| April 7, 2007 |
| Every year, the Institute organizes a workshop on the Union Budget in which the senior officials from the Central Board of Direct Taxes and Central Board of Excise and Customs participate and give appropriate clarifications. Based on the deliberations of the workshop on the Union Budget 2007-08 the Institute prepared its Post-Budget Memorandum which has been submitted to the Government on 5th April 2007. President ICAI CA. Sunil Talati in a press statement said that, the ICAI has suggested a number of amendments to the proposals contained in the Finance Bill, 2007 which would help the Government to achieve the desired objectives. |
Following are certain important suggestions relating to Direct taxes:
- Rates of tax: The income limit for the applicability of surcharge in the case of individuals and HUFs should also be increased to Rs. 1 crore. This would also ensure horizontal equity.
- Clause 8 – Amendment of section 12A : It may be provided that the trust can make application for registration within one year from the date of its creation. Further, the proposal to remove the power of the Commissioner to condone the delay in applying for registration may be modified and the Commissioner may be given power to condone the delay in line with section 264.
- Clause 12 sub-clause (C) – Amendment of section 36(1)(viii) : The provisions of the proposed clause (viii) of section 36(1) may be modified to extend the benefit of deduction of special reserve to a banking company and a co-operative bank in respect of the business of providing long-term finance for the purchase and construction of houses in India.
- Clause 13 - Substitution of sub-section (3) in section 40A :
- The concept of payment adopted under section 36(1)(ib) namely “payment by any mode of payment other than cash” may also be incorporated in section 40A(3).
- All the existing circumstances permitting the assessee to make payment by a mode otherwise than by an account payee cheque may be continued. Further, payment by such modes as electronic transfer, mail transfer and internet transfer should also be permitted.
- Clause 14 - Insertion of sub-section (2AB) in section 49 : The method of valuation of securities and shares coming within the ambit of FBT may be clarified and proper certification of the same may be prescribed.
- Clause 17 – Amendment of section 72A : In order to encourage co-operative banks amalgamating and becoming more financially viable, the benefit of section 72A of the Income-tax Act may be extended to co-operative banks also.
- Clause 26 - Amendment of section 115JB (2) Explanation
Even though the principle of promissory estoppel is not applicable to taxation laws it would be a healthy practice if an incentive provision is not curtailed in the midway.
- Fringe Benefit Tax
- The scope of the expression “directly or indirectly” occurring in the new sub clause (d) proposed to be inserted in section 115WB(1) may be defined precisely to avoid litigation regarding the liability of the entity for the fringe benefit tax.
- The substitution of clause (vii) in sub section (2) of section 115 WB relating to distribution of free samples, being clarificatory in nature, should be made effective from 1st April, 2007.
- The fringe benefit tax should be integrated with the income-tax. The assessee may be required to pay income-tax and fringe benefit tax by way of one consolidated challan only and inter-se adjustments may be allowed. This will not only reduce paper work but also avoid unnecessary refund of taxes, said CA. G Ramaswamy, Chairman, Fiscal Laws Committee of ICAI.
- Clause 36 - Insertion of new section 139D – Electronic filing of tax audit report
It is suggested that in the interest of the revenue it should be provided that wherever the assessee is required to get his accounts audited under section 44AB, he should furnish the tax audit report either electronically whether with the return of income or otherwise.
- Clause 48 – Amendment of section 194J
The existing rate of 5% for deduction of tax at source in respect of fees from professional and technical services may be retained
- Proposals relating to the Settlement Commission
- Relaxation of the dates for completion of cases and payment of taxes
Search cases may be allowed to file applications for settlement in case there is complexity. Further, it is proposed that the existing admitted cases have to be completed before 31st March, 2008. It is suggested that the cases may be completed in the particular staggered manner. Similarly, the cut-off date for payment of admitted taxes for the cases already admitted has been proposed to be fixed as 31st July, 2007. It is suggested that the cut-off dates may also be staggered in appropriate manner.
- Abatement of proceedings - Clause 60 – Insertion of new sections 245HA and 245HAA
A proviso may be inserted to the effect that the proceedings shall not abate in case the Settlement Commission passes an order to the effect that the delay in passing the order is due to reasons beyond the control of the applicant.
- Clause 67(iii) – Insertion of Explanation 5A in section 271
Where income is recorded in the books of account prior to the date of search, whether the assessee has furnished his return of income or not the deeming provisions of Explanation 5A should not be applicable to him.
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| Following are certain important suggestions relating to Indirect taxes: |
SERVICE-TAX
- Clause 125(A) – Works contract
The clauses relating to the existing services may be amended so as to exclude services provided in respect of the works contract. Further, it is suggested that the option to elect for the composition scheme must be for each contract. Also, in case common inputs are used for contracts where full tax is paid as well as where the composition scheme is availed, CENVAT Credit may be allowed to be claimed on a proportionate turnover basis.
- Renting of immovable property – Clause 125A
- The responsibility of payment of service tax should be vested upon the service recipient. The service recipient i.e. a commercial establishment would be better placed and would be having adequate infrastructure to fulfill the statutory obligations as compared to the service provider who may be old individuals also. In addition to making the service recipient liable for payment of service tax, a mechanism should be worked out so that the exemption of Rs. 8,00,000/- would be available to the property owner only.
- The units, which are rented, should not be considered as premises from where services are provided.
- The premises where records are kept and bills are issued should be registered without it being considered as registration pursuant to centralized billing or accounting thus dispensing with the permission from Commissioner of Central Excise.
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