CA SUPPLEMENTARY STUDY MATERIAL-2009

PROFESSIONAL EDUCATION (COURSE – II)

SUPPLEMENTARY STUDY PAPER - 2009

INCOME-TAX AND CENTRAL SALES TAX

[Covers amendments made by the Finance (No.2) Act, 2009 and Important Circulars/Notifications issued between 1st May 2008 and 30th April 2009]

(Relevant for students appearing for May, 2010 examination)

BOARD OF STUDIES

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

This supplementary study paper has been prepared by the faculty of the Board of Studies of the Institute of Chartered Accountants of India. Permission of the Council of the Institute is essential for reproduction of any portion of this paper. Views expressed herein are not necessarily the views of the Institute.


This Supplementary Study Paper has been prepared by the faculty of the Board of Studies of the Institute of Chartered Accountants of India with a view to assist the students in their education. While due care has been taken in preparing this Supplementary Study Paper, if any errors or omissions are noticed, the same may be brought to the attention of the Director of Studies. The Council of the Institute is not responsible in any way for the correctness or otherwise of the amendments published herein.

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

Income-tax and Central Sales Tax is a very dynamic subject of the chartered accountancy course. For attaining thorough knowledge, the students have not only to be well conversant with the basic provisions of the relevant laws, but also have to constantly update their knowledge regarding statutory developments.

The Board of Studies brings out an annual Supplementary Study Paper to help the students to update their knowledge relating to recent statutory developments in the field of income-tax and central sales tax made by the Annual Finance Act, Notifications/Circulars etc.

I compliment the Board of Studies for the good work in bringing out this publication, which would help the students to update their knowledge regarding the latest statutory developments. I am sure that this publication will be of great use to the students in preparing for their examination.

INCOME-TAX AND CENTRAL SALES TAX

AMENDMENTS AT A GLANCE – FINANCE (No.2) ACT, 2009

S.No.

Particulars

Section

I

INCOME-TAX ACT, 1961

1.

A. Rates of tax

B. Basic Concepts

2.

Scope of definition of charitable purpose expanded

2(15)

3.

Definition of the term “manufacture” incorporated in the Act

2(29BA)

4.

Zero Coupon Bonds to include bonds issued by scheduled banks also

2(48) & 36(1)(iiia)

C. Incomes which do not form part of total income

5.

Denial of double benefit in respect of VRS compensation

10(10C) & 89

6.

Extension of time limit for filing application for tax exemption

10(23C)

7.

Exemption under section 10(23D) to be available to mutual funds set up by “other public sector banks” also

10(23D)

8.

Exemption of income received by any person on behalf of NPS Trust

10(44)

9.

Sunset clause for deductions under sections 10A and 10B to be deferred by one more year

10A & 10B

10.

Exempted profits in the case of units in Special Economic Zones (SEZs) to be computed as a percentage of total turnover of the business carried on by the undertaking and not the total turnover of the business carried on by the assessee

10AA

11.

Exemption for voluntary contributions received by electoral trusts

13B, 2(22AAA), 2(24), 80GGB & 80GGC

12.

Exemption limit for taxation of anonymous donations

115BBC

D. Salaries

13.

Certain fringe benefits to be taxed as perquisites in the hands of employees

17(2) & 49(2AA)

E. Profits and gains of business or profession

14.

Definition of “block of assets” as per section 2(11) to apply for all purposes of the Income-tax Act

32(1)

15.

Scope of benefit of weighted deduction of 150% for in-house research and development expanded

35(2AB)

16.

Introduction of “investment-linked tax incentives” for specified businesses

35AD, 28, 43, 50B, 73A & 80-IA

17.

Withdrawal of commodities transaction tax

36(1)(xvi)

18.

Scope of deduction under section 36(1)(viii) expanded to include business of providing long-term finance for development of housing in India

36(1)(viii)

19.

Increase in limits for deductibility of remuneration paid to partners by a firm

40(b)(v)

20.

Increase in limit for attracting disallowance under section 40A(3)/(3A) from Rs.20,000 to Rs.35,000 for payments to transport operators

40A(3)/(3A)

21.

Increase in presumptive income for transport operators

44AE

22.

Increase in scope of coverage of presumptive tax provisions

44AD, 44AA, 44AB

23.

Full depreciation to be deducted to arrive at the written down value under section 43(6) in cases of composite income covered under Rules 7A, 7B & 8 also

43(6)

F. Capital Gains

24.

Transfer of land and/or building through “power of attorney” to attract the provisions of section 50C

50C

G. Income from Other Sources

25.

Transfer of movable/immovable property without consideration or for inadequate consideration to be taxed in the hands of the recipient

56(2)(vii), 2(24) & 49(4)

26.

Interest received on compensation/enhanced compensation deemed to be income in the year of receipt and taxable under the head “Income from Other Sources”

56(2)(viii), 57 & 145A

H. Deductions from Gross Total Income

27.

Certain exemptions and profit-linked deductions in Chapter VI-A to be allowed only if claimed in the return and to be restricted to the profits and gains of such undertaking/unit/enterprise or eligible business, as the case may be

80A

28.

Deduction in respect of contribution to NPS extended to self-employed individuals also

80CCD

29.

Increase in deduction for a person with severe disability and for maintenance including medical treatment of a dependent with severe disability

80DD & 80U

30.

Expansion of scope of section 80E to cover all fields of study after Class XII, including vocational study, for the purpose of interest deduction in respect of loan taken for pursuing such courses

80E

31.

One-time approval for institutions and funds for the purpose of recognition under section 80G

80G

32.

Extension of sunset clause for tax holiday under section 80-IA for power-sector undertakings and industrial parks

80-IA

33.

Tax holiday under section 80-IA not available in respect of works contract

80-IA

34.

Extension of time limit for refineries in the private sector to begin refining of mineral oil and expansion of scope of tax holiday under section 80-IB(9)

80-IB(9)

35.

All blocks licensed under a single contract to be treated as a single “undertaking”

80-IB(9)

36.

Further conditions to be satisfied by an undertaking developing and building housing projects for claiming benefit of deduction under section 80-IB(10)

80-IB(10)

37.

Deduction under section 80-IB extended to an undertaking deriving profit from the business of processing, preservation and packaging of meat and meat products or poultry or marine or dairy products

80-IB(11A)

I. Tax Treatment for LLPs

38.

Tax treatment for LLPs

2(23) & 140

J. Income-tax Authorities

39.

Power of Joint Director, Joint Commissioner, Additional Director & Additional Commissioner to issue warrant of authorization

132 & 132A

K. Assessment Procedure

40.

Time limit extended for issue of notification for relaxation, modification or adaptation of any provision of law to facilitate centralized processing of returns

143(1B)

41.

Provision for constitution of alternate dispute resolution mechanism

144C, 131, 246A & 253

42.

Assessing Officer empowered to assess or reassess income which comes to his notice subsequently though he has not recorded reasons for the same

147