Highlights
• The bill had replaced the Taxation Laws (Amendment) Ordinance, 2019, circulated in September with the intention of cutting the base corporate tax rate
• The Bill had met with condemnation by Opposition parties like Congress, TMC, who raised objections and stated that the legislation was 'fundamentally flawed'
• The Upper House has been adjourned for the day after it passed the bill through a voice vote
The Rajya Sabha recently had passed the Taxation Laws (Amendment) Bill, 2019, which paved the way for expediting growth and reducing the corporate tax rate.
The Lok Sabha had already passed the tax bill, as well as the Upper House, had passed the legislation with a voice vote without any alterations.
Finance Minister Nirmala Sitharaman stated in the House that the good reforms in order to boost the economy shall continue.
Sitharaman stated while replying to the debate on legislation for lowering corporate tax rate that cutting down corporate tax is a good reform. This Modi led government is now in the second term, and after it took up a lot of reformatory measures in the first term is committed towards further reforms.
The minister had stated that her government has safeguarded that tax authorities must not harass citizens, yet at the same time, it also makes certain that no offender could be let off.
The government had carried ordinance towards slashing the corporate tax rate and afterward brought a bill in this session. The Taxation Laws (Amendment) Bill, 2019 has been already passed by the Lok Sabha. The Upper House recently passed the legislation without any alterations.
The Taxation Laws (Amendment) Bill, 2019 as Passed by Rajya Sabha held;
CHAPTER I
PRELIMINARY
1. Short title and commencement.
• This Act might be called the Taxation Laws (Amendment) Act, 2019.
• Save as otherwise provided, it would be deemed to have come into force on the 20th day of September 2019.
CHAPTER II
AMENDMENTS IN THE INCOME-TAX ACT, 1961
2. Amendment of section 92BA.
In section 92BA of the Income-tax Act, 1961 (hereafter in this Chapter referred towards as the Income-tax Act), after clause (v), the following clause would be inserted, with effect from the 1st day of April 2020, namely:—
“(va) any business transacted amid the persons referred to in sub-section (6) of section 115BAB;”.
3. Amendment of section 115BA.
In section 115BA of the Income-tax Act, with effect from the 1st day of April 2020,—
(a) for the marginal heading “Tax on income of certain domestic corporations”, the marginal heading “Tax on income of certain manufacturing domestic corporations” would be substituted;
(b) in sub-section (1), for the words “subjected to the other provisions of this Chapter”, the words, figures and letters “subjected to the other provisions of this Chapter, except those stated under section 115BAA and section 115BAB” would be substituted;
(c) in sub-section (4), after the proviso, the following proviso would be inserted, namely:—
“Provided further that where the individual exercises option under section 115BAA, the option under this section might be withdrawn.”.
4. Insertion of new sections 115BAA and 115BAB. Tax on income of certain domestic companies.
After section 115BA of the Income-tax Act, the following sections have been inserted with effect from the 1st day of April 2020, namely:—
“115BAA. (1) Notwithstanding anything contained in this Act but subjected to the provisions of this Chapter, except those mentioned under section 115BA and section 115BAB, the income-tax payable relating to the total income of a individual, being a domestic corporation, for any previous year relevant to the assessment year beginning on or after the 1st day of April 2020, would, at the option of such individual, be computed at the rate of 22%, if the conditions contained in sub-section (2) are satisfied:
Provided that where the individual fails to satisfy the conditions contained in sub-section (2) in any previous year, the option would become invalid with respect to the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act would apply, as if the option had not been exercised for the assessment year relevant towards that previous year and subsequent assessment years.
(2) For the purposes of subsection (1), the total income of the corporation shall be computed,—
(i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under.—“Deductions relating to certain incomes” other than the provisions of section 80JJAA”, heading;
(ii) without set-off of any loss carried forward or depreciation from any previous assessment year, if such loss or depreciation is attributable towards any of the deductions referred to in clause (i);
(iii) without set-off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and
(iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as might be prescribed.
(3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) would be deemed to have been given full effect to and no further deduction for such loss or depreciation would be allowed for any subsequent year:
Provided that where there is a depreciation allowance with respect to a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April 2020, corresponding adjustment would be made to the written down value of such block of assets as on the 1st day of April 2019 in the set manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April 2020.
(4) In case of an individual, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions stated in sub-section (2) would be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfillment of the conditions contained in the said section.
Explanation.—relating to the purposes of this subsection, the term “Unit” shall have a similar meaning as allocated towards it in clause (zc) of section 2 of the Special Economic Zones Act, 2005.
(5) Nothing contained in this section would apply unless the option is exercised by the individual in the prescribed manner on or before the due date stated under sub-section (1) of section 139 for furnishing the returns of income for any preceding year relevant to the assessment year commencing on or after the 1st day of April 2020 and such option once exercised would apply to subsequent assessment years:
Provided that in case of an individual, where the option exercised through it under section 115BAB has been rendered invalid due to violation of conditions stated in sub-clause (ii) or sub-clause (iii) of clause (a), or clause (b) of sub-section (2) of said section, such individual might exercise option under this section:
Provided further that once the option was exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
Tax on income of new manufacturing domestic companies
115BAB. (1) Notwithstanding anything stated in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAA, the income-tax payable with respect to the total income of a individual, being a domestic corporation, for any previous year relevant to the assessment year beginning on or after the 1st day of April 2020, would, at the option of such individual, be computed at the rate of 15%, if the conditions contained in sub-section (2) are satisfied:
Provided that where the total income of the individual, includes any income, which has neither been derived from nor is incidental towards manufacturing or production of any article or thing and respecting which no specific rate of tax has been provided separately under this Chapter, such income would be taxed at the rate of 22%, and no deduction or allowance relating to any expenditure or allowance would be allowed in computing such income:
Provided further that the income-tax payable relating to the income of the individual deemed so under the second proviso to sub-section (6) would be computed at the rate of 30%:
Provided also that the income-tax payable with respect to income being short term capital gains derived from the transfer of a capital asset on which no depreciation is allowable under the Act would be computed at the rate of 22%.:
Provided also that where the person fails to satisfy the conditions as stated in sub-section (2) in any previous year, the option would become invalid relating to the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act would apply to the person as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.
(2) For the purposes of subsection (1), the following conditions would apply, namely:—
(a) the corporation has been set-up as well as registered on or after the 1st day of October 2019, and has begun manufacturing or production of any article or thing on or before the 31st day of March 2023 and,—
(i) the business is not formed by means of splitting up, or the reconstruction, of a business already in existence:
Provided that this condition would not apply relating to a corporation, business of which is formed as a result of the re-establishment, reconstruction or revival by the individual of the business of any such undertaking as is referred towards in section 33B, in the circumstances and within the period stated in the said section;
(ii) doesn’t use any machinery or plant previously used for any purpose.
Explanation 1.—Relating to the purposes of sub-clause (ii), any machinery or plant which has been utilized out of India through any other individual shall not be regarded as machinery or plant previously utilized for any purpose if the following conditions are fulfilled, which includes:—
(A) such machinery or plant was not, at any time previous to the date of the installation utilized in India;
(B) such machinery or plant is imported into India from any nation outside India; and
(C) no deduction on account of depreciation relating to such machinery or plant was allowed or is allowable under the provisions of this Act in computing the total income of any individual for any period prior to the date of the installation of machinery or plant by the individual.
Explanation 2.—Where in the case of an individual, any machinery or plant or any part thereof previously utilized for any purpose is put to use through the corporation and the total value of such machinery or plant or part thereof doesn’t exceed 20%. of the total value of the machinery or plant utilized by the corporation, then, for the purposes of sub-clause (ii) of this clause, the condition specified within would be considered to have been complied with;
(iii) doesn’t use any building previously used as a hotel or a convention center, as the case might be, relating to which deduction under section 80-ID was claimed and allowed.
Explanation.—For the purposes of this sub-clause, the expressions “hotel” and “convention center” would have the meanings respectively assigned to them in clause (a) and clause (b) of sub-section (6) of section 80-ID;
(b) the corporation is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of those article or thing manufactured or produced by it.
Explanation.—For the removal of uncertainties, it is clarified that the business of manufacture or production of any article or thing referred to in clause (b) would not comprise business of,—
• computer software development in any form or in any media;
• mining;
• conversion of marble blocks or same kind of items into slabs;
• bottling of gas into the cylinder;
• printing of books or production of cinematograph movie; or
• any other business as might be notified by the Central Government in this behalf; and
(c) the total income of the corporation was computed,—
(i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under the heading “C.—Deductions in respect of certain incomes” except the provisions of section 80JJAA;
(ii) without set-off of any loss or allowance for unabsorbed depreciation deemed so under section 72A where such loss or depreciation is attributable towards any of the deductions referred to in sub-clause (i);
Explanation.—For the removal of doubts, it is clarified that in case of an amalgamation, the option under sub-section (7) would remain valid in case of the amalgamated corporation only and if the conditions stated in sub-section (2) are continued to be satisfied by such corporation; and
(iii) by claiming the depreciation under the provision of section 32, except clause (iia) of sub-section (1) of the stated section, determined in such manner as might be prescribed.
(3) The loss referred towards in sub-clause (ii) of clause (c) of sub-section (2) would be deemed to have been given full effect to and no further deduction for such loss would be allowed for any subsequent year.
(4) If any difficulty arises relating to the fulfillment of the conditions contained in sub-clause (ii) or sub-clause (iii) of clause (a) of sub-section (2) or clause (b) of said sub-section, as the case may be, the Board might, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty and to promote manufacturing or production of article or thing using new plant and machinery.
(5) Every guideline issued through the Board under sub-section (4) would be laid before each House of Parliament and shall be binding on the individual, and the income-tax authorities subordinate to it.
(6) Where it appears towards the Assessing Officer that, owing to the close connection among the individual to which this section applies and any other individual, or for any other purpose, the method of business between them is arranged in a way that the business transacted amid them produces to the individual more than the ordinary profits which might be expected to arise in such business, the Assessing Officer shall, in computing the profits and gains of such business for the purposes of this section, take the amount of profits as might be reasonably deemed to have been derived therefrom:
Provided that in case the aforesaid arrangement involves a stated domestic transaction referred to in section 92BA, the number of profits from such transaction would be determined to have regard to arm’s length cost as stated in clause (ii) of section 92F:
Provided further that the amount, being profits in excess of the amount of the profits determined by the Assessing Officer, would be deemed to be the income of the individual.
(7) Nothing contained in this section would apply unless the option is exercised by the individual in the prescribed manner on or before the due date stated under sub-section (1) of section 139 for furnishing the first of the returns of income for any previous year relevant to the assessment year commencing on or after 1st day of April, 2020 and such option once exercised would apply to subsequent assessment years:
However if for once the option is exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
Explanation.—For the purposes of section 115BAA and this section, the expression “unabsorbed depreciation” would have the meaning assigned to it in clause (b) of sub-section (7) of section 72A.
5. Amendment of section 115JAA.
In section 115JAA of the Income-tax Act, after sub-section (7), the following sub-section would be inserted with effect from the 1st day of April 2020, namely:—
“(8) The provisions of this section would not apply to an individual who has exercised the option under section 115BAA.”.
6. Amendment of section 115JB.
In section 115JB of the Income-tax Act, with effect from the 1st day of April 2020,—
(a) in sub-section (1), the following proviso would be inserted, namely:—
“Provided that for the previous year relevant to the assessment year commencing on or after the 1st day of April 2020, the provisions of this subsection would have effect as if for the words “eighteen and one-half percent.” happening at both the places, the words “fifteen percent.” was substituted.”;
(b) for sub-section (5A), the following sub-section would be substituted, namely:—
“(5A) The provisions of this section would not apply to,—
• any income accruing or arising to a corporation from life insurance business referred to in section 115B;
• an individual who has exercised the option referred to under section 115BAA or section 115BAB.”.
7. Amendment of section 115QA.
In section 115QA of the Income-tax Act, in sub-section (1), the following proviso would be inserted and shall be deemed to have been inserted with effect from the 5th day of July 2019, namely:—
“Provided that the provisions of this sub-section would not apply to such buy-back of shares (being the shares listed on a recognized stock exchange), relating to which public announcement has been made on or before the 5th day of July 2019 according to the provisions of the Securities and Exchange Board of India (Buyback of Securities) Regulations, 2018 which has been made under the Securities and Exchange Board of India Act, 1992.
CHAPTER III
AMENDMENTS IN THE FINANCE (NO. 2) ACT, 2019
8. Amendment of Act No. 23 of 2019.
In section 2 of the Finance (No. 2) Act, 2019, in sub-section (9), with effect from the 1st day of April 2019,—
(a) in the second proviso, for the words “First Schedule”, the words, figures and letters “First Schedule, except in case of a domestic corporation whose income is chargeable to tax under section 115BAA or section 115BAB of the Income-tax Act” would be inserted and would be deemed to have been inserted;
(b) in the third proviso,—
(i) in clause (a) for “the Income-tax Act” the words, figures as well as letters “the Income-tax Act, not having any income under section 115AD of the Income-tax Act” would be inserted and would be deemed to have been inserted;
(ii) after clause (a), the following clause would be inserted and would be deemed to have been inserted, namely:—
‘(aa) for any person or association of persons or body of individuals, in case either incorporated or not incorporated, or any artificial juridical person as mentioned to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act having income under section 115AD of the Income-tax Act,—
(i) at the rate of 10% of such “advance tax”, where the total income exceeds 50 lakh rupees but does not exceed 1 crore rupees;
(ii) at the rate of 15% of such “advance tax”, where the total income exceeds 1 crore rupees but does not exceed 2 crore rupees;
(iii) at the rate of 25% of such “advance tax”, where the total income [excluding the income of nature referred to in clause (b) of sub-section (1) of section 115AD of the Income-tax Act] exceeds 2 crore rupees but does not exceed 5 crore rupees;
(iv) at the rate of 37% of such “advance tax”, where the total income [excluding the income of nature referred to in clause (b) of sub-section (1) of section 115AD of the Income-tax Act] exceeds 5 crore rupees;
(v) at the rate of 15% of such “advance tax”, where the total income [including the income of the nature referred to in clause (b) of sub-section (1) of section 115AD of the Income-tax Act] exceeds 2 crore rupees but is not covered in sub-clauses (iii) and (iv):
Provided that in the case where the total income includes any income chargeable under clause (b) of sub-section (1) of section 115AD of the Income-tax Act, the rate of surcharge on the advance tax calculated on that part of the income would not exceed 15%’;
(iii) in clause (c), in the opening portion, for the words “domestic company”, the words, figures, and letters “domestic company except such domestic company whose income is chargeable towards tax under section 115BAA or section 115BAB of the Income-tax Act,” would be inserted and would be deemed to have been inserted;
(c) in the fourth proviso, for the words, brackets and letter “in (a) above”, the words, brackets and letters “in (a) and (aa) above” would be substituted;
(d) after the eighth proviso, the following proviso would be inserted, namely:—
“Provided also that in case of every domestic company whose income is chargeable to tax under section 115BAA or section 115BAB of the Income-tax Act, the advance tax computed under the first proviso would be increased by surcharge, for the purposes of the Union, calculated at the rate of 10% of such “advance tax”.”
9. Amendment of Part II of First Schedule.
In the First Schedule of the Finance (No.2) Act,—
(A) in PART II, under the sub-heading “Surcharge on income-tax”, in paragraph (i), in clause (a), with effect from the 1st day of April 2019,—
(i) after the words “aggregate of such incomes”, relating to the sub-clauses I and II, the brackets, words, figures, and letters which includes the income under the provisions of section 111A and section 112A of the Income-tax Act would be inserted and shall be deemed to have been inserted;
(ii) after the words “aggregate of such incomes”, relating to the sub-clauses III and IV, the brackets, words, figures, and letters which excludes the income under the clauses of section 111A as well as section 112A of the Income-tax Act would be inserted and would be deemed to have been inserted;
(iii) after sub-clause IV, the following sub-clause would be inserted and would be deemed to have been inserted, namely:—
“V. at the rate of 15% of such tax, where the income or aggregate of the incomes (including income under the provisions of section 111A and section 112A of the Income-tax Act) paid or likely to be paid and subjected to the deduction exceeds 2 crore rupees, but is not covered under sub-clauses III and IV):
Provided that in the case where the total income includes any income chargeable under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of Income-tax deducted with regard to that part of the income would not exceed 15%;’’;
(B) in PART III, in Paragraph A, under the sub-heading “Surcharge on income-tax”, after the opening portion,—
• after the words saying “having a total income” in the clause (a) and (b), the brackets, words, figures as well as letters which includes the income under the proviso of section 111A and section 112A would be introduced;
• after the words saying “having a total income” in clause (c) and (d), the brackets, words, figures as well as letters which excludes the income under the provisos of section 111A and section 112A would be introduced;
• after clause (d) and before the proviso, the following clause would be introduced, namely:—
“(e) having a total income (including income under the provisions of section 111A and section 112A) exceeding two crore rupees, but is not covered under clauses (c) and (d), would be applicable at the rate of 15% of such income-tax:
Provided that in the case where the total income includes any income chargeable under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of Income-tax computed in respect of that part of the income would not exceed 15%.;”.
10. Repeal and savings.
• The Taxation Laws (Amendment) Ordinance, 2019 is hereby repealed.
• In spite of such repeal, anything carried out or any action which is taken under the mentioned Ordinance shall be deemed to have been carried out or taken under the corresponding provisos of this Act.
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