TIOL-DDT 524 · the untouched capture
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<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#660066"><b>TIOL-DDT
524</b></font><b><br>
03.01.2007<br>
Wednesday</b></font></p>
<p align="center" class=section1><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Condonation
of delay in filing IT return u/s 119 ? CBDT instructions</b></font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
CBDT instructs that</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 1. No fresh application
for claim of refund will be entertained beyond six years from the end of the
assessment year for which the application/claim is made.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 2. The amount of
refund should not exceed Rs.50 Lakhs in respect of Chief Commissioners and Rs
10 Lakhs for Commissioners.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
3. No interest will be admissible on the belated refund claims.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=67&filename=notification/cbdt/2006/instruct0613.htm">INSTRUCTION
NO 13/2006, Dated: December 22, 2006</a></b></font></p>
<p align="center" class=section1><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Finance
Act 2006 ? Board explains</b></font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Finance Act 2006, came into effect on 18.4.2006 and now the CBDT has explained
the intricacies of the budget. </font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some
important issues</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rationalisation
of provisions relating to deduction of health insurance premium paid by the
employer:- </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any
premium paid by the employer or any reimbursement of premium paid by the employees
for health insurance schemes of other insurers, approved by the Insurance Regulatory
and Development Authority, shall also be exempt from the purview of perquisites.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Deduction
in the computation of income against taxes paid on income earned outside India</st1:country-region>
not allowable</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation
1 has been inserted to sub-clause (ii) of clause (a) of section 40 of the Income-tax
Act thereby clarifying that any sum paid outside India and eligible for relief
of tax under section 90 or deduction from the income-tax payable under section
91 is not allowable, and is deemed to have never been allowable, as a deduction
under section 40 of the Income-tax Act. The taxpayers, however, will continue
to be eligible for tax credit in respect of income-tax paid in a foreign country
in accordance with the provisions of section 90, or as the case may be, section
91.This amendment is clarificatory in nature and is inserted in the Income-tax
Act on 1st April, 2006.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest
not 'actually paid' not eligible for deduction under section 43B</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under
the existing provisions in clause (d) of section 43B, any sum payable by the
assessee as interest on any loan or borrowing referred to in that clause is
allowed as deduction in the computation of income if the sum payable as interest
is actually paid by the assessee.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board
has noticed that certain assessees were claiming deduction under section 43B
on account of conversion of interest payable on an existing loan into a fresh
loan on the ground that such conversion was a constructive discharge of interest
liability and, therefore, amounted to actual payment. Claim of deduction against
conversion of interest into a fresh loan is a case of misuse of the provisions
of section 43B. A new Explanation 3C has, therefore, been inserted to clarify
that if any sum payable by the assessee as interest on any loan or borrowing,
referred to in clause (d) of section 43B, is converted into a loan or borrowing,
the interest so converted, shall not be deemed to be actual payment.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
amendment takes effect retrospectively from 1st April, 1989 i.e. the date from
which clause (d) was inserted in section 43B and applies in relation to assessment
year 1989-90 and subsequent years.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Benefits
of section 80 C to fixed deposits in banks</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section
80C provides for a deduction of rupees one lakh to an individual or a Hindu
undivided family, with respect to sums paid or deposited in certain specified
schemes. The investments or payments eligible for deduction include life insurance
premia, contributions to provident fund or schemes for deferred annuities, purchase
of infrastructure bonds, payment of tuition fees, repayment of principal amount
of housing loans, etc. Further, in order to minimise distortions, there are
no sectoral caps and the assessee is free to choose any one or more of the eligible
avenues within the overall ceiling specified.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To
provide a level playing field amongst banks and other institutions like insurance
companies, mutual funds, etc. a new clause (xxi) in sub-section (2) of section
80C has been inserted so as to provide that investment in a term deposit for
a fixed period of not less than 5 years with any scheduled bank, shall be eligible
for deduction under the said section. </font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rationalisation
of provisions of section 80CCC</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section
80CCC provides that an assessee, shall be allowed a deduction (up to rupees
ten thousand) from his total income of the amount paid or deposited by him to
effect or keep in force a contract for any annuity plan of Life Insurance Corporation
of India or any other insurer for receiving pension from the fund referred to
in clause (23AAB) of section 10.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since
the deduction available under section 80C and section 80CCC are capped by an
overall limit of rupees one lakh, as Said down in section 80CCE, and there are
no sectoral caps in section 80 C, the provisions of the two sections have been
aligned by amending the provisions of section 80CCC so as to increase the limit
of investment from rupees ten thousand to rupees one lakh. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Taxation
of anonymous donations received by wholly charitable trusts or institutions
including non-profit educational or medical institutions</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
of wholly charitable or religious trusts or institutions as well as partly charitable
or religious trusts or institutions is exempt from income-tax under sections
11 and 12, subject to the fulfillment of certain conditions of application of
income and investment in specified modes. Similarly, income of any university
or other educational institution or any hospital or other medical institution
or any fund or institution or any trust or institution is exempt from income-tax
subject to the fulfillment of conditions.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With
a view to prevent channelisation of unaccounted money to these institutions
by way of anonymous donations, a new section 115BBC has been inserted to provide
that any income of a wholly charitable trust or institution by way of anonymous
donation shall be included in its total income and taxed at the rate of 30 per
cent. Anonymous donation made to wholly charitable and religious trusts or institutions,
i.e. mixed purpose trusts or institutions shall be taxed only if it is for any
university or other educational institution or any hospital or other medical
institution run by them. Anonymous donation to wholly religious trusts or institutions
will not be taxed.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Powers
of the Board to issue directions regarding the power and function of the Income-tax
authorities</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section
120 lays down the jurisdiction of the income-tax authorities. The existing provisions
contained in sub-section (1) of the section, provide that the income-tax authorities
shall exercise all or any of the powers and perform all or any of the functions
conferred on or, assigned to, such authorities in accordance with directions
issued by the Board for the exercise of such powers and functions by all or
any of those authorities.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With
a view to clarify the intention of the legislature, an explanation to sub-section
(1) of the said section has been inserted so as to clarify that any income-tax
authority, being an authority higher in rank, may exercise the powers and perform
the functions of the income-tax authority lower in rank, if it is so directed
by the Board under the said section. And this amendment will have retrospective
effect from 1st April, 1988.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Omission
of the one-by-six scheme</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under
the existing provision of the proviso to sub-section {1} of section 139, it
has been provided that, any person fulfilling any of the six expenditure/asset
criteria listed therein, will be required to furnish his return of income, even
if his total income did not exceed the maximum amount not chargeable to tax.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
proviso to section 139 has been omitted and no return will be required to be
furnished under the proviso.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prescribing
new class of persons for allotment of PAN and suo-motu allotment of PAN</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
existing provisions of sub-sections (1) and (1A) of section 139A provide for
class of persons who are required to have a Permanent Account Number.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
new sub-section (IB) has been inserted so as to provide that for the purpose
of collecting any information which may be useful for or relevant to the purposes
of this Act, the Central Government may by way of notification specify any class
or classes of persons, and such persons shall within the prescribed lime apply
to the Assessing Officer for allotment of a permanent account number.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under
the existing provisions, the Assessing Officer may also allot to any other person
by whom tax is payable, a permanent account number. The sub-section has been
amended so as to provide that the Assessing Officer may, having regard to the
nature of transactions as may be prescribed, also allot a permanent account
number to any other person (whether any tax is payable by him or not), in the
manner and in accordance with the procedure as may be prescribed.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">New
Scheme to facilitate submission of returns through Tax Return Preparers</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
new section 139B has been inserted in the Income-tax Act so as to provide that
for the purpose of enabling any specified class or classes of persons to prepare
and furnish returns of income, the Board may, by way of notification, frame
a scheme providing that such persons may furnish their returns of income through
a Tax Return Preparer authorized to act as such under the scheme. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax
Return Preparer Scheme, 2006 has been notified in November 2006.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TDS
certificates to continue. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As
per the procedure introduced by Finance Act, 2004, TDS certificates were not
required to be enclosed with IT returns as the AO on a click of a button would
know how much TDS was deducted from you. The idea was whoever deducts TDS from
you will file a quarterly return with the Income Tax quoting your PAN and even
if you don?t know, the AO can tell you how much TDS was deducted from you. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But
that?s not the way things work. Not all deductors file quarterly return and
the Board?s On-Line Tax Accounting System (OLTAS) is yet to fully stabilize.
</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So
the scheme is in abeyance . Do demand those TDS certificates. </font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Annual
TDS and TCS returns ? done away with</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With
the system of quarterly statements in place, the requirement of furnishing annual
TDS and annual TCS returns has been rendered superfluous. Therefore, the requirement
of furnishing of the annual return of tax deducted and collected at source in
respect of taxes deducted or collected on or after 1st April, 2005 has been
dispensed with. </font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Penalty
for failure to collect tax at source</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No
penalty is, so far, specified under the income-tax Act for failure to collect
tax at source. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
new section 271CA has been inserted to provide for imposition of penalty on
any person who is responsible for collecting tax and who has failed to collect
tax at source in accordance with the provisions of Chapter XVII-BB of the Act.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Penalty
for false quoting of TAN</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under
the existing provisions of section 272BB of the Income-tax Act, a person becomes
liable for penalty of a sum of ten thousand rupees if he fails to comply with
the provisions of section 203A which require him to apply to the Assessing Officer
for the allotment of a "tax deduction and collection account number".
After allotment of the "tax deduction and collection account number",
the deductor or, as the case may be, the collector is required to quote such
number in all challans, certificates, returns and in all other documents.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
existing provisions of section 272BB, however, do not provide for a penalty
for quoting false "tax deduction and collection account number" on
the lines of a penalty specified for quoting or intimating a false "permanent
account number" under section 272B.</font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
new sub-section (1A) has been inserted in section 272BB to provide that if a
person who is required to quote his 'tax deduction account number' or 'tax collection
account number' or 'tax deduction and collection account number' in the challans
or certificates or statements or other documents referred to in sub-section
(2) of section 203A, quotes a number which is false and which he either knows
or believes to be false or does not believe to be true, such person shall pay
by way of penalty a sum of ten thousand rupees.</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/2006/it06cir014.htm">CBDT
CIRCULAR NO. 14/ 2006, Dated : December 28, 2006</a></b></font></p>
<p align="center" class=section1><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Medical
reimbursement taxable ? High Court</b></font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DDT</b>
had in DDT 491, remarked,</font></p>
<p align="justify" class=section1><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
State Bank of India officer Subhash Banhatti while traveling in a taxi met with
an accident. He was admitted in a private hospital which charged him Rs. 3.6
Lakhs which he claimed from is bank. The bank generously granted reimbursement
but added the amount t to his taxable income. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">PB
More, a typist with RBI was asked to pay more tax than what he could afford
because he had claimed reimbursement for his son?s treatment. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Bombay High Court had in 1992 stayed recovery of income tax on such medical
reimbursement. But in a recent judgement, the High Court held that reimbursement
above Rs.15,000 is a taxable perquisite. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
employees should be very careful before they check into those fancy private
hospitals. If the hospital bill is Rs. 5 Lakhs, you will end up paying Rs. 1.5
Lakhs as income tax. It is sickening to get sick. And what would happen if the
employee dies in the hospital? Will there be income tax on the corpse? </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please
see the <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4770">High
Court case</a> we are reporting today for more details on the interesting
case. </font></p>
<p align="justify" class=section1 ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6666">Until
tomorrow with more DDT</font></font></p>
<p align="justify" class=section1 ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice day.</font></p>
<p align="justify" class=section1 ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail
your comments to</font><font color="#0000FF" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>vijaywrite@taxindiaonline.com</b> </font></p>
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