9 Further Amendments in Finance Bill 2008 During Passage Of Bill In Parliament!

1. Exemption available under sections 10A and 10B has been extended by one more year. Consequently, these exemptions will now be available up to the assessment year 2010-11.
2. The scheme of disallowance under section 40(a)(ia) has been modified with retrospective effect from the assessment year 2005-06 on the following lines—
Tax is deductible but not deducted
No deduction in the current previous year
If tax is deducted in any subsequent year, the expenditure will be deducted in the year in which TDS will be deposited by the assessee with the Government.

Tax is deductible (and is so deducted) during the last month (i.e., in the month of March) of the previous year but it is not deposited on or before the due date of submission of return of income under section 139(1)
No deduction in the current previous year
If tax is deposited with the Government after the due date of submission of return of income, the expenditure will be deductible in that year in which tax will be deposited.
Tax is deductible (and is so deducted) during any month but other than the last month (i.e.,any time before March 1) of the previous year but it is not deposited on or before March 31 of the previous year
No deduction in the current previous year
If tax is deposited with the Government after the end of the current previous year, theexpenditure will be deductible in that year in which tax is deposited.
3. From the assessment year 2008-09, audit report under section 44AB should be obtained on or before September 30 of the assessment year.
4. An undertaking begins refining of mineral oil on or after April 1, 2009, deduction will be allowed only if the following conditions are satisfied—
i) It is wholly owned by a public sector company or any other company in which a public sector company or companies hold at least 49 per cent of the voting rights.
ii) It is notified by the Central Government before June 1, 2008.

iii) It begins refining during April 1, 2009 and March 31, 2012.

5. With effect from the assessment year 2001-02, the amount of deferred tax and provision if debited to profit and loss account, shall be added back to the net profit to compute book profit as also the amount of deferred tax, which is credited to the profit and loss account, shall be deducted from the net profit to find out book profit.
6.Notice for scrutiny assessment shall be served on the assessee within a period of 6 months from the end of the financial year in which return is furnished. This amendment is applicable from April 1, 2008.
7. With effect from June 1, 2008, an association of persons/body of individuals, whether incorporated or not, shall be liable to deduct tax at source under section 194C(1) if the books of account of the association of persons/body of individuals are required to be audited under section 44AB(a)/(b) during the immediately preceding financial year.
8.In an appeal against the order of assessment, the Commissioner (Appeals) can (with effect from April 1,2008) confirm, reduce, enhance or annul the assessment after taking into consideration the following—
i) The material and other information produced by the assessee before the Settlement Commission.
ii) The results of the inquiry held by the Settlement Commission.
iii) The evidence recorded by the Settlement Commission in the course of proceedings before it.
Such other material as may be brought on his record.
9. Section 292BB inserted with effect from April 1, 2008 provides a deeming clause that notice was duly served on an assessee who appeared in any proceeding or co-operated in any inquiry related to an assessment or reassessment, and such an assessee shall be precluded from taking any objection in any proceeding or inquiry under the Act that the notice was—
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner.
However, the provisions of section 292BB shall not be applicable where the assessee has raised the aforesaid objections before the completion of such assessment or reassessment.

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One Insurance Policy, Two Claimants Of Deduction U/s 80D Possible Now !

Budget 2008 -Fine Prints

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Budget 2008 has brought some very nice changes in section 80 D . These are :

1. Additional Rs 15,000 for medical insurance on parents. If the insured parent is senior citizen , additional insurance amount is Rs 20,000 (Not Rs 15,ooo)
2. Parents need not be dependent on the assessee.
3. If part payment is done by you and part payment by the parent, both can claim deduction to the extent of their contribution subject to maximum allowed.

Read the reason with example for such an amendment by the Government as given in Memorandum to Finance Bill 2008

"Section 80D of the Income-tax Act provides for a deduction of up to fifteen thousand rupees to an assessee, being an individual or a Hindu undivided family. The deduction is allowed for making a payment to effect or keep in force an insurance on,-

(a) the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the
assessee where the assessee is an individual;

(b) the health of any member of the family where the assessee is a Hindu undivided family.

In case the assessee or any other member of the family, on whose health the insurance has been effected or kept in force, is a senior citizen, the deduction allowed is up to twenty thousand rupees. The existing provisions also have the requirements that the payment must be through a mode other than cash and should be out of the taxable income of the assessee. Since health insurance cover for the elderly comes at a relatively higher price, it is necessary to encourage individual assessees to supplement the efforts of their parents in getting themselves medically insured.

Accordingly, it is proposed to allow an additional deduction of up to fifteen thousand rupees to an assessee, being an individual, on any payment made to effect or keep in force an insurance on the health of his parent or parents. The existing condition of ‘dependent’ with respect to parents is being dispensed with. This deduction shall be in addition to the existing deduction available to the individual assessee on medical insurance for himself, his spouse and dependent children. Further, it is proposed that if either of the individual assessee’s parents, who has been medically insured, is a senior citizen, the deduction would be allowed up to twenty thousand rupees.

For example, an individual assessee pays (through any mode other than cash) during the previous year medical insurance premia as under:

(i) Rs 12,000/- to keep in force an insurance policy on his health and on the health of his wife and dependent children;
(ii) Rs 17,000/- to keep in force an insurance policy on the health of his parents.

Under the proposed new provisions he will be allowed a deduction of Rs 27,000/- (Rs. 12,000/- + Rs. 15,000/-) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs 29,000/-
(Rs.12,000/- + Rs.17,000/-). Whether the parents are dependent or not, is not a consideration for deciding the deduction under the
proposed new section.

Further, in the above example, if cost of insurance on the health of the parents is Rs 30,000/-, out of which Rs 17,000/- is paid(by any non-cash mode) by the son and Rs 13,000/- by the father ( who is a senior citizen), out of their respective taxable income, the
son will get a deduction of Rs 17,000/- ( in addition to the deduction of Rs 12,000/- for the medical insurance on self and family) and the father will get a deduction of Rs 13,000/-.

This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to assessment year 2009-
10 and subsequent assessment years."

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What is The Date After Which Your Return Can Not Be Selected For Scrutiny ?

Budget 2008 -Fine Prints

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As on today, when A.O selects your case for scrutiny , a notice u/s 143(2) is served on you . This notice must be served within twelve months from end of month of filing of your return. So let us say , for Asst Yr 2007-08, you filed return on 29/7/2007, the A.O must serve on you a notice u/s 143(2) by 31/7/2008 .

Budget 2008 proposes to fix that A.O can not select your return for scrutiny after six from the end of financial year in which the return was filed. The amendment in section 143(2) is proposed is as under :

(b) in sub-section (2), in clause (ii), for the proviso, the following proviso shall be substituted,namely

‘‘Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.”.

In practical sense , if you file return for Asst Yr 2007-08 by due dates or by 31st March 2008 , and you do not get a notice u/s 143(2) by 30/9/2008 , then your case is not selected for scrutiny.

In fact ,return pertaining to Asst Yr 2007-08

1. filed by 31/3/2008 can not be selected for scrutiny after 30/9/2008.
2. Filed by 31/3/2009 (late return) can not be selected for scrutiny after 30/9/2009.

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Budget 2008 proposal-Non Cooperation With A.O Can Be Beneficial!

Budget 2008 -Fine Prints

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The Finance Bill 2008 has proposed a very important change. Suppose you did not receive any scrutiny notice u/s 143(2) and suddenly one day you get a call from income tax officer that your case is selected for scrutiny , that the notice u/s 143(2) required for selection of case for scrutiny was sent by registered post .After this you or your lawyer or C.A appeared before the A.O and submitted details . The compliance on verbal information given by the A.O is often done because the authorised representative or the assessee , do not want to earn the ire of the officer concerned and also in the hope that the cooperation may result in small addition and will save the assessee from harsh assessment . However if the the A.O passed the order with heavy additions. assessee used to appeal before CIT (Appeal) and raise the issue of non receipt of the first notice u/s 143(2) .

Now, a new section 292 BB is inserted to state as under

Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was—
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner.”.

The provision is self explanatory . The need of hour therefore, both for the assessee and their A.Rs is that if you have any grievance regarding the receipt of notice, make an issue in the beginning itself and not later stage. The law will take A.O's side!

What Govt. says?

In its memorandum to the Finance Bill 2008, the government has given following reasons for such a provision

Instances have come to the notice of the department, where notices under sub-section (2) of section 143, though issued by registered post within twelve months from the end of the month in which the return was furnished, have been held `invalid' on the ground that the notice was actually received by the assessee after the limitation date and there was no `service' as postulated under the section. This is notwithstanding the fact that the assessee has attended the assessment proceedings in response to the notice served on him. Instances have also come to notice where the orders of the assessing officer is being quashed on the consideration that there is no evidence of issue or service of notice, even though the assessee and his authorized representative have attended the hearing before the Assessing Officer during the assessment proceedings. Further, the design of the limitation period with reference to the end of the month leads to administrative inconvenience in as much as the last day of every month becomes a time barring date. In order to address these issues and to reduce litigation, it is proposed to insert a new section 292BB.

In my opinion this is a very welcome move by the government because this will eradicate following problems both for the assessee and the income tax department

1. The A.O will have to serve the notice properly , otherwise the assessee will not appear before him.
2. The absence of "a paper " known as notice does not override all other proceedings where assessee submitted all papers and assessments were made..
3. The unscrupulous persons practicing in the income tax department will lose one reason to win a case. This one step towards an environment where only professionalism will make you winner

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