Direct Tax Proposals Analysis

K.VAITHEESWARAN
ADVOCATE & TAX CONSULTANT
Flat No.3, First Floor,
No.9, Thanikachalam Road,
T. Nagar,
Chennai - 600 017, India
Tel.: 044 + 2433 1029 / 4048
402, Front Wing,
House of Lords,
15/16, St. Marks Road,
Bangalore – 560 001, India
Tel : 080 22244854/ 41120804
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E-mail : vaithilegal@gmail.com, vaithilegal@yahoo.co.in
www.vaithilegal.com
BUDGET 2016
ANALYSIS OF DIRECTTAX PROPOSALS

 This presentation seeks to identify certain
key changes in the context of direct taxes.
 The comments are based upon existing
decisions as well as the provisions of the
Finance Bill, 2016; and the memorandum
explaining the provisions.

 No change in basic exemption limit and tax rates for
individual assessees
 Surcharge @ 15% where the income exceeds Rs.1 crore.
 Section 87A maximum limit of rebate for resident individuals
increased to Rs. 5,000 w.e.f. 01.04.2017.
 Limits under Section 80GG in respect of individuals who do
not have HRA enhanced to Rs. 5,000 per month w.e.f.
01.04.2017.
 Advance tax in four installments.

Section Current Provision Proposed
provision
80CCC - contribution to a
pension fund of LIC or IRDA
approved insurer
Rs. 1 ,00,000 Rs. 1,50,000
80GG - individuals who do not
have HRA - limits enhanced
Rs. 2,000 per month or
25% of total income ,
whichever is less
Rs. 5,000
per month

 Contribution by employer to superannuation fund in excess of Rs.1.5 lakhs treated as
perquisite as against Rs.1 lakh.
 Section 10(12) is proposed to be amended to provide that exemption under the
recognised provident fund will be limited to 40% of the accumulated amount arising out
of contributions made in such funds on or after 01.04.2016. However, this restriction
shall not be applicable to an employee whose monthly salary does not exceed
Rs.15,000.
 Similar amendment is proposed to be made to Section 10(13) regarding superannuation
fund.
 Any payment from a superannuation fund made by way of transfer to the account of
the employee under a pension scheme referred to in section 80CCD and notified by the
Central Government is proposed to be exempt.
 PPF will continue to remain EEE (Exempt, Exempt, Exempt)

 New clause 12(A) is proposed to be inserted to Section 10 providing that
any payment from the National Pension System Trust to an employee on
closure of his account or on his opting out of the pension scheme referred
to in section 80CCD, to the extent it does not exceed 40% of the total
amount payable to him at the time of such closure or his opting out of the
scheme will not form part of his total income.
 Confusion with reference to the law prompting a press release which
states that the objective is to encourage private sector employees to go
for pension security after retirement instead of withdrawing entire
money from PPF.
 Press release indicates that all representations made would be considered
at the time of enactment of the Finance Act.
 All withdrawals need not be for the purpose of investment and in most cases
withdrawal or loans being taken are in connection with college education;
overseas education; wedding; hospitalization; etc.
 Should not the choice of investment be available to the retiring employee?

 Section 24 proposed to be amended w.e.f. 01.04.2017.
 Where the self-occupied house property is acquired or constructed with
capital borrowed on or after 01.04.1999, interest deduction will be allowed
provided the acquisition or construction is completed within 5 years from
the end of the financial year in which the capital was borrowed (old limit 3
years).
 New Section 25A recognises the judicial principle laid down by the Delhi High
Court in CIT Vs. Uberoi Sons Machines Ltd. (TS-666-HC-2012) wherein it was
held that the arrears of rent received by the assessee (as mesne profits) could
not be brought to tax for the previous years, when they fell due. They could
be brought to tax only during the year of receipt.
 From 01.04.2017, arrears of rent or unrealised rent would be taxable in
the year of receipt even if the assessee is not the owner of the property in
that FinancialYear.
 A standard deduction of 30% of the arrears of rent or the unrealised rent shall
be allowed as deduction.

 First-home buyers availing home loans can claim additional
deduction in respect of interest on loan taken for residential
house property from any financial institution up to
Rs.50,000.
 Applicable only in case of house property with value less
than Rs. 50 lakhs and loan value not exceeding Rs. 35 lakhs.
 Loan should have been sanctioned between 01.04.2016 and
31.03.2017.
 This is in addition to deduction of Rs. 2 lakhs provided for
self-occupied property under Section 24.

 Tax rate reduced to 29% from 30% where the
turnover or gross receipts do not exceed Rs. 5
crores in the previous year 2014-2015.
 Surcharge @ 7% where the total income
exceeds Rs. 1 crore but does not exceed Rs. 5
crores.
 Surcharge at the rate of 12% where the total
income exceeds Rs. 10 crores.

 In respect of domestic companies registered on or after 01.03.2016,
optional income tax @ 25% on the total income plus applicable
surcharge and education cess.
 The company is engaged in the business of manufacture or production of
any article or thing and is not engaged in any other business;
 The company while computing its total income should not claim any
benefit under section 10AA, accelerated depreciation, additional
depreciation, investment allowance, expenditure on scientific research
and any deduction in respect of certain income under Part-C of Chapter-
VI-A other than the provisions of section 80JJAAExercise of option in
prescribed format before due date for filing of return.
 Interesting development indicating a move towards flat rate of tax sans
deductions.

 Section 32(1)(iia) is proposed to be amended w.e.f.
01.04.2017 to provide that the plant & machinery acquired
and installed for transmission activity would also be eligible
for additional depreciation.
 Section 32AC is proposed to be amended to provide that the
acquisition of the plant & machinery exceeding Rs. 25 crores
has to be made in the previous year. However, installation
may be made by 31.03.2017 in order to avail the benefit of
additional depreciation of 15%

 Existing system results in double taxation since the profit of the company is
taxed and when the dividend is distributed there is a dividend distribution
tax (DDT).
 Dividend in the hands of the shareholder was exempt from tax in terms of
Section 10(34) where the dividend had suffered DDT under Section 115-O.
 Section 115BBDA provides for a levy of 10% tax on dividends declared,
distributed or paid by a domestic company, which exceed Rs.10 lakhs.
 This levy is applicable to individuals HUF or firms resident in India.
 No deduction in respect of any expenditure or allowance or set off is
allowable while computing the income by way of dividends.
 Dividend for the purpose of this provision has the same meaning as set out
in Section 2(22) but excludes Section 2(22)(e).
 Section 10(34) is being amended whereby it excludes income by way of
dividend chargeable to tax under Section 115BBDA.
 The provisions are effective from 01.04.2017.
 Triple taxation.

 Section 9A provides for a special regime in respect of
offshore funds and an eligible investment fund shall not be
considered as a resident in India merely because the fund
manager is located in India.This is subject to conditions.
 Section 9A is being amended whereby, eligible Investment
Funds for the purpose of ‘business connection’ in India, for
the purpose of Section 9A, will also not include a fund that is
established or incorporated or registered in a country or a
specified territory notified by the Central Government in
addition to funds resident of countries with which India has
an agreements under Section 90(1) or Section 90A(1).
 The fund shall not carry on or control or manage directly or
indirectly any business in India. [The term ‘from India’ is being
deleted.] The amendments are effective from 01.04.2017.

 Supreme Court in Castleton Investment Ltd.
 Justice A.P. Shah Committee recommendations.
 Retrospective amendment to Section 115JB w.e.f. 01.04.2001 to
provide that the provisions shall not be applicable to a foreign
company
 if the assessee is a resident of a country / territory which has an
agreement under Section 90 / 90A with India and the assessee
does not have a PE in India as per the said agreement.
 if the assessee is a resident of a country with which India does
not have an agreement and the assessee is not required to seek
registration under any law for the time being in force relating to
companies.

 New Section 115JB(7) provides that where
 the assessee is a unit located in an International Financial Services Centre and
 derives its income solely in convertible foreign exchange,
 Minimum AlternateTax shall be chargeable at the rate of 9%.
 Surcharge as applicable will be levied.
 Section 115-O proposed to be amended to provide that no tax on distributed
profits shall be chargeable in respect of the total income of a company being a
unit located in IFSC, deriving income solely in convertible foreign exchange, for
any assessment year on any amount declared, distributed or paid by such
company, by way of dividends (whether interim or otherwise) on or after the
01.04.2017 out of its current income, either in the hands of the company or the
person receiving such dividend.
 IFSC has the meaning assigned to it in the SEZ Act and unit means a unit
established in an IFSC on or after 01.04.2016.

 OECD recommends BEPS Action Plan 5 - income arising from
exploitation of Intellectual property (IP) should be attributed and taxed in
the jurisdiction where substantial R&D activities are undertaken rather
than the jurisdiction of legal ownership only.
 New Section 115BBF from 01.04.2017.
 Applicable to a person resident in India who is a patentee.
 Income by way of Royalty in respect of patent developed and registered in
India attracts income tax on income by way of Royalty @ 10%.
 No expenditure or allowance in respect of such Royalty income shall be
allowed under the Act.
 Royalty / Patent / Patentee defined.
 Changes made to Section 115JB whereby the income under Section 115BBF
shall be deducted and the expenditure incurred shall be added while
computing book profit.
 The objective apparently is to encourage R&D and make India a global
R&D hub through the concessional rate and encourage companies to
commercialize existing patents and develop new patents in India.

 Chapter-VIII of the Finance Bill, 2016
 Not a levy under the IncomeTaxAct
 Equalization levy means the tax leviable on consideration
received or receivable for any specified service under the
provisions of this chapter.
 Provisions shall come into force from a date to be notified.
 Specified service means online advertisement, any provision for
digital advertising space or any other facility or service for the
purpose of online advertisement and includes any other service
as may be notified by the Central Government in this behalf.
 New tax with huge implications and potential litigation
including on validity.

 Section 163 of the Finance Bill, 2016 provides that every resident carrying
on business or profession or a non-resident having PE in India (also
defined in the Chapter) shall deduct equalization levy from the amount
paid or payable to a non-resident in respect of the specified service at the
rate of 6% where the consideration for the specified service exceeds Rs.1
lakh.
 Various provisions of the IncomeTax Act made applicable.
 Amendment to Section 40 to provide for a disallowance if equalization
levy has not been deducted or not paid after deduction.
 Insertion of Section 10(50) to provide that income arising from any
specified service provided on or after the date Chapter-VIII comes into
force and chargeable to equalization levy shall not form part of total
income.
 Payments by residents / non-residents having PE to Google, Yahoo and
various other web-sites for online advertisements.

 The Tribunal in the case of Pinstorm Technologies Pvt. Ltd. Vs ITO had held that
similar payments do not attract TDS as they constitute business profits and not
taxable in the absence of PE.
 Tribunal in the case of Right Florists Pvt. Ltd. had held that search engines such
as Google, etc. do not have a fixed place unless the web servers are located in the
relevant jurisdiction.
 Attempt to surpass the concept of PE in the legislation and DTAA.
 Whether the levy is unconstitutional given the fact that Section 66B of the
Finance Act, 1994 levies service tax ?
 Service tax levied under Entry 97A, Union List and through Section 66C, if the
place of provision of service is considered to be in the taxable territory, service
tax can be imposed.
 Whether Section 40 can be amended even before Chapter-VIII comes into force?
 Whether there can be a disallowance of an expenditure on account of non-
deduction of tax which is not an income tax ?
 Whether the benefit of DTAA can still be availed ?
 Whether the proper course of action is the renegotiation of the definition of ‘PE’
in the DTAA ?

 The OECD report on BEPS Action Plan13 provides for revised standards for transfer
pricing documentation and a template for country-by-country reporting of income,
earnings, taxes paid and certain measure of economic activity.
 Section 286 is proposed to be introduced w.e.f. 01.04.2017 containing provisions
regarding furnishing of report in respect of international group which shall include:
 the aggregate information in respect of the amount of revenue, profit or loss
before income-tax, amount of income-tax paid, amount of income-tax accrued,
stated capital, accumulated earnings, number of employees and tangible assets
not being cash or cash equivalents, with regard to each country or territory in
which the group operates;
 the details of each constituent entity of the group including the country or
territory in which such constituent entity is incorporated or organised or
established and the country or territory where it is resident;
 the nature and details of the main business activity or activities of each
constituent entity; and
 any other information as may be prescribed.

 Finance Act, 2015 had amended Section 6 of the Income Tax
Act whereby it was provided that a company would be
resident in India in any previous year if it is an Indian
Company or its POEM in that year is in India.
 POEM was defined to mean a place where key management
and commercial decisions that are necessary for the conduct of
the business of an entity as a whole are, in substance made.
 Provisions are now effective from 01.04.2017.
 Deferred by a year.

 Section 80-IBA
 100% deduction of the profits of an assessee developing and building
affordable housing projects if the housing project is approved by the
competent authority before the 31st March, 2019.
 Project should be completed within a period 3 years from the date of
approval.
 Project should be on a plot of land measuring not less than 1000 sq.
mt. with the size of the residential unit not more than 30 sq. ft. where
the project is within 25 kms. from municipal limits of the four metros.
 In any other area, the land should not be less than 200 sq. mt. and the
size of residential unit is not more than 60 sq. mt.
 Where residential unit is allotted to an individual, no such unit shall be
allotted to him or any member of his family, etc.

 Section 50C.
 Delhi ITAT in the case of Modipon Ltd. had held that the rate
prevailing on the date of execution was relevant and not the rate
prevailing on the date of registration.
 Section 50C amended from 01.04.2017.
 Where the date of the agreement fixing the amount of consideration
and the date of registration of transfer of capital asset are not the
same, the value adopted or assessed by the stamp authorities on the
date of the agreement may be taken for computing full value of
consideration for such transfer.
 This provision is applicable only where the amount of consideration
or a part thereof has been received by way of an account payee
cheque or account payee bank draft or ECS on or before the date of
agreement of transfer.

Section Description of Exemption
10(23DA) • Any income of a securitization trust from the activity of securitization
will not form part of total income.
• Securitization to cover acquisition of financial assets by any
securitisation company or reconstruction company from any
originator, whether by raising of funds by such securitisation company
or reconstruction company from qualified institutional buyers by issue
of security receipts representing undivided interest in such financial
assets or otherwise as given under Section 2(1)(z) of the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.
10(23FC) Now also includes dividend referred to in Section 115O(7). Section 115O(7)
deals with non applicability of dividend distribution tax in respect of dividend
declared or distributed or paid to a business trust out of current income by a
specified domestic company on or after the specified date.

Section Description of Exemption
10(38) Exemption from tax on capital gains in respect of income arising from
transaction undertaken in foreign currency on a recognized stock exchange
located in an International Financial Services Center even when STT is
not paid in respect of such transactions.
10(48A) • Any income accruing or arising to a foreign company on account of
storage of crude oil in a facility in India and sale therefrom to any person
resident in India will not form part of the total income.
• The storage and sale by the foreign company must be pursuant to an
agreement or an arrangement entered into by the Central Government
or approved by the Central Government; and having regard to the
national interest, the foreign company and the agreement or
arrangement are notified by the Central Government in this behalf.
10(50) Income arising from any specified service provided on or after the date
Chapter-VIII comes into force and chargeable to equalization levy.

 100% deduction of profits and gains derived by an eligible start-up from a
business involving innovation development, deployment or commercialization of
new product, process or services driven by technology or intellectual property. –
Section 80-IAC
 Available to an eligible start-up which is setup before 01.04.2019.
 The start-up should fulfil conditions prescribed in this Section for availing
benefits under this Section.
 Deduction can be claimed for three consecutive years out of five years beginning
from the year in which it was incorporated.
 The total turnover of the business does not exceed Rs.25 crores in any of the
previous years beginning on or after 01.04.2016 and ending on 31.03.2021.
 Special fund to be created and new Section 54EE provides exemption from
capital gains where LTCG proceeds are invested in units of such specified fund
subject to limits.
 Section 54GB amended to provide that LTCG on account of transfer of residential
property not taxable if the gains are invested in the subscription of shares of a
company which qualifies as an eligible start-up subject to conditions.

 Threshold limit of Section 44AD increased from Rs.1 crore to
Rs.2 crores.
 If presumptive method followed for a previous year and
actual profit is adopted in any of the five assessment years
relevant to the previous year succeeding such previous year,
the benefit of this section is not available for subsequent five
assessment years.

 New Section 44ADA inserted to introduced a presumptive taxation scheme
for persons having income from profession.
 Estimation of income of an assessee engaged in any profession referred to in
Section 44AA such legal, medical, engineering, architectural profession or
profession of accountancy or technical consultancy or interior decoration or
any other profession notified by the Board.
 Gross receipts should not exceed Rs.50 lakhs in a previous year.
 50% of the gross receipts or a sum higher than that would be the income.
 Applicable to resident individuals / HUF / partnership firms / excluding LLP.
 All deductions deemed to be allowed including depreciation.
 Books of account not required to be maintained.
 Tax audit if the assessee claims that the profits and gains are lower than the
presumptive profits / gains.

Insertions
Share of member of an AoP in the income of the AoP which is
not taxable in terms of Section 86 of the Income Tax Act, shall be
excluded while computing MAT for the member. The amount of
expenditure relatable thereto shall be added back to the book
profit.
Income from transaction in securities (other than short term
capital gains arising on transactions on which securities
transaction tax is not chargeable) accruing or arising to FII shall
be excluded while computing MAT.The book profit shall be
increased by the amount of expenditure relatable to income
from transactions in securities

 Conversion of a private company to an LLP even more stringent with an
additional condition that the total value of assets as appearing in the books
of account of the company in any of the three previous years preceding the
previous year in which the conversion takes place does not exceed Rs. 5
crores.
 Proposed insertion of new sub-Section (xix) to Section 47 providing that any
transfer by a unit holder of a capital asset, held by him in the consolidating
plan of a mutual fund scheme, made in consideration of the allotment to him
of a capital asset, being a unit or units, in the consolidated plan of that
scheme of the mutual fund would not be regarded as transfer.
 Section 112 amended to clearly provide for tax at the rate of 10% on LTCG
arising from the transfer of a capital asset being shares of a company not
being a company in which public are substantially interested.

 The Delhi Tribunal in the case of Satya Kant Khosla v. ITO [2015] 63 taxmann.com
293 (Delhi - Trib.) held that sum received by Managing Director of 'Suzuki India', a two
wheeler manufacturing company, at time of termination of his relationship with said
company for not sharing his knowledge with any other person carrying on business of
manufacturing of two wheelers would be treated as sum received for a restrictive
covenant in relation to a profession, and not business and would not fall under Section
28(va).
 Section 28 amended from 01.04.2017, to include income from non-compete fee
received or receivable for not carrying out any profession under the head profits and
gains from business and profession.
 It is also proposed to amend the proviso to clarify that receipts for transfer of right to
carry on any profession, which are chargeable to tax under the head "Capital gains",
would not be taxable as profits and gains of business or profession.
 Amendment proposed to Section 55 w.e.f. 01.04.2017 to provide for provisions
regarding calculation of ‘indexed cost of improvement’ and ‘indexed cost of
acquisition’ for working out capital gains on receipts arising out of transfer of right to
carry on any profession shall also be taken as 'nil'.

Section Particulars of Payment Old Limits New Limits
192A Payment of ELP of due to employee 30,000 50,000
194BB Winning from horse race 5,000 10,000
194C Payments to Contractors Aggregate
annual Limit
of 75,000
Aggregate
annual limit of
1,00,000
194D Insurance Commission 20,000 15,000
194G Commission on sale of lottery tickets 1,000 15,000
194H Commission or Brokerage 5,000 15,000
194LA Compensation on immoveable
property
2,00,000 2,50,000

Section Particulars of Payment Old
Limit
New Limit
194DA Life Insurance Policy 2% 1%
194EE NSS Deposits 20% 10%
194G Commission on LotteryTickets 10% 5%
194H Commission or Brokerage 10% 5%
194LBB Units of Investment Funds 10% where payee is resident;
rate in force where payee is a
non-resident (not being a
company) or a foreign company.
194LBC Investment in Securitization Trust-
where any income is payable to a resident
investor, in respect of an investment in a
specified securitisation trust, the person
responsible for making the payment shall
deduct tax at source.
25% if payee is an individual or
HUF;
30% if payee is any other person

ITEM PERSON RESPONSIBLE RATE OF
TCS
Motor vehicle
value exceeding
Rs.10 lakhs
Seller at the time of receipt from the buyer in cash /
cheque / draft or any other mode has to collect from
the buyerTCS.
1%
Goods and
Services
Every person being a seller who receives any amount
in cash for sale of any other goods (other than bullion
and jewellery) or providing any service, where it
exceeds Rs.200,000/-, has to collect from the buyer
TCS.
1%
 Section 206C provides forTCS in respect of number of items
including bullion and jewellery.
 Scope expanded from 01.06.2016.
 Non-applicability to certain class of buyers to be prescribed.

 Section 206AA is being amended to provide that the provisions shall not
apply to a non-resident not being a company or to a foreign company in
respect of
 Interest under Section 194-LC and
 Any other payment subject to such conditions as may be prescribed.
 Justice Easwar Committee recommendations.
 Exemption from DDT in respect of distributions made by SPV to a business
trust subject to conditions.
 Relief to NBFCs in the form of amendment to Section 36(1)(viia) to provide
for deduction on account of provision of bad and doubtful debts to the
extent of 5% of the total income.
 Drive towards paperless assessment through amendments in Section 282A
and Section 143(2).
 Refund of tax arising out of appeal if delayed beyond the period specified in
Section 153(5), additional interest at the rate of 3% per annum.

 Time limit for belated return under Section 139(4) reduced and is now before
the end of the relevant assessment year or before the completion of
assessment whichever is earlier.
 Revised return under Section 139(5) can be furnished before the expiry of
one year from the end of the relevant assessment year or before the
completion of the assessment whichever is earlier.
 Scope of 143(1)(a) adjustment widened and also covers addition of income
appearing in Form 26AS or Form 16A or Form 16 which is not included in the
computation of the total income in the return. However no adjustment shall
be made unless intimation is given in writing or in electronic mode.
 Time limit for completion of assessment under 143 or 144 is now 21 months
from the end of the assessment year.
 Concept of e-hearing whereby the definition of ‘hearing’ under Section
2(23C) includes communication of data and documents through electronic
mode.

 Section 271 omitted from 01.04.2017 and penalty is under the new Section 270A.
 Penalty shall be equal to 50% of the amount of tax payable on under reported
income.
 Elaborate definition of ‘under reported income’.
 In terms of Section 270A(8), penalty shall be equal to 200% of the amount of tax
payable on under reported income where the under reported income is in
consequence of any misreporting.
 Misreporting of income referred to in Section 270A(8) covers
 Misrepresentation or suppression of facts;
 Failure to record investments in books of accounts;
 Claim of expenditure not substantiated by any evidence;
 Recording of any false entry in the books of account;
 Failure to record any receipt in the books of account having a bearing on total
income and
 Failure to report any international transaction or any transaction deemed to be an
international transaction or any specified domestic transaction to which Chapter X
applies.

 Sweeping changes in penal provisions.
 Usage of ‘shall’ against ‘may’.
 SC in CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR
158 had held that where the assessee had claimed deduction of
the entire interest when there was an exempt income requiring
proportionate disallowance under Section 14A, penalty cannot
be justified even if disallowance was justified.

 SecuritizationTrust – New Section 115TA
 Phase out plan for incentives, weighted deductions set out in the legislation
with identification of sunset clauses; percentage of deductions; etc.
 Capital expenditure incurred for acquisition of spectrum – amortization
through Section 35ABA
 Section 115QA amended to plug the loophole and accordingly the provisions
are no longer restricted to only buyback under Section 77A and shall cover
any buy back of unlisted shares undertaken by the company in accordance
with the provisions of the law relating to the Companies
 Tax Audit limit for professionals increased to Rs.50 lakhs.
 Amendment to Section 56 to exclude any shares received by an individual or
HUF as a consequence of demerger or amalgamation of a company.
 Loss under Section 73A cannot be carried forward unless return is filed –
Section 80.

 Income Declaration Scheme, 2016 inserted by Chapter IX w.e.f 01.06.2016 proposing limited
period (01.06.2016 to 30.09.2016) Compliance Window for domestic taxpayers to declare
undisclosed income or income represented in the form of any asset and clear up their past tax
transgressions by paying tax at 30%, and surcharge at 7.5% (Krishi Kalyan surcharge to be
used for agricultural development) and penalty at 7.5%, which is a total of 45% of the
undisclosed income.The salient features of the Scheme are:
 Undisclosed income declared not to affect finality of completed assessments.
 Declarations made under the scheme shall be exempt from wealth-tax in respect of assets
specified in declaration.
 No scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in
respect of such declarations and immunity from prosecution under such Acts be provided.
 Immunity from the Benami Transactions (Prohibition) Act, 1988 subject to certain
conditions.
 Any amount of tax and surcharge paid in respect of voluntarily disclosed income not
refundable.
 Where a declaration under the scheme has been made by misrepresentation or
suppression of facts, such declaration shall be treated as void.

 The following cases are not eligible:-
 where notices have been issued under section 142(1) or 143(2) or 148 or 153A
or 153C, or
 where a search or survey has been conducted and the time for issuance of
notice under the relevant provisions of the Act has not expired, or
 where information is received under an agreement with foreign countries
regarding such income,
 cases covered under the Black MoneyAct, 2015, or
 persons notified under Special Court Act, 1992, or
 cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic
Substances Act, 1985, the UnlawfulActivities (Prevention) Act, 1967, the
Prevention of Corruption Act, 1988.

 VDIS, 1997 was upheld by the Supreme Court in All India
Federation of Tax Practitioners Vs. UoI (1998) 231 ITR 24 based
on the statement given by the Attorney General to the effect that
they would step up survey operations; search operations; after
31.12.1997. The statement also referred to the stringent provisions
for tax and penalty; promised tightening of the enforcement of
law through accelerated issue of PAN; computerization and
installation of software and the fact that the Finance Minister had
announced that in every case of detection prosecution will be
launched.
 The Supreme Court in the case of R.K. Garg Vs. UoI (1982) 133 ITR
239 known as the ‘bearer bonds case’ had upheld a similar scheme
of immunity.

 The scheme be applicable to "tax arrear" which is defined as the amount of tax,
interest or penalty determined under the Income-tax Act or the Wealth-tax Act,
1957 in respect of which appeal is pending before the Commissioner of Income-tax
(Appeals) or the Commissioner ofWealth-tax (Appeals) as on 29.02.2016.
 The pending appeal could be against an assessment order or a penalty order.
 The declarant under the scheme be required to pay tax at the applicable rate
plus interest upto the date of assessment. However, in case of disputed tax
exceeding Rs. 10 lakhs, 25% of the minimum penalty leviable shall also be
required to be paid.
 In case of pending appeal against a penalty order, 25% of minimum penalty
leviable shall be payable along with the tax and interest payable on account of
assessment or reassessment.
 Consequent to such declaration, appeal in respect of the disputed income and
disputed wealth pending before the Commissioner (Appeals) shall be deemed to be
withdrawn.

K.VAITHEESWARAN
ADVOCATE & TAX CONSULTANT
Flat No.3, First Floor,
No.9, Thanikachalam Road,
T. Nagar,
Chennai - 600 017, India
Tel.: 044 + 2433 1029 / 4048
402, Front Wing,
House of Lords,
15/16, St. Marks Road,
Bangalore – 560 001, India
Tel : 080 22244854/ 41120804
Mobile: 98400-96876
E-mail : vaithilegal@gmail.com, vaithilegal@yahoo.co.in
www.vaithilegal.com

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