IMPORTANT AMENDMENTS TAXATION(IPCC)

IPCC
PAPER 4: TAXATION
IMPORTANT AMENDMENTS MADE BETWEEN 01.05.2009 TO 31.10.2009
Students may note that the Study Material for Taxation contains all the relevant amendments made by
the Finance (No. 2) Act, 2009. Further, circulars/notifications issued up to 30.04.2009 and Budget
notifications have also been incorporated therein. The following are the amendments which have been
made between 01.05.2009 to 31.10.2009. It may be carefully noted that for the students appearing in
May 2010 exams, the amendments made by the notifications, circulars and other legislations up to
31.10.2009 are relevant.
INCOME TAX
I CIRCULARS
1. Circular No. 4/2009, dated 29.6.2009
Section 195 mandates deduction of income tax from payments made or credit given to non-residents
at the rates in force. The Reserve Bank of India has also mandated that except in the case of certain
personal remittances which have been specifically exempted, no remittance shall be made to a nonresident
unless a no objection certificate has been obtained from the Income Tax Department. This
was modified to allow such remittances without insisting on a no objection certificate from the Income
Tax Department, if the person making the remittance furnishes an undertaking (addressed to the
Assessing Officer) accompanied by a certificate from an Accountant in a specified format. The
certificate and undertaking are to be submitted (in duplicate) to the Reserve Bank of India / authorised
dealers who in turn are required to forward a copy to the Assessing Officer concerned. The purpose of
the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it
may not be possible to recover the tax at a later stage from non-residents.
There has been a substantial increase in foreign remittances, making the manual handling and
tracking of certificates difficult. To monitor and track transactions in a timely manner, section 195 was
amended vide Finance Act, 2008 to allow CBDT to prescribe rules for electronic filing of the
undertaking. The format of the undertaking (Form 15CA) which is to be filed electronically and the
format of the certificate of the Accountant (Form 15CB) have been notified vide Rule 37BB of the
Income-tax Rules, 1962.
The revised procedure for furnishing information regarding remittances being made to non-residents
w.e.f. 1st July, 2009 is as follows:-
(i) The person making the payment (remitter) will obtain a certificate from an accountant (other
than employee) as defined in the Explanation to section 288 in Form 15CB.
(ii) The remitter will then access the website to electronically upload the remittance details to the
Department in Form 15CA (undertaking). The information to be furnished in Form 15CA is to be
filled using the information contained in Form 15CB (certificate).
(iii) The remitter will then take a print out of this filled up Form 15CA (which will bear an
acknowledgement number generated by the system) and sign it. Form 15CA (undertaking) can
be signed by the person authorised to sign the return of income of the remitter or a person so
authorised by him in writing.
(iv) The duly signed Form 15CA (undertaking) and Form 15CB (certificate), will be submitted in
duplicate to the Reserve Bank of India / authorized dealer. The Reserve Bank of India /
authorized dealer will in turn forward a copy of the certificate and undertaking to the Assessing
Officer concerned.
(v) A remitter who has obtained a certificate from the Assessing Officer regarding the rate at or
amount on which the tax is to be deducted is not required to obtain a certificate from the
Accountant in Form 15CB. However, he is required to furnish information in Form 15CA
(undertaking) and submit it along with a copy of the certificate from the Assessing Officer as per
the procedure mentioned from Sl.No.(i) to (iv) above.
2. Circular No. 7/2009 dated 22.10.2009
The CBDT has, through this circular, withdrawn the following circulars:
a) Circular No. 23 issued on 23rd July 1969 regarding taxability of income accruing or arising
through, or from, business connection in India to a non-resident, under section 9 of the
Income-tax Act, 1961.
b) Circulars No. 163 dated 29th May, 1975 and No.786 dated 7th February, 2000 which provided
clarification in respect of certain provisions of Circular No 23 dated 23rd July, 1969.
II NOTIFICATIONS
1. Notification No. 67/2009 dated 9.9.2009
The Central Government has, vide notification no.67/2009 dated 9.9.2009, specified the cost
inflation index (CII) for the financial year 2009-10. The CII for F.Y. 2009-10 is 632.
S. No. Financial Year Cost Inflation Index
1. 1981-82 100
2. 1982-83 109
3. 1983-84 116
4. 1984-85 125
5. 1985-86 133
6. 1986-87 140
7. 1987-88 150
8. 1988-89 161
9. 1989-90 172
10. 1990-91 182
11. 1991-92 199
12. 1992-93 223
13. 1993-94 244
14. 1994-95 259
15. 1995-96 281
16. 1996-97 305
17. 1997-98 331
18. 1998-99 351
19. 1999-2000 389
20. 2000-01 406
21. 2001-02 426
22. 2002-03 447
23. 2003-04 463
24. 2004-05 480
25. 2005-06 497
26. 2006-07 519
27. 2007-08 551
28. 2008-09 582
29. 2009-10 632
2. Notification No. 70/2009, dated 22.9.2009
The CBDT has, in exercise of the powers conferred by section 139(1B), made an amendment in
the notification of the Government of India relating to qualifications of an e-Return intermediary.
The qualifications of an e-Return Intermediary, as amended, are detailed hereunder -
(1) An e-Return Intermediary shall have the following qualifications, namely:-
(a) it must be a public sector company as defined in section 2(36A) of the Act or any other
company in which public are substantially interested within the meaning of section
2(18) of the Act and any subsidiary of those companies; or
(b) a company incorporated in India, including a bank, having a net worth of rupees one
crore or more; or
(c) a firm of Chartered Accountants or Company Secretaries or Advocates, if it has been
allotted a permanent account number; or
(d) a Chartered Accountants or Company Secretaries or Advocates or Tax Return
Preparers, if he has been allotted a permanent account number; or
(e) a Drawing or Disbursing Officer (DDO) of a Government Department.
(2) The e-intermediary shall have at least class II digital signature certificate from any of the
Certifying authorities authorized to issue such certificates by the Controller of Certifying
authorities appointed under section 17 of the Information Technology Act, 2002.
(3) The e-intermediary shall have in place security procedure to the satisfaction of e-Return
Administrator to ensure that confidentiality of the assessees information is properly secured.
(4) The e-intermediary shall have necessary archival, retrieval and, security policy for the e-
Returns which will be filed through him, as decided by e-Return Administrator from time to
time.
(5) The e-intermediary or its Principal Officer must not have been convicted for any professional
misconduct, fraud, embezzlement or any criminal offence.
SERVICE TAX
Notification No. 26/2009 ST dated 19.08.2009 has notified 01.09.2009 as the date on which the
services introduced by the Finance (No. 2) Act, 2009 would become effective. Further, the
amendments made in the existing services vide the Finance (No. 2) Act, 2009 would also become
effective from 01.09.2009.
Exemptions
1. Notification No. 16/2009 ST dated 07.07.2009 has exempted services provided by twenty two
export promotion councils, which were earlier taxable under the category of club or association
services. Notification No. 35/2009 ST dated 03.09.2009 has amended the said notification so
as to extend the exemption to the following organizations:
(i) Electronics and Computer Software Export Promotion Council, PHD House, 3 rd Floor,
Ramakrishna Dalmia Wing, New Delhi-110 016.
(ii) Indian Oilseeds & Produce Export Association Export Promotion Council, 62, Mittal
Chambers, Nariman Point, Mumbai-400 021.
(iii) Jute Manufacturers Development Council, 3A, Park Plaza,71, Park Street, Kolkata-700016.
(iv) Services Export Promotion Council, #1206, Chiranjiv Tower, 43, Nehru Place, New Delhi-
110 019.
(v) Wool Industry Export Promotion Council, Churchgate Chamber, 7th Floor, 5, New Marine
Lines, Mumbai - 400 020.
Thus, now total of twenty seven export promotion councils have been granted exemption under
Notification No. 16/2009.
2. Notification No. 40/2009 ST dated 30.09.2009 has amended Notification No.17/2009 ST dated
07.07.2009 which exempts certain specified taxable services received by an exporter and used
for export of goods. The following service (inserted at point no. 17 in the original notification)
received by an exporter and used for export of goods has also been exempted vide this
notification:
17. (zzzzl) Service provided for
transport of export goods
through national
waterway, inland water
and coastal shipping.
i. The exporter shall-
1. produce the Bill of Lading or a
Consignment Note or a similar
document by whatever name called,
issued in his name;
2. produce evidence to the effect that
the said transport is provided for
export of relevant goods.
Other amendments
3. Notification No. 9/2009 ST dated 03.03.2009 was issued to provide refund of service tax paid on
taxable services specified in section 65(105) of the Finance Act, 1994 which are provided in
relation to the authorised operations (as defined under SEZ Act, 2005) in a Special Economic
Zone (SEZ), and received by a developer or units of a SEZ, whether or not the said taxable
services are provided inside the SEZ.
Notification No. 15/2009 ST dated 20.05.2009 has been issued to amend the aforesaid
Notification 9/2009 ST dated 03.03.2009 to provide unconditional exemption to services
consumed within the SEZ without following the refund route thus dispensing with the requirement
of first paying the tax by the service provider and then claiming the refund thereof by
developer/unit. The exemption by way of refund would be limited to situations only when taxable
services provided to SEZ are consumed partially or wholly outside SEZ.
This has been done by making the following amendments in Notification No. 9/2009 ST dated
03.03.2009:
A. Conditions (a) to (f) mentioned in paragraph 1 for claiming the exemption have been
amended in the following manner:
(i) The condition (c) for claiming the exemption has been substituted with the following
condition:
“the exemption claimed by the developer or units of special economic zone shall be
provided by way of refund of service tax paid on the specified services used in relation
to the authorised operations in the special economic zone except for services
consumed wholly within the special economic zone;”
(ii) The condition (d) for claiming the exemption has been substituted with the following
condition:
“the developer or units of special economic zone claiming the exemption, by way of
refund in accordance with clause (c), has actually paid the service tax on the specified
services;”
(iii) Another condition (g) has been added after condition (f) for claiming the said
exemption. The new condition (g) reads as follows:
“(g) the developer or unit of a special economic zone shall maintain proper account of
receipt and utilisation of the taxable services for which exemption is claimed.”
B. The manner of giving exemption mentioned in paragraph 2 has been amended. In
paragraph 2, for the words, “shall be subject to the following conditions”, the words, “,except
for services consumed wholly within the Special Economic Zone, shall be subject to the
following conditions” shall be substituted.