposed Net No. Basic Basic Impact Customs Customs Rate Rate A. Cars having length not exceeding 4 meters 1. Cars having engine capacity not 10% ad 12 % ad 2% exceeding 1200 cc (Petrol, LPG or CNG) valorem valorem increase 2. Engine capacity not exceeding 1500 CC 10% ad 12% ad 2% (Diesel) valorem valorem increase B. Others 1. Engine capacity not exceeding 1500 cc 22 ad 24% Ad 2% valorem valorem increase 2. Engine capacity exceeding 1500 CC 22% + Rs. 27% ad Val Increase 15000 per unit10 Taxpert Professionals Private Limited • India Budget 2012
  12. 12. Indirect TaxGeneralAs per the Finance Minister ther has been considerable progress in preparing a roadmap for the introduction of the Goods andService Tax (GST) with effect from August 2012 enhanced 10% to 12%. Further the rate of Service Tax has also been enhanced from10% to 12 %CustomsCustoms Duty Rate:The peak rate of the Customs is retained at the 10%. Howeverdue to increase of the rate of Central Excise Duty, the rate ofCVD shall also be increased. The effective Customs Rate shallbe 28.85%Product Wise Analysis: Increase.Sr. Item Name Current Proposed NetNo. Basic Basic Impact Customs Customs Rate Rate1. Completely Built Units of Large Car/ 60% 75% 15% MUV/SUV2. Boric Acid 5% 7.5% 2.5%3. Digital Still Cameras Nil 10% 10%4. Flat Rolled Products (HR and CR) of non- 5% 7.5% 2.5% alloy steel5. Standard Gold Bar and Platinum Bars 2% 4% 2%6. Non Standard Gold 2% 4% 2%Product Wise Analysis: Decrease Sr. Item Name Current Proposed Net No. Basic Basic Impact Customs Customs Rate Rate1. Isolated Soya Protein and soya protein 30% 10% 20% concentrate2. Railway Safety Equipment and railway 10% 7.5% 2.5% laying machines3. Machinery and instruments for surveying 10% 7.5% 2.5% and prospecting of mines4. Titanium Dioxide 10% 7.5% 2.5%Other Proposed Amendments:Importers of specified goods need to declare the State ofdestination where the goods are intended to be sold for thefirst time after import and VAT registration number.Effective Date: This requirement is effective from 1st May,2012.Refund of SAD:It is proposed to permit the transfer of unutilized credit of SADto other registered premises of the same manufacturer onquarterly basis.Effective Date: This transfer would be possible from the 1stApril, 2012Baggage Allowance:The limit of duty free baggage allowance is increased from INR25,000/- to INR 35,000/-.The limit of duty free baggage allowance in case of children up11 Taxpert Professionals Private Limited • India Budget 2012
  13. 13. Indirect TaxGoods and Service TaxAs per the speech provided by the Finance Minister, the Negative List of Services:drafting of model GST legislation in concert with States isunder progress. The GST network shall be set up as a National The Union Budget proposes that all services will come underInformation Utility and is expected to become operational by the ambit of Service Tax unless specified in the Negative List orAugust 2012. which are otherwise exempted by a specific exemption notification. Negative List will comprise the list followingNote: It is still very doubtful that within four month period services.the consensus of all state and constitutional amendments shallbe carried out. Interesting to note that Finance Minister has 1. Services by Government or a local authority excluding theconfirmed that a study team to examine the possibility of following services to the extent they are not covered elsewhere—Service Tax (I) Services by the Department of Posts by way ofService Tax is the most preferred subject for the draftsman and speed post, express parcel post, life insurance andlegislators for Budget 2012. The Service Tax legislation has agency services provided to a person otherattained the age of eighteen years this year. On the eve of than Government;attaining age of eighteen, The Finance Ministry has tried torationalize the complete Service Tax law. Following are the (ii) Services in relation to an aircraft or a vessel, insidemajor amendments proposed by Budget, 2012. or outside the precincts of a port or an airport;RATE OF SERVICE TAX: (iii) Transport of goods or passengers; orThe Service Tax rate has been enhanced form 10 % to 12 %. This (iv) Support services, other than services coveredamendment shall be applicable from the 1st Day of April, 2012. under clauses (i) to (iii) above, provided to businessThe effective rate shall be 12.36% (inclusive of Education Cess entities;at the rate of 2% and Secondary and Higher Education Cess atthe rate of 1%). The net government earnings due to increase 2. Services by the Reserve Bank of India;of service tax would be increased by Rs.18,660/- Crore. 3. Services by a foreign diplomatic mission located in India;Consequent to the change of rate of service, followingamendments also been proposed: 4. Services relating to agriculture by way of:Works Contract Services: The composition rate for the works (i) Agricultural operations directly related tocontract services has been increased in proportion to the production of any agricultural produce includingincreased in general rate. The composition rate under the cultivation, harvesting, threshing, plant protectionworks contract scheme is being proposed to increase from 4% or seed testing;to 4.8%. (ii) Supply of farm labour;Services in relation to purchase and sale of foreign currencyincluding money changing: Raising the existing rates (iii) Processes carried out at an agricultural farmproportionately by 20%; including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying,Services of promotion, marketing, organizing or in any manner fumigating, curing, sorting, grading, cooling or bulk | Taxpert Professionals Private Limited • India Budget 2012assisting in organizing lottery: Raising the specified amounts packaging and such like operations which d o n o tproportionately to Rs 7,000 and 11,000. alter the essential characteristics of agricultural produce but make it only marketable for the primaryOther Proposal to amend the Service Tax rate (Specific market;Services): (iv) Renting or leasing of agro machinery or vacantLife insurance service: Where the entire premium is not landwith or without a structure Incidental to itstowards risk cover, the first years premium shall be taxed at the use;rate of three per cent. While subsequent premium shall attracttax at the rate of 1.5 per cent. Availment of full CENVAT Credit is (v)Loading, unloading, packing, storage orbeing allowed. warehousing of agricultural produce;Transport of passengers embarking in India for domestic and (vi) Agricultural extension services;international journey by air: The dual rate structure ofmaximum service tax of INR 150/- and INR 750/- in case of (vii) Services by any Agricultural Produce Marketingeconomy class travel is being replaced by an ad valorem rate of Committee or Board or services provided by atwelve per cent, with abatement of sixty per cent. This commission agent for sale or purchase ofabatement shall be available subject to the condition that no agricultural produce;credit on inputs and capital goods is taken 12
  14. 14. 5. Trading of goods; 15.Service of transportation of passengers, with or without accompanied belongings, by:6. Any process amounting to manufacture or production ofgoods; (i) a stage carriage;7. Selling of space or time slots for advertisements other than (ii) railways in a class other than—advertisements broadcast by radio or television; (A) first class; or8. Service by way of access to a road or a bridge on payment of (B) an air-conditioned coach;toll charges; (iii) metro, monorail or tramway;9. Betting, gambling or lottery; (iv) inland waterways;10. Admission to entertainment events or access toamusement facilities; (v) public transport, other than predominantly for tourism purpose, in a vessel of less than fifteen ton11. Transmission or distribution of electricity by an electricity net; andtransmission or distribution utility; (vi) metered cabs, radio taxis or auto rickshaws;12. Services by way of— 16. Services by way of transportation of goods— (I) Pre-school education and education up to higher secondary school or equivalent; (I) By road except the services of: (ii) Education as a part of a curriculum for obtaining a (A) a goods transportation agency; or qualification recognized by any law for the being in force; (B) a courier agency; (iii) Education as a part of an approved vocational (ii) By an aircraft or a vessel from a place outside India education course; to the first customs station of landing in India; or13. Services by way of renting of residential dwelling for (iii) By inland waterways; use as residence; 17. Funeral, burial, crematorium or mortuary services14. Services by way of— including transportation of the deceased. (I) Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; (ii) inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers;13 Taxpert Professionals Private Limited • India Budget 2012
  15. 15. Indirect TaxExport of Service RuleProvision of service to be qualified as export if following OTHER IMPORTANT PROPOSED AMENDMENTS:requirements have to be fulfilled: The statutory limit of days to raise invoice has been enhancedŸThe Service Provider is located in Taxable Territory. from 14 days to 30 days.ŸService Recipient is located outside India Special audit provision on the similar lines with Central Excise, Commission of Service Tax can now appoint charteredŸService provided is a service other than in the negative list accountant or Cost accountant to provide audit report of the service provider.ŸThe Place of provision of the service is outside India. New Service Tax Return i.e. EST – 1 shall be introduced forŸThe payment is received in convertible foreign exchange. service provider and manufacturer.CENVAT Credit Rules 2004Removal of Capital Goods after being used:A manufacturer or service provider need to pay an amount equal tothe CENVAT Credit taken on capital good reduced by thepercentage points calculated by straight line method for eachquarter of a year or part thereof from the date of taking the CENVATCreditCapital Goods other than computers and commuters peripherals:2.5% for each quarter;Computers and Computer Peripherals: First Year: 10% SecondYear: 8% Third Year: 5% and Fourth and Fifth Year: 1% (onquarterly basis).Refund of CENVAT Credit:Refund provision is being rationalized further. The refund shall bebased on the proportion of extort turnover of goods and servicesand total turnover. The major change is the definition of the Exportturnover.Export Turnover means:Payment received during the relevant period for export services +Export services whose provision has been completed for whichpayment has been received in advance in any period prior to therelevant period – Advance received for export services for whichthe provision of service has not been completed during therelevant period.Transfer of CENVAT Credit:The unutilized CENVAT Credit of Special Additional Duty can betransferred from one registered unit to other registered unit of themanufacturer or service provider.Renting of Immovable Property (Penalty Waived): In view ofJudicial precedent Retailers Association of India Vs. Union ofIndia, it is proposed that penalty may be waived for tax payers whopay the eservice due on the renting of immovable propertyservices within six months from the date of Bill come into force.(Section 80A).Point of Taxation in case of Small Service Provider:Individuals and Partnership Firms who are having service receiptsless than fifty lacs may pay service tax liability on receipt basis.Necessary amendments have been introduced in the Service TaxRules.14 Taxpert Professionals Private Limited • India Budget 2012
  16. 16. Chapter 3International Taxes15 Taxpert Professionals Private Limited • India Budget 2012
  17. 17. International TaxationCompulsory filing of income tax return in relation to assets It is, therefore, proposed to amend the Income Tax Act in thelocated outside India following manner:-Furnishing of Return of Income is made compulsory for every (I) Amend section 9(1)(i) to clarify that the expression throughresident having any asset (including financial interest in any shall mean and include and shall be deemed to have alwaysentity) located outside India or signing authority in any meant and included “by means of”, “in consequence of”account located outside India. Furnishing of return by such a or “by reason of”.resident would be mandatory irrespective of the fact whetherthe resident taxpayer has taxable income or not. (ii) Any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shallEffective Date :- 1st day of April, 2012 always be deemed to have been situated in India if the share or interest derives, directly or indirectly, its value substantiallyReassessment of income in relation to any asset located from the assets located in India.outside India (iii) Amend definition of Capital asset to clarify that propertyUnder the provisions of section 149 of the Income-tax Act, the includes and shall be deemed to have always included anytime limit for issue of notice for reopening an assessment on rights in or in relation to an Indian company, including rights ofaccount of income escaping assessment is 6 years. In the cases management or control or any other rights whatsoever.where the assets are located outside India the time limit forissue of notice for reopening an assessment has been (iv) Amend section 2(47) to clarify that transfer includes andextended to 16 years. shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating anyEffective From : 1st July, 2012 interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily orRemoval of the cascading effect of Dividend Distribution Tax involuntarily by way of an agreement (whether entered into in(DDT) India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected orWith a view to remove the cascading effect of DDT in multi-tier dependent upon or flowing from the transfer of a share orcorporate structure, it is proposed to amend Section 115-O of shares of a company registered or incorporated outside India.the Act to provide that in case any company receives, duringthe year, any dividend from any subsidiary and such subsidiary (v) Amend section 195(1) to clarify that obligation to complyhas paid DDT as payable on such dividend, then, dividend with sub-section (1) and to make deduction thereunderdistributed by the holding company in the same year, to that applies and shall be deemed to have always applied andextent, shall not be subject to Dividend Distribution Tax under extends and shall be deemed to have always extended to allsection 115-O of the Act. persons, resident or non-resident, whether or not the non- resident has:-Effective from : 1st July 2012. (a) a residence or place of business or business connection in India; orTaxability of Indirect Transfers of capital Assets (b) any other presence in any manner whatsoever inSection 9 of the Income Tax provides cases of income, which India.are deemed to accrue or arise in India. This is a legal fictioncreated to tax income, which may or may not arise in India and Effective from : 1st April, 1962would not have been taxable but for the deeming provisioncreated by this section. Sub-section (1)(i) provides a set ofcircumstances in which income accruing or arising, directly orindirectly, is taxable in India. under clause (i) is income accruingor arising directly or indirectly through the transfer of a capitalasset situate in IndiaConsequent to doubts created by cer tain judicialpronouncements there is a need to provide clarificatoryretrospective amendment to restate the legislative intent inrespect of scope and applicability of section 9 and 195 and alsoto make other clarificatory amendments for providingcertainty in law. Effective from :- 1st April, 201316 Taxpert Professionals Private Limited • India Budget 2012
  18. 18. International TaxationClarification in the definition of Royalty Consequential amendments are proposed in section 149, toSection 9(1)(vi) provides that any income payable by way of extend time limit for issue of notice in case of a person who isroyalty in respect of any right, property or information is treated as agent of a non-resident, the time limit presentlydeemed to be accruing or arising in India. prescribed of two years be extended to six years. It is also clarified that these provisions being of procedural nature shallThe term “royalty” has been defined in Explanation 2 which also be applicable for any assessment year beginning on ormeans consideration received or receivable for transfer of all or before the 1st day of April, 2012.any right in respect of certain rights, property or information. Effective from: - 1st July, 2012.It is further proposed to amend the Income Tax Act in followingmanner:- Validation clause:(i) To amend section 9(1) (vi) to clarify that the consideration for It is proposed to provide for validation of demands raiseduse or right to use of computer software is royalty by clarifying under the Income-tax Act in certain cases in respect of incomethat transfer of all or any rights in respect of any right, property accruing or arising, through or from transfer of a capital assetor information as mentioned in Explanation 2, includes and has situate in India, in consequence of the transfer of a share oralways included transfer of all or any right for use or right to use shares of a company registered or incorporated outside Indiaa computer software (including granting of a licence) or in consequence of agreement or otherwise outside India. Itirrespective of the medium through which such right is is proposed to provide through this validation clause that anytransferred. notice sent or purporting to have been sent, taxes levied, demanded, assessed, imposed or collected or recovered(ii) To amend section 9(1) (vi) to clarify that royalty includes and during any period prior to coming into force of the validatinghas always included consideration in respect of any right, clause shall be deemed to have been validly made and suchproperty or information, whether or not notice or levy of tax shall not be called in question on the ground that the tax was not chargeable or any ground (a) the possession or control of such right, property or including that it is a tax on capital gains arising out of information is with the payer; transactions which have taken place outside India. The (b) such right, property or information is used directly validating clause shall operate notwithstanding anything by the payer; contained in any judgment, decree or order of any Court or (c) the location of such right, property or information Tribunal or any Authority. is in India. This validation shall take effect from coming into force of the(iii) To amend section 9(1)(vi) to clarify that the term Finance Act, 2012.“process” includes and shall be deemed to have alwaysincluded transmission by satellite (including up-linking, Taxation of a non-resident entertainer, sports person etc.amplification, conversion for down-linking of any signal),cable, optic fibre or by any other similar technology, whether or To align the treatment of Income Tax Act with that of DTAAnot such process is secret. Section 115BBA have been amended to include income arising to a non-citizen, non-resident entertainer (such as theatre,Effective from: - 1st June, 1976 radio or television artists and musicians) from performance in India.Clarification on Scope of Section 195 It is also proposed to increase the taxation rate, in case of non-Section 195 of the Income-tax Act requires any person to citizen, non-resident sportsmen and non-resident sportsdeduct tax at source before making payments to a non- association, from 10% to 20% of the gross receipts.resident if the income of such non-resident is chargeable to taxin India. “Person”, here, will take its meaning from section 2 Effective from: - 1st April, 2013and would include all persons, whether resident or non-resident. Therefore, a non-resident person is also required todeduct tax at source before making payments to another non-resident, if the payment represents income of the payee non-resident, chargeable to tax in India. There are no otherconditions specified in the Act and if the income of the payeenon-resident is chargeable to tax, then tax has to be deductedat source, whether the payment is made by a resident or a non-resident.17 Taxpert Professionals Private Limited • India Budget 2012
  19. 19. International TaxationGENERAL ANTI-AVOIDANCE RULE (GAAR) (v) It is also provided that certain circumstances like period of existence of arrangement, taxes arising from arrangement, exitMost countries have codified the “substance over form” route, shall not be taken into account while determining lackdoctrine in the form of General Anti Avoidance Rule (GAAR). of commercial substance test for an arrangement.Keeping in view the aggressive tax planning with the use ofsophisticated structures, there is a need for statutory (vi) Once the arrangement is held to be an impermissibleprovisions so as to codify the doctrine of “substance over avoidance arrangement then the consequences of theform” where the real intention of the parties and effect of arrangement in relation to tax or benefit under a tax treaty cantransactions and purpose of an arrangement is taken into be determined by keeping in view the circumstances of theaccount for determining the tax consequences, irrespective of case, however, some of the illustrative steps are:-the legal structure that has been superimposed to camouflage (a) disregarding or combining any step of thethe real intent and purpose. Internationally several countries arrangement.have introduced, and are administering statutory General Anti (b) ignoring the arrangement for the purpose ofAvoidance Provisions. taxation law. (c) disregarding or combining any party to theIt is proposed to provide General Anti Avoidance Rule in the arrangement.Income Tax Act to deal with aggressive tax planning. The main (d) reallocating expenses and income between thefeature of such a regime are: parties to the arrangement. (e) relocating place of residence of a party, or location(i) An arrangement whose main purpose or one of the main of a transaction or situs of an asset to a place otherpurposes is to obtain a tax benefit and which also satisfies at than provided in the arrangement.least one of the four tests, can be declared as an (f) considering or looking through the arrangement“impermissible avoidance arrangements”. by disregarding any corporate structure. (g) re-characterizing equity into debt, capital into(ii) The four tests referred to in (i) are– revenue etc. a. The arrangement creates rights and obligations, which are not normally created between parties (vii) These provisions can be used in addition to or in dealing at arms length. conjunction with other anti avoidance provisions or provisions b. It results in misuse or abuse of provisions of tax laws. for determination of tax liability, which are provided in the c. It lacks commercial substance or is deemed to lack taxation law. commercial substance. d. Is carried out in a manner, which is normally not (viii) For effective application in cross border transaction and to employed for bonafide purpose. prevent treaty abuse a limited treaty override is also provided.iii) It shall be presumed that obtaining of tax benefit is the main Effective from :- 1st April, 2013purpose of an arrangement unless otherwise proved by thetaxpayer.(iv) An arrangement will be deemed to lack commercialsubstance if – (a) the substance or effect of the arrangement as a whole, is inconsistent with, or differs significantly Taxpert Professionals Private Limited • India Budget 2012 from, the form of its individual steps or a part; or (b) it involves or includes - (I) round trip financing; (ii) an accommodating party ; (iii) elements that have effect of offsetting or cancelling each other; or (iv) a transaction which is conducted through one or more persons and disguises the value, location, source, ownership or control of fund which is subject matter of such transaction; or (c) it involves the location of an asset or of a transaction or of the place of residence of any party which would not have been so located for any substantial commercial purpose other than obtaining tax benefit for a party. 18
  20. 20. Transfer Pricing RegulationsMeaning assigned to a term used in Double Taxation Extension of time limit for completion of assessment orAvoidance Agreement (DTAA) reassessment where information is sought under a DTAAThe Central Government has entered into various treaties Under the provisions of section 90 or section 90A of thecommonly known as Double Taxation Avoidance Agreements Income-tax Act, information can be exchanged with the(DTAAs). Central Government is empowered to assign a foreign tax authorities for prevention of evasion or avoidancemeaning, through notification, to any term used in such of income tax chargeable under this Act or under theAgreement, which was neither defined in the Act nor in the corresponding law in force in that country or specifiedagreement. It is proposed to provide that any meaning territory, as the case may be. For the purpose of assessment theassigned through notification to a term used in an agreement time taken for getting information is excluded. This timebut not defined in the Act or agreement, shall be effective from period to be excluded would start from the date on which thethe date of coming into force of the agreement. process of getting information is initiated by making a reference by the competent authority in India to the foreign taxEffective From: - 1st October, 2009 authorities and end with the date on which information is received by the Commissioner. Currently, this period ofTax Residence Certificate (TRC) for claiming relief under exclusion is limited to six months. It is proposed to extend theDTAA period to 1 year.The scheme of interplay of DTAA and domestic legislation Effective from: - 1st day of July, 2012.ensures that a taxpayer, who is resident of one of thecontracting country to the treaty, is entitled to claimapplicability of beneficial provisions either of treaty or of thedomestic law.In order to restrict the treaty benefits to the actual tax residentof a contracting country it is proposed to make the submissionof Tax Residency Certificate containing prescribed particularscompulsory for availing benefits of the agreementsEffective from: - 1st April, 201319 Taxpert Professionals Private Limited • India Budget 2012
  21. 21. Transfer Pricing Regulations 8. For the purpose of computing any period of limitation under the Act, the period beginning with the date of such APA and ending on the date of order declaring the agreement voidIntroduction of Advance Pricing Agreement (APA) ab-initio shall be excluded. However if after the exclusion of the aforesaid period, the period of limitation referred to in anyThe much awaited Advance Pricing Agreement has been provision of the Act is less than sixty days, such remainingintroduced with this Budget. period shall be extended to sixty days.Definition: - APA is an agreement between a taxpayer and a 9. The Board is empowered to prescribe a Scheme providingtaxing authority on an appropriate transfer pricing for the manner, form, procedure and any other mattermethodology for a set of transactions over a fixed period of generally in respect of the advance pricing agreement.time in future. The APAs offer better assurance on transferpricing methods and are conducive in providing certainty and 10. Where an application is made by a person for entering intounanimity of approach. such an APA, proceedings shall be deemed to be pending in the case of the person for the purposes of the Act likeIt is proposed to insert new sections 92CC and 92CD in the Act for making enquiries under section 133(6) of the Act.to provide a framework for advance pricing agreement underthe Act. 11. The person entering in to such APA shall necessarily have to furnish a modified return within a period of three monthsThe proposed sections provide the following. – from the end of the month in which the said APA was e n t e r e d in respect of the return of income already filed for a previous1. It empowers Board, to enter into an advance pricing year to which the APA applies. The modified return has toagreement with any person undertaking an international reflect modification to the income only in re s p e c t of t h etransaction. issues arising from the APA and in accordance with it.2. Such APAs shall include determination of the arms length 12. Where the assessment or reassessment proceedings for anprice or specify the manner in which arms length price shall be assessment year relevant to the previous year to which thedetermined, in relation to an international transaction which agreement applies are pending on the date of filing ofthe person undertake. modified return, the Assessing Officer shall proceed to complete the assessment or reassessment proceedings in3. The manner of determination of arms length price in such accordance with the agreement taking into considerationcases shall be any method including those provided in the modified return so filed and normal period of limitation ofsubsection (1) of section 92C, with necessary adjustments or completion of proceedings shall be extended by one year.variations. 13. If the assessment or reassessment proceedings for an4. The arms length price of any international transaction, assessment year relevant to a previous year to which thewhich is covered under such APA, shall be determined in agreement applies has been completed before the expiry ofaccordance with the APA so entered and the provisions of period allowed for furnishing of modified return ,the Assessingsection 92C or section 92CA which normally apply for Officer shall, in a case where modified return is filed, proceed todetermination of arms length price would be modified to this assess or reassess or re-compute the total i n c o m e of t h eextent and arms length price shall be determined in relevant assessment year having regard to and in accordanceaccordance with APA. with the APA and to such assessment, all the provisions relating to assessment shall apply as if the modified return is a5. The APA shall be valid for such previous years as specified in return furnished under section 139 of the Act. The period ofthe agreement which in no case shall exceed five consecutive limitation for completion of such assessment or reassessmentprevious years. is one year from the end of the financial year in which the modified return is furnished.6. The APA shall be binding only on the person and theCommissioner (including income- tax authorities subordinate 14. All the other provisions of this Act shall apply accordingly asto him) in respect of the transaction in relation to which the if the modified return is a return furnished under section 139.agreement has been entered into. The APA shall not be bindingif there is any change in law or facts having bearing on such Effective from: - 1st July, 2012.APA. Examination by the Transfer Pricing Officer of international7. The APA can be declared void ab initio by Board, if it found transactions not reported by the Assesseethat agreement has been obtained by the person by fraud ormisrepresentation of facts. In the extant Transfer pricing regulations in the absence of specific power, the determination of Arms Length Price by the Transfer Pricing Officer may be open to challenge even though the basis of such an action is non-reporting of transaction by the taxpayer at first instance. 20 Taxpert Professionals Private Limited • India Budget 2012
  22. 22. Transfer Pricing RegulationsIt is proposed to amend the section 92CA of the Act Effective from: - 1st April, 2012retrospectively to empower Transfer Pricing Officer (TPO) todetermine Arms Length Price of an international transactionnoticed by him in the course of proceedings before him, even if Distended definition of International Transactionthe said transaction was not referred to him by the AssessingOfficer, provided that such international transaction was not Certain judicial authorities have taken a view that in cases ofreported by the taxpayer as per the requirement cast upon him transactions of business restructuring etc. where even if thereunder section 92E of the Act. is an international transaction Transfer Pricing provisions would not be applicable if it does not have bearing on profits orEffective from: - 1st June, 2002. loss of current year or impact on profit and loss account is not determinable under normal computation provisions otherTransfer Pricing Regulations to apply to certain domestic than transfer pricing regulations. The present scheme oftransactions Transfer pricing provisions does not require that international transaction should have bearing on profits or income ofIt is proposed to introduce the transfer pricing provisions to current year.the domestic related party transactions by application andextension of scope of transfer pricing regulations to Therefore, there is a need to amend the definition oftransactions between related resident parties for the purposes international transaction in order to clarify the true scope ofof computation of income, disallowance of expenses etc. as the meaning of the term. "international transaction" and torequired under provisions of sections 40A, 80-IA, 10AA, 80A, clarify the term "intangible property" used in the definition.sections where reference is made to section 80-IA, or to It is, therefore, proposed to amend section 92B of the Act, totransactions as may be prescribed by the Board, if aggregate provide for the explanation to clarify meaning of internationalamount of all such domestic transactions exceeds Rupees 5 transaction and to clarify the term intangible property used incrore in a year. It is further proposed to amend the meaning of the definition of international transaction and to clarify that therelated persons as provided in section 40A to include international transaction shall include a transaction ofcompanies having the same holding company. business restructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of theEffective from: - 1st April, 2013 fact that it has bearing on the profit, income, losses or assets or such enterprises at the time of the transaction or at any futureDetermination of Arms Length Price (ALP) date.Clarification has been brought in section 92C (2) which says Effective from: - 1st April, 2002while arriving at Arms Lenth Price if more than one price isdetermined by application of most appropriate method, the Safe Harbor range notified to be 3%arms length price shall be taken to be the arithmetic mean ofsuch prices. The proviso to this sub-section was inserted by Section 92C provides methods for determination of ArmsFinance Act, 2002 with effect from 01.04.2002 to ensure that in Length Price (ALP). Sub section (1) of the said sectioncase variation of transaction price from the arithmetic mean is prescribes the methods of computation of Arms Length Price.within the tolerance range of 5%, no adjustment was required Sub section (2) of the said sub section provides that if theto be made to transaction value. appropriate method results in more than one price then the arithmetic mean of these prices would be the ALP. The provisoIt has been clarified that the tolerance band of 5% is not taken to sub section (2) of section 92C which was amended by Taxpert Professionals Private Limited • India Budget 2012to be a standard deduction but is treated only as range of Finance Act, 2011 provides that the Central Government maytolerance while computing Arms Length Price . notify a percentage and if variation between the ALP so determined and the transaction price is within the notifiedEffective from: - 1st April, 2002 percentage (of transaction price), no adjustment shall be made to the transaction price. It is, therefore, proposed to amendFiling of return of income, definition of international Section 92C (2) of the Act, so as to provide an upper ceiling oftransaction, tolerance band for ALP, penalties and 3% in respect of power of Central Government to notify thereassessment in transfer pricing cases tolerance range for determination of arms length price.Vide the Finance Act, 2011 the due date for filing of return of Effective from: - 1st April, 2013income in case of corporate assesses who were required toobtain and file Transfer Pricing report (required under section Transfer Pricing Penalty Increased92E of the Act), was extended to 30th November of theassessment year. The provision has now been extended to all It is, therefore, proposed to amend additional penalty underassesses [corporates and non-corporates] who are required to Section 271AA to provide levy of a penalty at the rate of 2% ofobtain and file Transfer Pricing report as per Section 92E of the the value of the international transaction, if the taxpayer.-Act. The due date would be 30th November of the assessmentyear. 21
  23. 23. Transfer Pricing RegulationsŸ fails to maintain prescribed documents or information or;Ÿ fails to report any international transaction which is An explanation have been inserted in the provisions of section required to be reported, or; 144C to clarify that the power of the DRP to enhance theŸ maintains or furnishes any incorrect information or variation shall include and shall always be deemed to have documents. included the power to consider any matter arising out of the assessment proceedings relating to the draft assessmentEffective from: - 1st July, 2012. order. This power to consider any issue would be irrespective of the fact whether such matter was raised by the eligible assesseSection 147 of the Act, provides for reopening of the cases of or not.the previous years, if any income chargeable to tax hasescaped assessment. It is proposed to amend Section 147 of Effective from:- 1st day of April, 2009the Act, to provide that in all cases where it is found that aninternational transaction has not been reported either by non-filing of report or otherwise by not including such transaction Completion of assessment in search cases referred to DRPin the report mentioned in section 92E then such non-reporting would be considered as a case of deemed Under the provisions of section 144C of the Income-tax Actescapement of income and such a case can be reopened under where an eligible assesse files an objection against the draftsection 147 of the Act. assessment order before the Dispute Resolution Panel (DRP), then, the time limit for completion of assessments are asEffective from: 1st July, 2012. provided in section 144C notwithstanding anything in section 153. A similar provision is proposed to be made whereAppeal against the directions of the Dispute Resolution Panel assessments are framed as a result of search and seizure to(DRP) provide that for such assessments, time limit specified in section 144C will apply, notwithstanding anything in sectionUnder the provisions of sub-section (8) of section 144C, the 153B.DRP has the power to confirm, reduce or enhance thevariations proposed in the draft order. The Income Tax It is also proposed to provide for exclusion of such ordersDepartment does not have the right to appeal against the passed by the Assessing Officer in pursuance of the directionsdirections given by the DRP. The taxpayer has been given a of the DRP, from the appellate jurisdiction of the Commissionerright to appeal directly to the Income Tax Appellate Tribunal (Appeals) and to provide for filing of appeals directly to ITAT(ITAT) against the order passed by the Assessing Officer in against such orders. Accordingly, consequential amendmentspursuance of the directions of the DRP. are proposed to be made in the provisions of section 246A and 253 of the Income-tax Act.It is proposed to amend the provisions of section 253 andsection 254 of the Income-tax Act to provide for filing of appeal Effective from: - 1st day of October, 2009.by the Assessing Officer against an order passed in pursuanceof directions of the DRP in respect of an objection filed on orafter 1st July, 2012.Effective from: - 1st day of July, 2012.Power of the DRP to enhance variationsDispute Resolution Panel (DRP) had been constituted with aview to expeditiously resolve the cases involving transferpricing issues in the case of any person having internationaltransactions or in case of a foreign company. It has beenprovided under sub-section (8) of section 144C that DRP mayconfirm, reduce or enhance the variations proposed in thedraft order of the Assessing Officer.22 Taxpert Professionals Private Limited • India Budget 2012