Adding Value with Quality and Commitment: Analysis of India's Budget 2012

adding value with quality and commitment

India
Budget 2012
Analysis

www.taxpertpro.com
www.taxpertpro.com/budget2012

INDEX:.

Introduction 2

Chapter 1 3
Direct Tax

Chapter 2 9
Indirect Tax

Chapter 3 15
International Tax

Chapter 4 23
Sector Initative

This 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 this
publication without obtaining specific professional advice. Further information and assistance may be obtained from any of the offices listed in the publication. No representation or
warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, Taxpert Professionals , its members, employees and
agents 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 for
any decision based on it.
© 2012 Taxpert Professionals Private Limited. All rights reserved. 'Taxpert Professionals.

Introduction

For Indian economy, recovery was interrupted this year due Some important changes in the Income Tax Act,1961 is
to intensification of debt crises in Euro zone, political rationalization of tax deduction at source and tax collection
turmoil in Middle East, rise in crude oil price and earthquake at source provisions, an attempt by Government to curb the
in Japan. GDP is estimated to grow by 6.9 per cent in 2012- generation and circulation of Black money by introducing
13, after having grown at 8.4 per cent in preceding two the tax on unexplained share premium account, widening
years. India however remains front runner in economic of tax base .
growth in any cross-country comparison. Monetary and
fiscal policy response for better part of past 2 years aimed at Government has further evolved its approach to divestment
taming domestic inflationary pressure. Growth moderated of Central Public Sector Enterprises by allowing them a level
and fiscal balance deteriorated due to tight monetary playing field vis-à-vis the private sector in respect of
policy and expanded outlays. Twelfth Five Year Plan to be practices like buy backs and listing at stock exchanges. Coal
launched with the aim of "faster, sustainable and more India Limited advised to sign fuel supply agreements with
inclusive growth". Five objectives identified to be addressed power plants, having long-term PPAs with DISCOMs and
effectively in ensuing fiscal year. If India can build on its getting commissioned on or before March 31, 2015.For
economic strength, it can be a source of stability for world 2012-13, `30,000 crore to be raised through disinvestment
economy and a safe destination for restless global capital.
Legislative Reforms
The Union budget 2012-13 comes in background of 6.9% of
economic growth in GDP with manufacturing and services Ÿ ·Official amendment to "The Pension Fund Regulatory
sector continuing to be twin engines of growth. With and Development Authority Bill, 2011", "The Banking
election looming in the horizon loss of congress in state Laws (Amendment) Bill, 2011" and "The Insurance Law
elections 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 Budget
With a planned expenditure for 2012- 13 at INR 5,21,025 session of the Parliament to take forward the process of
Crore higher than Budgeted expenditure for 2011-12 by financial sector legislative reforms.
18% the government intends to achieve inclusive growth
through 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 Anti
Avoidance rules and Advance pricing Agreements. Ÿ DTC rates proposed to be introduced for personal
Although the implementation of major reforms like GST income tax.
and DTC have been again deferred yet the introduction of
GAAR and APAs indicates the willingness of government to
move towards international mechanism.

2 Taxpert Professionals Private Limited • India Budget 2012

Chapter 1

Direct Taxes


Direct Tax Ÿ ·Section 80C of the Income-tax Act provides that in
The proposals in the Union Budget 2012-2013 have major computing the total income of an assessee, being an
elements relating to lowering the burden on individual tax, individual or an HUF, a deduction of up to one lakh
streamlining tax administration processes, enhancing rupees for life insurance premia. The existing provisions
research and development, lowering cascading effect of contained in section 80C (3) provide that the deduction
DDT and introduction of GAAR and APAs, enhancing the for life insurance premium shall be allowed for only so
scope of international transaction. much of any premium or other payment made on an
insurance policy as is not in excess of 20% of the actual
Personal Taxation capital sum assured.

Individual, Hindu Undivided Family, Association of Persons, Ÿ ·It is proposed to amend the provisions to provide that
Body of Individuals, Artificial Juridical Person the deduction for life insurance premium as regards
insurance policies issued on or after 1st April, 2012 shall
The rates of income-tax in the case of Individual or Hindu be allowed for only so much of the premium payable as
Undivided 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 artificial
juridical person is as follows: - Ÿ ·It is proposed to amend deduction under Section 80D to
include any payment made uptp Rs. 5000/- by an
Monetary Limits (2011 – 2012) Monetary Limits (2012 – Tax Rates
2013) assessee on account of preventive health check-up of
Upto 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 women

The basic exemption limit for Senior Citizens is same as
INR 2,50,000

ŸExemption has been given to Senior citizens not having
business/professional income from payment of advance tax.

Ÿ·Reduction of the eligible age for senior citizens for certain
tax reliefs from from sixty-five years of age to sixty years for
the purposes of application of various tax slabs and rates of
tax under the Income Tax Act, 1961

ŸA new section have been introduced Section 80TTA under
which a deduction up to an extent of ten thousand rupees in
aggregate shall be allowed to individual or a Hindu
undivided family, in respect of any income by way of interest
on 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 life
insurance policy, including the sum allocated by way of
bonus on such policy, is exempt. For this purpose, it is
necessary that the premium payable for any of the years
shall not exceed 20% of the actual capital sum assured. It is
proposed to reduce the threshold of premium payable to
10% of the actual capital sum assured from 20% of the actual
capital sum assured.


Direct Tax Measures to Prevent Generation and Circulation of
Unaccounted Money
Corporate Sector Taxation
In the present budget, it is, proposed to amend section 68 of
The rates of income tax in case of Company, Co – Operative
the Act to provide that the nature and source of any sum
societies, Firms, Local authorities are same as rate applicable
credited, as share capital, share premium etc., in the books of
for 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 assessee
Education 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 unaccounted
income-tax” and “Secondary and Higher Education Cess money by taking advantage of basic exemption limit, it is
on 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, section
Surcharge: - 69B, section 69C or section 69D, at the rate of 30% (plus
surcharge and cess as applicable). It is also proposed to
The existing surcharge of five per cent in case of a domestic provide that no deduction in respect of any expenditure or
company shall continue to be levied. In case of companies allowance shall be allowed to the assessee under any
other than domestic companies, the existing surcharge of provision of the Act in computing deemed income under the
two 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 to
Provision of AMT have been made applicable of all person the director;
other than Company where the Adjusted Total Income of
such 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 bullion
These 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


Direct Tax Turnover or gross receipts for audit of accounts and
presumptive taxation
Tax Incentive for funding of certain infrastructure sectors
Threshold limit of total sales,
Section 115A of the Income Tax Act provides that any
interest income received by any non-resident from the
Business turnover or gross receipts increased
from 60 Lakhs to 1 Crore
Government or an Indian concern shall be taxable at the rate
of 20% on the gross amount of such interest income. The
Threshold limit of total sales,
interest income received by a non-resident from a notified
Infrastructure Debt Fund (IDF) is taxable at a reduced rate of
Profession turnover or gross receipts increased
from 15 Lakhs to 25 Lakhs
5% on gross amount of such interest income.

Effective from: 1st July 2012

Weighted deduction for scientific research and
Effective Date :- 1st April, 2013.
development

Relief from long-term capital gains tax on transfer of
Under the existing provisions of Section 35(2AB) of the
residential property if invested in a Manufacturing small or
Income-tax Act, a company is allowed weighted deduction
medium enterprise
at the rate of 200% of expenditure (not being in the nature of
cost of any land or building) incurred on approved in-house
New section 54GB has been inserted, the Government had
research 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 the
company after 31st March, 2012.
Small and Medium Enterprises (SME) in the manufacturing
sector. It is proposed to insert a new section 546B so as to
In order to incentivize the corporate sector to continue to
provide rollover relief from long term capital gains tax to an
spend on in-house research, it is proposed to amend this
individual or an HUF on sale of a residential property (house
section to extend the benefit of the weighted deduction for
or plot of land) in case of re-investment of sale consideration
a 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 for
Effective 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 of
agricultural extension project
residential property made on or before 31st March, 2017
New section 35CCC has been introduced because,
Effective from 1st April, 2013
agricultural extension services play a critical role in
enhancing the productivity in the agricultural sector. In
order 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 to
insert a new provision in the Income-tax Act to allow
Section 98 defines the Securities Transaction Tax (STT) on
weighted deduction of 150% of the expenditure incurred on
transactions in specified securities . It is proposed to reduce
agricultural extension project. The agricultural extension
STT in Cash Delivery segment from the existing 0.125% to
project eligible for this weighted deduction shall be notified
0.1%. The proposed new rates along with details of old rates
by the Board in accordance with the prescribed guidelines.
are given in the following table.
Effective from:- 1st April, 2013

Weighted deduction for expenditure for skill
development

New section 35 CCD has been introduced to encourage the
private sector to set up their own institutions, the
government 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)
transaction
incurred on Public Private Partnership (PPP) project for skill
1 Delivery based purchase of equity Purchaser 0.125 0.1
development in the ITIs in manufacturing sector in separate shares in a company/ units of an
facilities 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.


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.



Direct Tax Disallowance of business expenditure on account of non-
deduction of tax on payment to resident payee
Deduction in respect of capital expenditure on specified
business
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 is
purposes of the investment-linked deduction under section
deducted in subsequent previous year, the expenditure shall
35AD, 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 on
container freight station notified or approved under the
account of non-deduction of tax from the payments made
Customs 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 of
storage of sugar.
payment of taxes by the payee, then, for the purpose of
allowing deduction of such sum, it shall be deemed that the
The dates of commencement of the “specified business”
assesse has deducted and paid the tax on such sum on the
are 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 investment
linked deduction in respect of the three new specified
These beneficial provisions are proposed to be applicable
businesses 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, 2013
of the Income Tax Act
**150% deduction of capital expenditure under section
Fee and penalty for delay in furnishing of TDS/TCS
35AD of the Income Tax Act
Statement and penalty for incorrect information in
TDS/TCS Statement
Effective 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 furnishing
Deemed 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 total
Under the existing provisions of Chapter XVII-B of the
amount of tax deductible during the period for which the
Income-tax Act, a person is required to deduct tax on certain
TDS statement is delayed, and
specified payments at the specified rates if the payment
exceeds specified threshold. In case of non-deduction of tax
(ii) to provide that in addition to said fee, a penalty ranging
in accordance with the provisions of this Chapter, he is
from Rs.10,000 to Rs.1,00,000 shall also be levied for not
deemed 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 incorrect
However, section 191 of the Act provides that a person shall
information in TDS statement, it is proposed to provide that
be deemed to be assessee in default in respect of non/short
a penalty ranging from Rs.10,000 to Rs.1,00,000 shall be
deduction of tax only in cases where the payee has also
levied for furnishing incorrect information in the TDS
failed to pay the tax directly. Therefore, the deductor cannot
statement.
be treated as assessee in default in respect of non/short
deduction 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 that
The 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 furnished
by the payer.
Effective from 1st July, 2012
Amendments on similar lines are also proposed to be made
in the provisions of section 206C relating to TCS for clarifying
the deemed date of discharge of tax liability by the buyer or
licensee or lessee.

Effective from 1st July, 2012.

Chapter 2

Indirect Taxes


Indirect Tax
Central Excise Duty

Central Excise Duty Rate: Other Products:

The standard rate of Central Excise Duty has been enhanced The duty rates of the following products have been
from 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
unit


Indirect Tax
General
As per the Finance Minister ther has been considerable progress in preparing a roadmap for the introduction of the Goods and
Service Tax (GST) with effect from August 2012 enhanced 10% to 12%. Further the rate of Service Tax has also been enhanced from
10% to 12 %

Customs

Customs Duty Rate:

The peak rate of the Customs is retained at the 10%. However
due to increase of the rate of Central Excise Duty, the rate of
CVD shall also be increased. The effective Customs Rate shall
be 28.85%

Product Wise Analysis: Increase
.

Customs Customs
Rate Rate
1. Completely Built Units of Large Car/ 60% 75% 15%
MUV/SUV
2. 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 steel
5. Standard Gold Bar and Platinum Bars 2% 4% 2%
6. Non Standard Gold 2% 4% 2%

Product Wise Analysis: Decrease
Customs Customs
Rate Rate
1. Isolated Soya Protein and soya protein 30% 10% 20%
concentrate
2. Railway Safety Equipment and railway 10% 7.5% 2.5%
laying machines
3. Machinery and instruments for surveying 10% 7.5% 2.5%
and prospecting of mines
4. Titanium Dioxide 10% 7.5% 2.5%

Other Proposed Amendments:

Importers of specified goods need to declare the State of
destination where the goods are intended to be sold for the
first 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 SAD
to other registered premises of the same manufacturer on
quarterly basis.

Effective Date: This transfer would be possible from the 1st
April, 2012

Baggage Allowance:

The limit of duty free baggage allowance is increased from INR
25,000/- to INR 35,000/-.
The limit of duty free baggage allowance in case of children up


Indirect Tax
Goods and Service Tax
As per the speech provided by the Finance Minister, the Negative List of Services:
drafting of model GST legislation in concert with States is
under progress. The GST network shall be set up as a National The Union Budget proposes that all services will come under
Information Utility and is expected to become operational by the ambit of Service Tax unless specified in the Negative List or
August 2012. which are otherwise exempted by a specific exemption
notification. Negative List will comprise the list following
Note: It is still very doubtful that within four month period services.
the consensus of all state and constitutional amendments shall
be carried out. Interesting to note that Finance Minister has 1. Services by Government or a local authority excluding the
confirmed 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 of
Service Tax is the most preferred subject for the draftsman and
speed post, express parcel post, life insurance and
legislators for Budget 2012. The Service Tax legislation has
agency services provided to a person other
attained the age of eighteen years this year. On the eve of
than Government;
attaining age of eighteen, The Finance Ministry has tried to
rationalize the complete Service Tax law. Following are the
(ii) Services in relation to an aircraft or a vessel, inside
major 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; or

The Service Tax rate has been enhanced form 10 % to 12 %. This
(iv) Support services, other than services covered
amendment shall be applicable from the 1st Day of April, 2012.
under clauses (i) to (iii) above, provided to business
The effective rate shall be 12.36% (inclusive of Education Cess
entities;
at the rate of 2% and Secondary and Higher Education Cess at
the 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, following
amendments 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 to
contract services has been increased in proportion to the
production of any agricultural produce including
increased in general rate. The composition rate under the
cultivation, harvesting, threshing, plant protection
works 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 currency
including money changing: Raising the existing rates
(iii) Processes carried out at an agricultural farm
proportionately 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 2012

assisting in organizing lottery: Raising the specified amounts
packaging and such like operations which d o n o t
proportionately to Rs 7,000 and 11,000.
alter the essential characteristics of agricultural
produce but make it only marketable for the primary
Other Proposal to amend the Service Tax rate (Specific
market;
Services):
(iv) Renting or leasing of agro machinery or vacant
Life insurance service: Where the entire premium is not
landwith or without a structure Incidental to its
towards risk cover, the first year's premium shall be taxed at the
use;
rate of three per cent. While subsequent premium shall attract
tax at the rate of 1.5 per cent. Availment of full CENVAT Credit is
(v)Loading, unloading, packing, storage or
being 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 of
maximum service tax of INR 150/- and INR 750/- in case of
(vii) Services by any Agricultural Produce Marketing
economy class travel is being replaced by an ad valorem rate of
Committee or Board or services provided by a
twelve per cent, with abatement of sixty per cent. This
commission agent for sale or purchase of
abatement shall be available subject to the condition that no
agricultural produce;
credit on inputs and capital goods is taken
12

5. Trading of goods; 15.Service of transportation of passengers, with or without
accompanied belongings, by:
6. Any process amounting to manufacture or production of
goods; (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; or

8. 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 to
amusement facilities; (v) public transport, other than predominantly for
tourism purpose, in a vessel of less than fifteen ton
11. Transmission or distribution of electricity by an electricity net; and
transmission 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; or

13. Services by way of renting of residential dwelling for (iii) By inland waterways;
use as residence;
17. Funeral, burial, crematorium or mortuary services
14. 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;


Indirect Tax
Export of Service Rule

Provision 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 enhanced
ŸThe 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 chartered
ŸService 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 for
ŸThe payment is received in convertible foreign exchange. service provider and manufacturer.

CENVAT Credit Rules 2004
Removal of Capital Goods after being used:

A manufacturer or service provider need to pay an amount equal to
the CENVAT Credit taken on capital good reduced by the
percentage points calculated by straight line method for each
quarter of a year or part thereof from the date of taking the CENVAT
Credit

Capital Goods other than computers and commuters peripherals:
2.5% for each quarter;

Computers and Computer Peripherals: First Year: 10% Second
Year: 8% Third Year: 5% and Fourth and Fifth Year: 1% (on
quarterly basis).

Refund of CENVAT Credit:

Refund provision is being rationalized further. The refund shall be
based on the proportion of extort turnover of goods and services
and total turnover. The major change is the definition of the Export
turnover.

Export Turnover means:

Payment received during the relevant period for export services +
Export services whose provision has been completed for which
payment has been received in advance in any period prior to the
relevant period – Advance received for export services for which
the provision of service has not been completed during the
relevant period.

Transfer of CENVAT Credit:

The unutilized CENVAT Credit of Special Additional Duty can be
transferred from one registered unit to other registered unit of the
manufacturer or service provider.
Renting of Immovable Property (Penalty Waived): In view of
Judicial precedent Retailers Association of India Vs. Union of
India, it is proposed that penalty may be waived for tax payers who
pay the eservice due on the renting of immovable property
services 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 receipts
less than fifty lacs may pay service tax liability on receipt basis.
Necessary amendments have been introduced in the Service Tax
Rules.


Chapter 3

International Taxes


International Taxation

Compulsory filing of income tax return in relation to assets It is, therefore, proposed to amend the Income Tax Act in the
located 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 'through'
resident having any asset (including financial interest in any shall mean and include and shall be deemed to have always
entity) 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 whether
the 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 shall
Effective 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 substantially
Reassessment 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 'property'
Under the provisions of section 149 of the Income-tax Act, the includes and shall be deemed to have always included any
time limit for issue of notice for reopening an assessment on rights in or in relation to an Indian company, including rights of
account 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 for
issue of notice for reopening an assessment has been (iv) Amend section 2(47) to clarify that 'transfer' includes and
extended to 16 years. shall be deemed to have always included disposing of or
parting with an asset or any interest therein, or creating any
Effective From : 1st July, 2012 interest in any asset in any manner whatsoever, directly or
indirectly, absolutely or conditionally, voluntarily or
Removal 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 or
With a view to remove the cascading effect of DDT in multi-tier dependent upon or flowing from the transfer of a share or
corporate 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, during
the year, any dividend from any subsidiary and such subsidiary (v) Amend section 195(1) to clarify that obligation to comply
has paid DDT as payable on such dividend, then, dividend with sub-section (1) and to make deduction thereunder
distributed by the holding company in the same year, to that applies and shall be deemed to have always applied and
extent, shall not be subject to Dividend Distribution Tax under extends and shall be deemed to have always extended to all
section 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; or
Taxability of Indirect Transfers of capital Assets
(b) any other presence in any manner whatsoever in
Section 9 of the Income Tax provides cases of income, which India.
are deemed to accrue or arise in India. This is a legal fiction
created to tax income, which may or may not arise in India and Effective from : 1st April, 1962
would not have been taxable but for the deeming provision
created by this section. Sub-section (1)(i) provides a set of
circumstances in which income accruing or arising, directly or
indirectly, is taxable in India. under clause (i) is income accruing
or arising directly or indirectly through the transfer of a capital
asset situate in India

Consequent to doubts created by cer tain judicial
pronouncements there is a need to provide clarificatory
retrospective amendment to restate the legislative intent in
respect of scope and applicability of section 9 and 195 and also
to make other clarificatory amendments for providing
certainty in law. Effective from :- 1st April, 2013


Clarification in the definition of Royalty
Consequential amendments are proposed in section 149, to
Section 9(1)(vi) provides that any income payable by way of extend time limit for issue of notice in case of a person who is
royalty in respect of any right, property or information is treated as agent of a non-resident, the time limit presently
deemed 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 shall
The term “royalty” has been defined in Explanation 2 which also be applicable for any assessment year beginning on or
means 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 following
manner:- Validation clause:

(i) To amend section 9(1) (vi) to clarify that the consideration for It is proposed to provide for validation of demands raised
use or right to use of computer software is royalty by clarifying under the Income-tax Act in certain cases in respect of income
that transfer of all or any rights in respect of any right, property accruing or arising, through or from transfer of a capital asset
or information as mentioned in Explanation 2, includes and has situate in India, in consequence of the transfer of a share or
always included transfer of all or any right for use or right to use shares of a company registered or incorporated outside India
a computer software (including granting of a licence) or in consequence of agreement or otherwise outside India. It
irrespective of the medium through which such right is is proposed to provide through this validation clause that any
transferred. 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 validating
has always included consideration in respect of any right, clause shall be deemed to have been validly made and such
property 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 always
included 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 DTAA
not 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 sports
deduct 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 tax
in India. “Person”, here, will take its meaning from section 2 Effective from: - 1st April, 2013
and would include all persons, whether resident or non-
resident. Therefore, a non-resident person is also required to
deduct 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 other
conditions specified in the Act and if the income of the payee
non-resident is chargeable to tax, then tax has to be deducted
at source, whether the payment is made by a resident or a non-
resident.



GENERAL ANTI-AVOIDANCE RULE (GAAR) (v) It is also provided that certain circumstances like period of
existence of arrangement, taxes arising from arrangement, exit
Most countries have codified the “substance over form” route, shall not be taken into account while determining 'lack
doctrine 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 of
sophisticated structures, there is a need for statutory (vi) Once the arrangement is held to be an impermissible
provisions so as to codify the doctrine of “substance over avoidance arrangement then the consequences of the
form” where the real intention of the parties and effect of arrangement in relation to tax or benefit under a tax treaty can
transactions and purpose of an arrangement is taken into be determined by keeping in view the circumstances of the
account 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 the
the real intent and purpose. Internationally several countries arrangement.
have introduced, and are administering statutory General Anti (b) ignoring the arrangement for the purpose of
Avoidance Provisions. taxation law.
(c) disregarding or combining any party to the
It 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 the
feature 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 other
purposes 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 arm's 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, 2013
purpose of an arrangement unless otherwise proved by the
taxpayer.

(iv) An arrangement will be deemed to lack commercial
substance 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

Transfer Pricing Regulations

Meaning assigned to a term used in Double Taxation Extension of time limit for completion of assessment or
Avoidance Agreement (DTAA) reassessment where information is sought under a DTAA

The Central Government has entered into various treaties Under the provisions of section 90 or section 90A of the
commonly known as Double Taxation Avoidance Agreements Income-tax Act, information can be exchanged with the
(DTAA's). Central Government is empowered to assign a foreign tax authorities for prevention of evasion or avoidance
meaning, through notification, to any term used in such of income tax chargeable under this Act or under the
Agreement, which was neither defined in the Act nor in the corresponding law in force in that country or specified
agreement. It is proposed to provide that any meaning territory, as the case may be. For the purpose of assessment the
assigned through notification to a term used in an agreement time taken for getting information is excluded. This time
but not defined in the Act or agreement, shall be effective from period to be excluded would start from the date on which the
the 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 tax
Effective From: - 1st October, 2009 authorities and end with the date on which information is
received by the Commissioner. Currently, this period of
Tax Residence Certificate (TRC) for claiming relief under exclusion is limited to six months. It is proposed to extend the
DTAA 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 the
contracting country to the treaty, is entitled to claim
applicability of beneficial provisions either of treaty or of the
domestic law.
In order to restrict the treaty benefits to the actual tax resident
of a contracting country it is proposed to make the submission
of Tax Residency Certificate containing prescribed particulars
compulsory for availing benefits of the agreements



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 void
Introduction 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 any
The much awaited Advance Pricing Agreement has been
provision of the Act is less than sixty days, such remaining
introduced 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 providing
taxing authority on an appropriate transfer pricing
for the manner, form, procedure and any other matter
methodology 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 transfer
pricing methods and are conducive in providing certainty and
10. Where an application is made by a person for entering into
unanimity of approach.
such an APA, proceedings shall be deemed to be pending in
the case of the person for the purposes of the Act like
It 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 under
the Act.
11. The person entering in to such APA shall necessarily have to
furnish a modified return within a period of three months
The 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 previous
1. It empowers Board, to enter into an advance pricing
year to which the APA applies. The modified return has to
agreement with any person undertaking an international
reflect modification to the income only in re s p e c t of t h e
transaction.
issues arising from the APA and in accordance with it.
2. Such APAs shall include determination of the arm's length
12. Where the assessment or reassessment proceedings for an
price or specify the manner in which arm's length price shall be
assessment year relevant to the previous year to which the
determined, in relation to an international transaction which
agreement applies are pending on the date of filing of
the person undertake.
modified return, the Assessing Officer shall proceed to
complete the assessment or reassessment proceedings in
3. The manner of determination of arm's length price in such
accordance with the agreement taking into consideration
cases shall be any method including those provided in
the modified return so filed and normal period of limitation of
subsection (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 an
4. The arm's length price of any international transaction,
assessment year relevant to a previous year to which the
which is covered under such APA, shall be determined in
agreement applies has been completed before the expiry of
accordance with the APA so entered and the provisions of
period allowed for furnishing of modified return ,the Assessing
section 92C or section 92CA which normally apply for
Officer shall, in a case where modified return is filed, proceed to
determination of arm's length price would be modified to this
assess or reassess or re-compute the total i n c o m e of t h e
extent and arm's length price shall be determined in
relevant assessment year having regard to and in accordance
accordance with APA.
with the APA and to such assessment, all the provisions
relating to assessment shall apply as if the modified return is a
5. The APA shall be valid for such previous years as specified in
return furnished under section 139 of the Act. The period of
the agreement which in no case shall exceed five consecutive
limitation for completion of such assessment or reassessment
previous 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 the
Commissioner (including income- tax authorities subordinate
14. All the other provisions of this Act shall apply accordingly as
to 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 binding
if 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 international
7. The APA can be declared void ab initio by Board, if it found
transactions not reported by the Assessee
that agreement has been obtained by the person by fraud or
misrepresentation of facts.
In the extant Transfer pricing regulations in the absence of
specific power, the determination of Arm's 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.


It is proposed to amend the section 92CA of the Act Effective from: - 1st April, 2012
retrospectively to empower Transfer Pricing Officer (TPO) to
determine Arm's Length Price of an international transaction
noticed by him in the course of proceedings before him, even if Distended definition of International Transaction
the said transaction was not referred to him by the Assessing
Officer, provided that such international transaction was not Certain judicial authorities have taken a view that in cases of
reported by the taxpayer as per the requirement cast upon him transactions of business restructuring etc. where even if there
under section 92E of the Act. is an international transaction Transfer Pricing provisions
would not be applicable if it does not have bearing on profits or
Effective from: - 1st June, 2002. loss of current year or impact on profit and loss account is not
determinable under normal computation provisions other
Transfer Pricing Regulations to apply to certain domestic than transfer pricing regulations. The present scheme of
transactions Transfer pricing provisions does not require that international
transaction should have bearing on profits or income of
It is proposed to introduce the transfer pricing provisions to current year.
the domestic related party transactions by application and
extension of scope of transfer pricing regulations to Therefore, there is a need to amend the definition of
transactions between related resident parties for the purposes international transaction in order to clarify the true scope of
of computation of income, disallowance of expenses etc. as the meaning of the term. "international transaction" and to
required 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, to
transactions as may be prescribed by the Board, if aggregate provide for the explanation to clarify meaning of international
amount of all such domestic transactions exceeds Rupees 5 transaction and to clarify the term intangible property used in
crore in a year. It is further proposed to amend the meaning of the definition of international transaction and to clarify that the
related persons as provided in section 40A to include 'international transaction' shall include a transaction of
companies having the same holding company. business restructuring or reorganisation, entered into by an
enterprise with an associated enterprise, irrespective of the
Effective 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 future
Determination of Arm's Length Price (ALP) date.

Clarification has been brought in section 92C (2) which says Effective from: - 1st April, 2002
while arriving at Arms Lenth Price if more than one price is
determined 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 of
such prices. The proviso to this sub-section was inserted by Section 92C provides methods for determination of Arm's
Finance Act, 2002 with effect from 01.04.2002 to ensure that in Length Price (ALP). Sub section (1) of the said section
case variation of transaction price from the arithmetic mean is prescribes the methods of computation of Arm's Length Price.
within the tolerance range of 5%, no adjustment was required Sub section (2) of the said sub section provides that if the
to 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 proviso
It 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 2012

to be a standard deduction but is treated only as range of Finance Act, 2011 provides that the Central Government may
tolerance while computing Arm's Length Price . notify a percentage and if variation between the ALP so
determined and the transaction price is within the notified
Effective from: - 1st April, 2002 percentage (of transaction price), no adjustment shall be made
to the transaction price. It is, therefore, proposed to amend
Filing of return of income, definition of international Section 92C (2) of the Act, so as to provide an upper ceiling of
transaction, tolerance band for ALP, penalties and 3% in respect of power of Central Government to notify the
reassessment in transfer pricing cases tolerance range for determination of arm's length price.

Vide the Finance Act, 2011 the due date for filing of return of Effective from: - 1st April, 2013
income in case of corporate assesses who were required to
obtain and file Transfer Pricing report (required under section Transfer Pricing Penalty Increased
92E of the Act), was extended to 30th November of the
assessment year. The provision has now been extended to all It is, therefore, proposed to amend additional penalty under
assesses [corporates and non-corporates] who are required to Section 271AA to provide levy of a penalty at the rate of 2% of
obtain 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 assessment
year.
21


Ÿ 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 the
Ÿ 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 assessment
Effective 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 assesse
Section 147 of the Act, provides for reopening of the cases of or not.
the previous years, if any income chargeable to tax has
escaped assessment. It is proposed to amend Section 147 of Effective from:- 1st day of April, 2009
the Act, to provide that in all cases where it is found that an
international 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 DRP
in 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 Act
escapement of income and such a case can be reopened under where an eligible assesse files an objection against the draft
section 147 of the Act. assessment order before the Dispute Resolution Panel (DRP),
then, the time limit for completion of assessments are as
Effective from: 1st July, 2012. provided in section 144C notwithstanding anything in section
153. A similar provision is proposed to be made where
Appeal 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 section
Under the provisions of sub-section (8) of section 144C, the 153B.
DRP has the power to confirm, reduce or enhance the
variations proposed in the draft order. The Income Tax It is also proposed to provide for exclusion of such orders
Department does not have the right to appeal against the passed by the Assessing Officer in pursuance of the directions
directions given by the DRP. The taxpayer has been given a of the DRP, from the appellate jurisdiction of the Commissioner
right 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 amendments
pursuance 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 and
section 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 pursuance
of directions of the DRP in respect of an objection filed on or
after 1st July, 2012.

Effective from: - 1st day of July, 2012.

Power of the DRP to enhance variations

Dispute Resolution Panel (DRP) had been constituted with a
view to expeditiously resolve the cases involving transfer
pricing issues in the case of any person having international
transactions or in case of a foreign company. It has been
provided under sub-section (8) of section 144C that DRP may
confirm, reduce or enhance the variations proposed in the
draft order of the Assessing Officer.


Adding Value with Quality and Commitment: Analysis of India's Budget 2012

Adding Value with Quality and Commitment: Analysis of India's Budget 2012

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Adding Value with Quality and Commitment: Analysis of India's Budget 2012

Similar to Adding Value with Quality and Commitment: Analysis of India's Budget 2012 (20)

More from TAXPERT PROFESSIONALS

More from TAXPERT PROFESSIONALS (20)

Recently uploaded

Recently uploaded (20)

Adding Value with Quality and Commitment: Analysis of India's Budget 2012