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Suggestion given on Direct taxes

Posted on 29 July 2009,    
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Suggestions given by ICAI in Post Budget Memorandum, 2009 and accepted by the Ministry of Finance

Clause

Section

Proposed Amendment

Suggestion Given in Post-Budget

Memorandum, 2009

Suggestions Accepted

13

35AD

100% of the capital expenditure

incurred wholly and exclusively for the specified businesses would be allowed as deduction from the business income in the year in which the expenditure is

incurred.

A significant portion of the capital expenditure is generally incurred

before the commencement of business, and consequently, the

assessee may not be able to avail

deduction in respect of the same. For example, if capital expenditure

is incurred in Feb 2009 and the

assessee commences business in May 2009, he would not be able to

avail deduction in respect of the

expenditure, since it was not

incurred during the P.Y.2009-10.

Therefore, it may be clarified that

such expenditure incurred before

the commencement of business should be allowed in the year of commencement of business.

This suggestion has been accepted

in toto. A condition has been inserted that such amount incurred prior to commencement should be capitalized in the books of account

of the assessee on the date of

commencement of its operations.

(See Sl. No.14 of list no.3 Amendments to Finance (No.2) Bill,

2009)

11, 23 & 26

56(2)(vii)

It is proposed to bring gifts-inkind,

whose value exceeds Rs.50,000, also within the purview of section 56 with effect from 1st October, 2009. Accordingly, it has been provided that the value of the property received without consideration or for inadequate consideration, would be included in the computation of the total income

of the recipient.

It was suggested that -

The definition of income under

section 2(24) be amended to include any sum referred to in clause (vii) of sub-section (2) of

section 56.

The fair market value of movable

property and stamp value of immovable property taken into

account for the purpose of section 56(2)(vii) should be

considered as cost of acquisition

for computation of capital gains on sale of such property.

These suggestions have been accepted.

(See Sl. Nos.11 & 15 of list no.3

Amendments to Finance (No.2) Bill,

2009)

26

56(2)(viii)

Clause (viii) is proposed to be

inserted in section 56(2) to include income by way of interest received on compensation or enhanced compensation referred to in sub-section (2) of section 145A, within its scope.

The reference should be to clause

(b) of section 145A and not subsection

(2) of section 145A.

This correction has been incorporated.

(See Sl. No.18 of list no.3

Amendments to Finance (No.2) Bill,

2009)

30

80CCD

The benefit of deduction under

this section in respect of contribution to pension scheme

of the Central Government has

been extended to self employed

individuals also.

However, the deduction in all cases

is restricted to 10% of salary. There

is no salary income for a self

employed person. Therefore, in

such cases, the deduction may be

restricted to 10% of gross total

income.

This suggestion has been accepted

in toto.

(See Sl. No.19 of list No.3

Amendments to Finance (No.2) Bill,

2009)

42

115BBC

An exemption is proposed to be

given in respect of anonymous

donations taxable under section

115BBC. The exemption would

be the higher of 5% of total income or Rs.1 lakh.

It was suggested that the exemption

should be the higher of 5% of gross receipts (instead of total income) or Rs.1 lakh.

This suggestion has been accepted.

The limit would be the higher of 5%

of total donations received by the

assessee or Rs.1 lakh.

(See Sl. No.34 of list No.3 Amendments to Finance (No.2) Bill,

2009)



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