Taxation Laws Bill introduced
A recap of the Taxation Laws (Amendment) Ordinance, 2005 promulgated on 31.10.2005.
(i) Clause (15A) of section 10 of the Income-tax Act has been amended so as to provide that any payment received in respect of a lease of an aircraft or an aircraft engine by the Government of a foreign state or a foreign enterprise from an Indian company engaged in the business of operation of an aircraft under an agreement entered into before 1st, April, 2006 shall be exempt from Income-tax. A consequential amendment of clause (6BB) of section 10 of the Income-tax Act has been carried out.
(ii) The following new clauses have been inserted in section 10 of the Income-tax Act:-
(a) Clause (39) exempts specified income of the persons notified by the Central Government arising from any international sporting event conducted in India, approved by the recognised international body responsible for regulating the relevant sport and having multi-nation participation.
(b) Clause (40) exempts any income of any subsidiary company by way of grant or otherwise received from an Indian company, being its holding company engaged in the business of generation, transmission or distribution of power if such receipt is for settlement of dues in connection with reconstruction or revival of an existing business of power generation taken over by an Indian company, referred to in sub-clause (a) of clause (v) of sub-section (4) of section 80-IA.
(c) Clause (41) exempts any income arising from transfer of a capital asset, being an asset of an undertaking engaged in the business of generation, transmission or distribution of power where such transfer is effected on or before 31.3.2006 to the Indian company notified under sub-clause (a) of clause (v) of sub-section (4) of section 80-IA.
(iii) Section 80-IA of the Income-tax Act has been amended so as to provide that an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant shall be eligible for tax benefit under the said section if it fulfils the following conditions:-
(a) such Indian company is formed before 30.11. 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified before 31.12.2005 by the Central Government;
(b) such undertaking begins to generate or transmit or distribute power before 31.3.2007.
(iv) Section 115W of the Income-tax Act has been amended so as to provide that a political party registered under section 29A of the Representation of the People Act, 1951 with Election Commission of India and companies registered under section 25 of the Companies Act,1956 and section 12AA of the Income-tax Act will not be liable to fringe benefit tax in terms of section 115WA of the income-tax Act.
(v) Chapter-VII of the Finance Act, 2005 has been amended so as to provide that inter- bank transactions would be exempt from Banking Cash Transaction Tax.
Now the Ordinance is to be replaced with the THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2005 introduced in the Lok Sabha on 6th December. The Bill after becoming the Act will have retrospective effect from 31.10.2005, the date of the ordinance.
Profits from transfer of DEPB and DFRC included in income chargeable to Income Tax under Section 28 and for deduction under Section 80 HHC. Exporters should be happy.
Section 28 of the Income Tax Act enumerates the items of income chargeable to tax under the head “profits and gains of business or profession” This includes profits from transfer of certain export scrip but does not include DEPB and DFRC, which are now added. But what really matters is not the taxability under Section 28 but the deductability under Section 80 HHC. Under this Section profits from exports are deducted from the total income and this deduction is also allowed to the extent of 90% of the profits earned by sale of export incentive scrips but here also DEPB and DFRC were not included which had led to several disputes.