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(S. Rajaratnam, Tax Consultant, Retd. Member, ITAT)

There is an increase in general exemption limit by Rs.10,000 with same increase for women and senior citizens for the financial year 2009-2010. Revision is marginal and it is welcome. There is no change in slabs. The largest class of beneficiaries are, however, persons in top bracket with income exceeding Rs.10 lakhs, because of abolition of surcharge for personal taxation. The present two cesses will, however, continue for all.

Fringe Benefits Tax (FBT), which targets primarily manufacturing industries, mainly because of their larger work force, is now scrapped. So is the Commodity Transaction Tax. These are welcome developments. Presumptive tax is now proposed to be extended for all businesses with turnover below Rs.40 lakhs with income estimated at 8% of such turnover. Securities Transaction Tax on National Pension Scheme under the proposed Pension System Trust will be removed. These changes especially the one relating to FBT should be most welcome for the industry.

Contributions to political parties would be fully deductible, if made through an electoral trust approved by the Government. So is the extension of weighted deduction for in-house research under section 35(2AB). Capital expenditure for rural infrastructure industries, which are environment friendly and for transportation for bulk goods, are made fully deductible. These are welcome features of the Bill. A contrary step is to withdraw spreadover benefit under section 89 for those availing benefit of deductions for voluntary retirement compensation under section 10(10C) overruling a number of decisions.

Amendment to section 2(15), which had earlier withdrawn exemption for a class of trusts and institutions with the object of general public utility with commercial activity, is now proposed to be relaxed by making exceptions for objects of preservation of environment including watersheds, forests and wild life and preservation of monuments and places or objects of artistic and historical interest. But the relaxation is too little, since equally important objects are conspicuous by their absence.

Period of recognition under section 80G will now be for perpetuity till it is withdrawn.

Liability for anonymous donations is proposed at 5% of total income partly for religious institutions and wholly charitable institutions. This may reduce scope for litigation as a small tax is more easily acceptable.

A retrogade step is not only continuing Minimum Alternate Tax (MAT) but also enhancing the rate of tax from 10% to 15%. The decisions holding that provision for bad debt could be allowed as ascertained liability is now sought to be nullified by a retrospective Explanation to section 115JA and 115JB. But the period for availing tax credit for MAT tax paid is now extended to ten years.

Limited Liability Partnership (LLP) recognised under the Limited Liability Partnership Act, 2008 is treated on par with firms under the Indian Partnership Act, 1932.

There is a proposed upward revision of remuneration to partners under section 40(b) in computation of taxable income of a firm.

Exemptions and deductions extended

Relief under section 10A, 10B, 80IA(4) and 80IB(9) will stand extended by another year. Benefit of deduction of interest on educational loans under section 80E will be extended for graduate courses on specified subjects. Benefit under section 80DD will get enhanced for severe disability from Rs.75,000 to Rs.1 lakh.

Limit for disallowance under section 40A(3) for payment to transport operators will be Rs.35,000 instead of Rs.20,000.

Section 50C would now cover not only registered sale but also other transfers without registration.

Section 56(2)(vi), which covered only cash gifts from non-relatives as income, will now be extended to include gifts in kind as well.

Lower penalty under Explanation 5A to section 271(1)(c) would now cover not only years for which return, which is yet due but also for years for which return is filed.

A new amendment by way of section 282B would require a New Identification Number (DIN), so as to link the correspondence with a taxpayer with the assessee’s file kept by the Department.

Disputed compensation is now proposed to be taxed on receipt basis overruling some decisions of the Court with retrospective effect from A.Y.1998-1999.

An alternative mechanism for resolving disputes in respect of international transactions has now been provided to take effect from 1st April, 2009. Section 92C is proposed to be amended to empower the Board to provide for safe harbours obviously with intent to remedy the erratic implementations of transfer pricing rules. These steps are welcome.

Wealth tax limit is proposed to be enhanced from Rs.15 lakhs to Rs.30 lakhs.

These are some of the amendments. Such a large number of amendments should have been made by an independent Amendment Act, so that they can receive adequate consideration before they become law.