Applicability Of Various Dates

CA SUDHIR HALAKHANDI , 11 January 2009
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COMPLEXITIES OF DATES IN FINANCE ACT

- CA SUDHIR HALAKHANDI

THE DATE OF APPLICABILITY OF VARIOUS PROVISIONS OF SERVICE TAX IS A BIG PROBLEM AND IN 2007 I HAVE WRITTEN AN ARTICLE ON THE SUBJECT. THIS ARTICLE IS RELATED TO DATES AS MENTIONED IN FINANCE ACT, 2007 BUT THE SPIRIT BEHIND THE ARTICLE CAN BE APPLIED IN ANY YEAR.

JOURNAL- ONCE AGAIN???

- CA SUDHIR HALAKHNADI

SYNOPSYS

1.DATE OF ENACTMENT OF FINANCE ACT-2007

2. APPLICBILITY OF THE FINANCE ACT-2007

3. SENIOR AND HIGHER EDUCATION CESS

4. SHEC ON PREENACTMENT TDS

5. THE 1^ST. JUNE EFFECT ON INCOME TAX

6. SERVICE TAX ON NEW SERVICES

The Finance Bill, 2007 got the assent of the President on 11^th May 2007 and it is published in official gazette on 12^th May 2007. Since the assent to the Bill is given on11th May 2007 hence it becomes the Finance Act, 2007 on 11th May 2007 itself.The various provisions of the Act are applicable on various dates and somehow this system is of applying various provisions on different dates are not only confusing and complicated but important also. Since ignorance of law is no excuse hence for the taxpayers it will be very difficult to follow various different dates but missing these dates will always create problems for them.

There are some interesting questions that may take place in the mind of the taxpayers.First question is Why Senior and Higher education Cess (SHEC) is applicable in case of income tax w.e.f. 1^st. April 2007 and for service tax it is applicable from 11^th May 2007. What will be the effect of SHEC on TDS deducted before 11^th May 2207 in case of Income tax? All the provisions of Finance Act, 2007 are applicable from 1^st. April 2007 or are there any exception of this applicability? Let us try to understand this jugglery of dates and in final outcome you will get the answer of the age-old question why our taxation laws are so complicated?

Let us take these points one by one to understand this complexities of applicability of various provision of the FA-2007: -

1. DATE OF ENACTMENT OF FINANCE ACT-2007

The Finance bill 2007 got the assent of the president of 11^th May 2007 and it is published in official gazette on 12^th May 2007. A bill becomes and Act when it got the assent of the President hence the Finance bill 2007 is enacted on 11^th May 2007. There is some confusion about applicability of various provisions of the Finance Act 2007 and these are related to the publication of the same in the official gazette on 12^th May 2007. Some o the service tax Notifications are issued on 12^th May 2007 to give effect of SHEC on effect of rebate on discount though the SHEC is applicable w.e.f. 11^th May 2007 required reconsideration from the side of lawmakers.

2. APPLICBILITY OF THE FINANCE ACT-2007

Some of the provisions of the Finance Act-2007 are applicable from 1^st. April 2007 and others are applicable 11^th May 2007 (the date of enactment of the Finance Act-2007) and some others are from 1^st. June 2007 or the date mentioned in the section itself.

How these dates are ascertained is a very interesting question. See here the provisions of the Finance Act-2007 as contained in Section 2 to 84 are applicable from 1^st. April 2007 with the exception of sections and provisions in which any other date of applicability is specifically mentioned. These sections 2 to 84 of the Finance Act-2007 are related to direct taxes only. See the preliminary part of the Finance Act-2007: -

CHAPTER I

PRELIMINARY

1. (1) This Act may be called the Finance Act, 2007.

(2) Save as otherwise provided in this Act, sections 2 to 84 shall be deemed to have come into force on the 1st day of April 2007.

The provisions contained in section 85 onwards are applicable from the date of enactment of the Finance Act-2007 with the exception of the provisions in which the date of applicability is specifically mentioned are applicable from that date only.

3. SENIOR AND HIGHER EDUCATION CESS

In case of Income tax Senior and education cess is applicable w.e.f. 1^st. April 2007 but in the case of all the indirect taxes including service tax it is applicable from 11^th May 2007. The reason is very simple the provisions applicable to Direct taxes with respect to SHEC are contained in Section 2(12) of the Fiannce Act-2007and the provisions of Direct Taxes as contained in Section 2 to 84 are applicable from 1^st. April 2007 hence the SHEC is applicable on IT from 1^st. April 2007 and it is applicable for whole the assessment year 2008-09.

The provisions of education cess with respect to indirect taxes are contained in section 126 of the Finance Act -2007 and since it is out of section 2 to 84 and hence this provision is applicable from the date of enactment of the Fiannce Act-2007 i.e. from 11^th May 2007.

4. SHEC ON PRE-ENACTMENT TDS

The SHEC is applicable to Income tax w.e.f. 1^st. April 2007 but it can not be deducted before enactment of the Finance Act 2007 because the existence of Finance Act 2007 comes into the existence on conversion of Fiannce Bill-2007 into the Fiannce Act-2007 but now when it is enacted then the SHEC is applicable from 1^st. April 2007. The TDS deducted by the various detectors without applying the SHEC and now when SHEC is applicable from 1^st. April 2007 the detectors have to deposit the difference of 1% cess? If this is true then they have to collect the difference from the deductee and deposit the same.

But this is not the situation. The TDS up to 10^th May 2007 is to be deducted and deposited at the old rates of and this is final and no further deduction on this account with respect to SHEC is required because of provisions of section 294 of the Income tax act-2007 which are being reproduced herewith: -

Act to have effect pending legislative provision for charge of tax.

294. If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income-tax for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force

5. THE 1^ST. JUNE EFFECT ON INCOME TAX

As explained above the provisions of Finance Act-2007 related to direct tax as contained in Section 2 to 84 is applicable w.e.f. 1^st. April 2007 with the exception of provisions in which the different date is mentioned. Here the 1^st. June is an important date like earlier years and various provisions alongwith, which the date 1st. June 2007 is affixed.

Some of the important provisions, which are applicable w.e.f. 1^st June 2007 are: -

1. TDS rates for Brokerage and commission under section 194H has been raised from 5% to 10%.

2. TDS provisions on commission or Brokerages payable by BSNL and MTNL to their PCO franchisees are not applicable w.e.f. 1^st. June 2007.

2. TDS provisions under section 194C for Individual and HUFs having turnover in excess of limit laid down by Section 44AB with respect to payments to contractors are also applicable w.e.f. 1^st. June 2007. The TDS provisions under section 194C with respect to payment to Sub-contractors for these specified Individual and HUFs are already applicable and now w.e.f. 1^st. June 2007 these provisions will also be applicable for payments to contracts also.

3. The TDS provisions under section 194A for interest from Bank and co-operative Banks and central Governments notified Post office deposit scheme will not apply for payment up to 10000.00 w.e.f. 1^st. June 2007. The limit up to 31^st. May is Rs.5000.00. The central Government has recently notified senior citizen deposit scheme for this purpose.

4. An explanation is added to section 206C is added w.e.f. 1^st. June 2007 to mention that TDS is not required with respect to Minning and quarrying Mineral oil including petroleum and Natural Gas.

6. SERVICE TAX ON NEW SERVICES

It is provided in the Finance Act-2007 that the service tax on new and regrouped services including the expansion of the scope of the existing services are applicable with effect from the date to be notified by the Government after enactment of the Finance Act-2007 and as per notification 27/2007 23/2007 ST dated 22-5-2007 the date is 1^st. June 2007 hence the service tax on all the new and regrouped services including the important service like Works contract services and Renting an immovable property services are applicable w.e.f. 1^st. June 2007. Accordingly these new and regrouped services are taxable w.e.f. 1^st June 2007: -

S.NO	DESCRIPTION OF SERVICE
1.	Service provided by a telegraph authority in relation to telecommunication service- Section 65(105) (zzzx).
2.	Service provided in relation to mining of mineral, oil or gas- Section 65(105) (zzzy)
3.	Service provided in relation to renting of immovable property for use in the course or furtherance of business or commerce- Section 65(105) (zzzz).
4.	Service provided in relation to the execution of a works contract- Section 65(105) (zzzza).
5.	Service provided in relation to development and supply of content for use in telecom services, advertising agency services and on-line information and database access or retrieval services- Section 65(105) (zzzzb).
6.	Service provided by any person, except a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, in relation to asset management including portfolio management and all forms of fund management- Section 65(105) (zzzzc).
7.	Service provided in relation to design services- Section65 (105) (zzzzd).