Draft Direct Tax Code Bill - 2009
Presentation by :
CA. Kapil Goel, ACA, LLB
Chartered Accountant
9910272806
New Delhi
cakapilgoel @gmail.com
OBJECT/SCOPE
To deliberate upon provisions proposed in new
Code vis a vis Business Head Taxation & specfic
Business & capital gains
Concept of Assessment Year done away with :
Replaced with Financial year (as stated in
Discussion Paper of New Code said change will
not impact the existing system of TDS; Advance
Tax; Self Assessment Tax etc and is aimed to
reduce confusion in compliance and
administration)
New Concept of Tax base
 275.“tax bases” means(a) income or total income, as the case
may be, in relation to income-tax;
(b) net wealth in relation to wealth-tax;
(c) dividend distributed in relation to
dividend distribution tax; and
(d) the income or total income, net
wealth, or dividend distributed referred to
in sub-clauses (a) to (c) of any other
person in respect of which the assessee is
assessable under this Code
3
Revenue’s Objective in Discussion
Paper towards new Code

The Code is not an attempt to amend the Income Tax Act,
1961; nor is it an attempt to "improve" upon the
present Act. In drafting the Code, the Central Board of
Direct Taxes(the Board) has, to the extent possible, started
on a clean drafting slate. Some assumptions which have
held the ground for many years have been discarded.
Principles that have gained international acceptance have
been adopted. The best practices in the world have been
studied and incorporated. Tax policies that would promote
growth with equity have been reflected in the new
provisions. Hence, while reading the Code, it would be
advisable to do so without any preconceived notions
and, as far as possible, without comparing the
provisions with the corresponding provisions of the
Income Tax Act, 1961 (Para 1.7)
4
Revenue’s Objective in Discussion
Paper towards Business Taxation
 The computation of income from business is the
most important head of income having profound
implications for the Revenue. Therefore, the
Code has rationalized the provisions relating to
computation of income from business.
 Section 284 clause 40. “business” includes (a) any trade, commerce or manufacture;
(b) any adventure, or concern of that nature;
(c) any profession;and
(d) any vocation; (earlier provision in 1961 Act
were sections 2(13) only business included and
profession dealt separately in section 2(36))
5
Date of Setting up of Business
Section 284
 75. “date of setting up of a business” means
(a) in the case of business of manufacturing,
production or processing of goods,the date on
which the manufacture, production or
processing of the goods begins after successful
trial run of the plant; or
(b) in any other case, the date on which it is
ready to commence its commercial Operations
Earlier No specific definition- Judicial decisions
analysed it – interalia in BHC in Vegetable
Products; DHC in ESPN; Del ITAT in Whirlpool etc
6
Revenue’s Objective in Discussion
Paper towards Business Taxation

There are two models for computation of income under this
head. The first is the model where the taxable income is
equal to business profits with specified adjustments.
However, this model does not provide for items of receipts
which form part of business profit and deductions to be
made therefrom. As a result, there are frequent
disputes about taxability of receipts and deductions
for expenses. The second model is the incomeexpenses model which is now followed in countries
like U.S.A., Canada, Australia and most Asian
countries. The computation of income from business
under the Code will be based on the incomeexpenses model where the taxable income under this
head will be equal to gross income minus allowable
deductions. To the extent possible, the items of
receipts and deductions for expenses are enumerated
to reduce the scope for litigation
7
Comparison at a glance
Provisions in new code bill
Comparative provisions in
old/present 1961 Act
Umbrella Expense Disallowance
Scattered Provisions Section
Provision Section 17 containing no 14A; Expl to Section 37; Section
of eventualities
69C Proviso; Part Picture of
Section 37
Umbrella TDS Default
Section 40(a)(i); (ia); (iii)
Disallowance Provision Section 18:
applicable for default of TDS in
every case
Subsequently expense allowable if
tax stands deposited by next 2 yrs
Computation of income from
Ordinary Sources to be classified
head wise Section 14 which
includes business head
Section 14
8
Comparison at a glance
Provisions in new bill
Comparative provisions
in old 1961 Act
Business Head Charging Provision
Section 28(1)- EACH BUSINESS
SEPARATE
Section 28(i)
Taxability of income from
business/profession discontinued section
28(3)- In year of receipt – under
business head
Section 176(3A)/176(4)
Distinct and Separate Business Section
No Provision except
29 with deemed separate businessess u/s Expl 2 to Section 28 for
29(2) and speculative separate business
speculative business
u/s 29(3)
Profits of Business Taxable under
Business HEAD = GROSS EARNIGS
MINUS BUSINESS EXPENSE Sec 30
Section 28(i) and
Section 29 business
profits
9
Comparison at a glance
Provisions in new bill
GROSS EARNINGS FOR SECTION 30
DEFINED IN SECTION 31 (interalia)
include
 Subsidy Receipts (other than to
meet asset cost)
 Profits from Business Capital Asset
 Slump Sale Profits
 Remission/Cessation
 Long term leasing of business
asset
 Reimbursement receipts
 Other than a/c payee payment
Section 104 Disallowance of expenditure
having regard to Fair Market Value -wide
Comparative provisions
in old 1961 Act
-SC Sawhney
Steels/Ponni SUGARS &
Expl to sec 43
-Section 50/50B Capital
Gains Head
-Section 41
- Section 40A(3)
Section 40A(2)
10
Comparison at a glance
Provisions in new bill
Comparative provisions
in old 1961 Act
GROSS EARNINGS FOR SECTION 30
DEFINED IN SECTION 31
(interalia/exclude)
 letting income other than by
hotel/convention centre/cold
storage
 income from transfer of
investment asset (NON BUSINESS
TRADING & CAPITAL ASSET)
 remission ETC of loan ETC to
individual by relative
Section 28/22 (SC
Shambu Investments
etc)
Capital gains versus
business head
11
Comparison at a glance
Provisions in new bill
Comparative
provisions in old 1961
Act
DEDUCTION FOR BUSINESS EXPENSE
SEC 32
A) OPERATING EXPENSE- SEC 33
B) PERMITTED FINANCIAL CHARGES –
SECTION 34
C) CAPITAL ALLOWANCES – SEC 35
SECTION 37
FOR BUSINESSS CARRIED ON DURING
FINACIAL YEAR
SEC 32(3) AO EMPOWERED TO RESTRICT
AFORESAID EXPENSES TO PROPORTION
DEEMED FIT
SECTION 38 (1)& (2)
12
Some key clauses in section 33(2)
allowable expenses
(ii) rent actually paid for any premises if it is
occupied by the person and used by him
(vi) maintenance of computer software or
hardware;
(xv) sales promotion incl. advertisement and
publicity not exceeding the amount charged
to profit and loss account
(section 33(2) subject to expense being
wholly and exclusively for business purposesubject to 33(4))
13
Some key clauses in section 33(2)
allowable expenses
(xxvi) subscription, including entrance fee, to a
club or a trade association or the use of their
facilities
(xxxv) protecting or safeguarding the goodwill
of the person, which has necessarily to be
preserved for the purpose of his business;
(xxxvi) business reorganisation, dissolution or
liquidation of the business
(xliii) the amount of any other expenditure.
14
Some key Losses allowable u/s
33(3)
 (b) loss of inventory, or money, on account of
theft, robbery, fraud or embezzlement,
occurring in the course of the business, if the
inventory, or the money, is written off in the
books of account;
 (e) trade debt or part thereof, if,- (i) the person
is not a permitted financial institution; and
(ii) the amount is written off as irrecoverable in
the books of the person
15
Some key Disallowances u/s 33(4)
(a) personal expenses of the person;
(b) capital expenditure including expenditure in respect of which capital
allowance is allowable under section 35;
(c) finance charges; (separately dealt in section 34)
(d) any unascertained liability of the person;
(e) remuneration payable to any sleeping participant;
(f) any expenditure incurred by a person on advertisement in any
souvenir, brochure, tract, pamphlet or the like published by a political
party;
(g) wealth-tax; and
(h) any rate or tax,(i) levied on the profits of any business (ii) assessed at a
proportion of , or otherwise on the basis of, the profits of any
business; or (iii) paid which is eligible for relief of tax under
section 206 or section 258, as the case may be; and
(i) any dividend declared or distributed
Earlier provisions were separately contained in section 37; 40(a) etc.
16
Some key Disallowances u/s 33(5)

(5) Any amount of expenditure or deduction referred to in
sub-section (1) or subsection (2) or under section 34 or
under section 35, which is not allowable by reason of the
fact that the expenditure is in violation of the condition, if
any, or is in excess of the amount, if any, specified therein,
shall not be allowed as a deduction under clause (xliii) of
sub-section (2) only on the reasoning that it is laid out or
expended, wholly and exclusively, for the purposes of
business.
Earlier on aforesaid principle in 1961 Act allowability of expense
u/s 37 not allowable u/s 36, contrary rulings from High Court
were there DHC In Sony case etc. in context of Gratuity Fund
Contribution.
However SC in context of allowability of Repairs to
Plant not allowable u/s 30/31 held could be still allowed under
residuary clause section 37
17
Some key Disallowances u/s 33(5)
 (6) The deduction in respect of the amount
referred to in clause (xxx), and clauses (xxxvii)
to (xl), of sub-section (2) shall, notwithstanding
anything contained in sub-section (1), be
allowed in the financial year in which the
amount is actually paid or in the financial year
in which the liability has arisen, whichever is
later.
Refer on aforesaid principle contrary ruling
in Chd ITAT Special Bench IN Glaxo case on Sectio
43B – Advance payment of listed expense allowable
18
Allowable Financial Charges u/s 34


(a) the amount of interest paid on any capital borrowed or
debt incurred;
(b) the amount of interest paid to trade creditors;
(c) the amount of interest paid to any participant to the
extent it is in accordance with the agreement of the
association and relates to the period falling after
the date of the agreement;
(d) the amount of any charge or fee paid in respect of any credit
facility which has not been utilized;
(e) the amount of any incidental financial charges;
(f) the proportionate amount of discount or premium
payable on any bond or debenture issued by the person,
calculated in the manner as may be prescribed (refer SC in
Madras Industrial etc)
Earlier allowances were made u/s 36(1)(iii) and section
37 – debenture issue expenses and section 40 for interest to
partners.
19
Allowable Financial Charges u/s 34
Section 284 clause 127.“incidental financial charges”
means any fee, commission, brokerage, premium, tax
payable or any other similar expenditure incurred for the
purposes of borrowing or raising capital or incurring any
debt or in respect of any credit facility which has not been
utilized
However as stated in sec 34(2):following is
not included in section 34(1): ..(b) any amount of
incidental financial charges for issue of debentures,
bonds or share capital
Refer earlier jurisprudence in SC ruling in General
Insurance- Bonus Share Issue expense allowable
and Brooke Bond Share Capital issue expense CAPITAL in
nature; SC in India Cements- Debenture issue expense
revenue in nature etc under 1961 Act Section 37

20
Capital Allowance Section 35
 On:
42. “business capital asset” means,(a) any capital asset self -generated in the course of
business; (b) any intangible capital asset in the nature of,(i) goodwill of a business, (ii) a trade mark or brand name
associated with the business, (iii) a right to manufacture or
produce any article or thing, (iv) right to carry on any
business,(v) tenancy right in respect of premises
occupied by the assessee and used by him for the
purposes of his business, or (vi) licence, right or permit
(by whatever name called) acquired in connection with,
or in the course of, any business;
(c) any tangible capital asset in the nature of a building,
machinery, plant or furniture;or (d) any other capital asset
connected with or used for the purposes of any
business of the assessee; (section 55 of earlier lawcapital cost deemed nil- submerged in business head
taxation)
21
Capital Allowance Section 35




Earlier provision in section 32: INTANGIBLE ASSETS
included:
Finance [No. 2] Act, 1998 brought in a major amendment
with regard to the law regarding depreciation allowance.
Section 32 of the Income-Tax Act, 1961 was
amended to grant depreciation allowance on
knowhow, patents, copyrights, trademarks, licences,
franchisee and other business or commercial rights
of similar nature, being intangible assets acquired on
or af ter April 1, 1998.
Explanation 3 defined tangible assets as buildings,
machinery, plant or furniture and intangible assets as
knowhow, patents, etc. Explanation 4 gives a separate
meaning for knowhow as any industrial information
or technique likely to assist in the manufacture or
processing of goods. We can all understand that
knowhow can depreciate with rapid advances being
made in science and technology – NOW IN CLAUSE
157 OF SECTION 284
22
Capital Allowance Landmark change
in Finance Lease Section 35

(4) A business capital asset shall be deemed to be owned by
the person if he is a lessee in terms of a financial lease
Section 284 clause 108.“financial lease” and its grammatical
variation, means a lease transaction where(a) contract for lease is entered into between two parties for
leasing of a specific asset;
(b) such contract is for use and occupation of the asset by the
lessee;
(c) the lease payment is calculated so as to cover the full cost of
the asset together with the interest charges; and
(d) the lessee is entitled to own, or has the option to own, the
asset at the end of the lease period after making the lease
payment;
In 1961 Act there has been litigation ongoing on what is financial lease
& what is not – refer SC ruling in Asea Brown Boveri & Mumbai
Special Bench ITAT pending in Industrial Bank;
23
Capital Allowance Section 35
 (2) The depreciation, initial depreciation or terminal
allowance, referred to in subsection (1), shall be
allowed in respect of any business capital asset if
the asset is,(a) owned, wholly or partly, by the person; and
(b) used for the purposes of the business of the
person.
(3) The condition referred to in clause (a) of
sub-section (2) shall not apply in the case of a
business capital asset being a capital
expenditure on any building which is held by
the person under a lease or other right of
occupancy (in earlier law refer expl 1 in section
32- depreciation on leasehold improvements)
Also refer sch XV of new code Point V
24
Computation of Depreciation for
Section 35- Dealt in Section 36
 (2) The depreciation allowance on assets
referred to in section 35 shall, regardless of
the fact that all business capital assets in
any block of assets have ceased to exist by
reason of being demolished, destroyed,
discarded or transferred, be allowed to a
person in respect of the block of asset if
the adjusted value of the block of assets is
greater than zero- REFER XV TH SCHDULE
TO NEW CODE
Above has been litigated in 1961 Act.
25
Computation of Depreciation for
Section 35- Dealt in Section 36
 (xiii)Loss on sale of business capital
assets, which is treated as capital loss
under the 1961 Act, will be treated as
intangible asset and depreciation will be
allowed at the same rates applicable to the
relevant block of assets. Effectively,
therefore, a taxpayer will be allowed to set
off only a fraction of the loss every year.
This will, accordingly, serve as a
disincentive for asset stripping and loss
manipulation. From Discussion Note
26
XV Schedule-Snapshot- Change etc
S.No
Particulars
1
Buildings used as
-railway station -airport -sea port
-bus terminal
General
2
Books – Annual Publication for
professional & other books
-Books for library business
-Other books
Rate of Dep
15%
10
100 & 60 resp.
100
25
3
Assets used for family planning by a 25
company
4
Scientific research assets- all
asset other than land
100
27
XV Schedule-Snapshot- Change etc
S.No
Particulars
Rate of Dep
5
Animals
0
6
Intangible assets
-Earlier specified in section 32
-Prescribed preliminary exp
- Enduring benefit non owned
asset/project of which benefit
exceeds 10 years
- Enduring benefit non owned
asset/project of benefit not exceeds
10 years
25
25
15
20
28
XV Schedule-Snapshot- Change etc
S.No
Particulars
7
Deferred revenue expense
-Non compete fees
-Lease hold premium
-VRS Compensation
-Business reorganization by Indian
co.
-Indian resident mineral prospecting
expense
8
Computers incl computer software
Rate of Dep
25
25
25
25
15
60
29
Scientific Research Expense
Provisions-Section 39
xii) Scientific research and development allowance will be allowed
with reference to expenditure on scientific research and
development since such expenditure generates positive
externalities. The salient features of the allowance are:
(a) 100 per cent deduction for any revenue expenditure laid out
or expended on scientific research related to the business.
(b) 100 per cent deduction for any capital expenditure, other than
expenditure on land.
(c) 150 per cent deduction for any expenditure (both revenue and
capital) incurred on in-house research and development by a
company, excluding expenditure on land.
-
-
Inhouse facility must be approved from central govt on
recommendation of prescribed authority
Approval to predecessor – to apply to successor in business
reorganization if transferred to successor
Board to prescribe rules for approval procrdures
30
Scientific Research Expense
Provisions – Definition

247.“scientific research and development” shall mean
systemic investigation and search in a field of technology, natural
or applied science (including agriculture, animal husbandry or
fisheries) if,(a) it is carried out by the assessee by means of experiment or
analysis;
(b) it is in the nature of,(i) basic research, namely, work undertaken for the advancement
of scientific knowledge without a specific practical application
in view;
(ii) applied research, namely, work undertaken for the
advancement of scientific knowledge with a specific practical
application in view; or
(iii) experimental development, namely, work undertaken
for the purpose of achieving technological advancement for
the purpose of creating new, or improving existing
materials, devices, products or processes, including
incremental improvements thereto;and
31
Scientific Research Expense
Provisions- Definition

..(c) it is not in the nature of ,(i) market research or sales promotion;
(ii) quality control or routine testing of materials,
devices, products or processes;
(iii) research in the social sciences or the humanities;
(iv) prospecting, exploring or drilling for, or
producing, minerals, petroleum or natural gas;
(v) the commercial production of a new or improved
material, device or product or the commercial use of
a new or improved process;
(vi) style changes; or
(vii) routine data collection;
32
Other provisions- Snap Shot
 Profit on transfer of business capital
asset taxable under business head
determined as per section 40 (only
positive element)
 Special provision for depreciation in
case where business reorganization
takes place – section 41 – similar to
earlier IInd Proviso to section 32proportionate distribution of capital
allowance between successor and
predeccesor on basis of days
33
Other provisions- Snap Shot
 Cases similar to actual cost in earlier
section 43 are dealt in section 42 of
new code Clause “5 of section 284:.
“actual cost” in relation to a business
capital asset shall be the cost computed
under section 42;
34
Other provisions- Snap Shot

Certain words used in business head/above slides
explained in section 284 under clauses:



Agreement for non compete used in context of taxation u/s
31 on gross earnings : clause 10
Business capital asset : clause 42 (gross earnings section
and section 35; 40 etc including business capital asset
transfer receipts)
Slump sale : clause 254 (gross earning section including
slump sale receipts etc)
234.“remission or cessation of any liability” shall
include the remission or cessation of any liability,- (a) by
a unilateral act by the assessee by way of writing off such
liability in his account or creating a reserve(by whatever name
called); or b) by virtue of there being no transaction with the
creditor during the period of three years from the end of the
financial year in which the last transaction took place;
HIGHLY IMPACTFUL….
35
Other provisions- Snap Shot
 Certain words used in business head/above
slides explained in section 284 under
clauses:
 Long term leasing : clause 165 (in gross earning
provision)
 Business asset : clause 41 (in gross earning
provision)
 Computer software : clause 63 : used IN operating
expense provision
 Salary : Clause 244 used IN operating expense
provision
 Speculative transaction : Clause 262 : used in
distinct/separate business provision
36
Other provisions- Snap Shot
 Certain words used in business head/above
slides explained in section 284 under
clauses:
 Participant and Working Participant and Sleeping
Participant: 191; 314 & None terms used in
operating expense and disallowable expense
provisions
 Head Office Expense: Clause 119 used in operating
expense allowable provision
 190.“paid” shall,(a) in relation to “Income from business” or “Income
from residuary sources”, mean incurred or actually
paid, according to the method of accounting on the
basis of which the income under those heads are
computed; and (b) in all other cases, mean actually
paid
37
Other provisions- Snap Shot
 Certain words used in business
head/above slides explained in section
284 under clauses:
 Owner clause 189 : phrase used in context
of capital allowance
 Transfer in relation to capital asset: clause
287 phrase used in context of GROSS
EARNING including business capital asset
transfer & section 40 etc
 Tax : Clause 274 used in specific
disallowable expenses
 Predecessor and Successor in Clauses 213
& 271 resp used in business head
38
Other provisions- Snap Shot
 Maintenance of accounts and tax audit
– provisions separately dealt in
section 83; 84 & 85
 Books to be maintained by non
specified business in case Income
from business exceeds 2 lakh rupees
 Books of account u/s 83(4) read with
clause 38/section 284 specifically
includes “daily inventory of business
trading asset” and stock register
respectively
39
Capital Gains Taxation under New code
Chapter III-E
Charging Provision: Section 44(1): The
income from the transfer of any investment
asset shall be computed under the
head “Capital gains
40
Change in scheme of capital gains – transfer
definition section 284 clause 287
New entrants in transfer definition
and corresponding provisions in
Code
Earlier scheme u/s 2(47) &
other provisions in 1961 Act
The buy back of shares or other
Section 46A
specified securities by the issuer of
such shares/securities- Full value
of consideration is amount recd
u/s 48(2)(c)
Contribution of asset by
capital/otherwise to company/firm
etc- financial year of taxabilitydealt in sec 46(1)-table2 (e) entry
& full value of consideration is
amount recorded in books of
transferee company/firm etc
Section 45(3) did not included
contribution to company
41
Change in scheme of capital gains – transfer
definition section 284 clause 287
New entrants in transfer definition
and corresponding provisions in
Code
Earlier scheme u/s 2(47) &
other provisions in 1961 Act
Distribution of asset on dissolution
of firm etc- financial year of
taxability- dealt in sec 46(1)-table
2- (e) entry & full value of
consideration is fair market value
on transfer date- section 48(2)(e)
Section 45(4)
Distribution of asset on distribution Section 46
of asset on liquidation of
company- full value of
consideration is money/fair market
value of asset recd from
liquidating co. reduced by deemed
dividend u/s 284(89)(iii)
42
Change in scheme of capital gains – transfer
definition section 284 clause 287
New entrants in transfer definition
and corresponding provisions in
Code
Earlier scheme u/s 2(47) &
other provisions in 1961 Act
On Retirement – distribution of
asset to partner/participant of
firm/unincorporated body – Full
value of consideration u/s
48(2)- (h)- is amount of
money/fair market value of asset
recd. – financial year of transfer
u/s 46(1)- year in which
money/asset is distributed
Litigated- Difference in High
courts on Section 45(4)
whether included retirement or
not
Slump sale
Separate section Section 50B
Damage to insured asset/or its
destruction- financial year of
transfer u/s 46(1)- year in which
money/asset is RECD.
45(1A)
43
Change in scheme of capital gains – transfer
definition section 284 clause 287
New entrants in transfer definition
and corresponding provisions in
Code
Earlier scheme u/s 2(47) &
other provisions in 1961 Act
“ANY
NO PROVISION
DISPOSITION.SETTLEMENT,TRU
ST,COVENANT,AGREEMENT,ARR
ANGEMENT”- APPARENTLY
DIRECTIONLESS/TRAGETLESS
Transfer of securities by person
having beneficial interest in
securities held by depository
Section 45(2A)
44
FINANCIAL YEAR OF transfer Table 2
Section 46(1)
Change
Earlier scheme & other
provisions in 1961 Act
Transfer by part performance of
a contract of nature of section
53A of T.P.Act- for real estate
transactions etc – year of
transfer – shall be – in which
POSSESSION IS
TAKEN/RETAINED
Litigated – Refer
a) SC ruling in Amit Shah
Jajgati
b) AAR Jasbir Sarkari
c) BHC Chatirbhuj Kapadia
260 ITR
Refer Clause 2(47)(v)
Compulsory acquisition- Year in
which compensation/part is recd.
Section 45(5)
General The financial year in which
transfer took place
Section 45(1)
45
Basic Computation Scheme- Section
47(1);48;49;50;51;52
Provision
Section
Computation of income from
transfer of any investment asset
47 Full value of consideration
minus (expense for transfer &
cost of acquisition &
improvement – indexed if
applicable)
Full value of Consideration
48(1)
Deemed cases 48(2)
Deduction of cost of acquisition,
inflation/adjustment
Section 49
Indexed cost of
acquisition/improvement
Section 50
Cost of acquisition of an investment Section 51
asset
Cost of Improvement
Section 52
46
Basic Computation Scheme- Section
47(1);48;49;50;51;52
Change
Earlier scheme & other
provisions in 1961 Act
Now there is no short
term/long term concept and an
an investment asst transferred
after one year from financial
year end in which said asset
was acquired qualifies for
INDEXATION of cost of
acquisition and improvement
u/s 49(2)
Short term capital asset:
2(42A)/2(42B) & Long term
Capital Asset 2(29A)/2(29B)
-
Shares etc – 12 months
limit
Other assets- thirty six
months
No special treatment for Long
term capital gains unlike earlier
section 112 – STT proposed to
be abolished
47
Basic Computation Scheme- Section
47(1);48;49; 50;51;52
Change
Earlier scheme & other
provisions in 1961 Act
Definition of Full value of
consideration:
Section 48(1)
The full value of the consideration shall
be the amount received by, or accruing
to, the transferor, directly or indirectly,
as a result of the transfer of the
Investment asset.
Deemed Full value…….
(j) the higher of the stamp duty value of
the asset and the value of the asset
ascertained on reference, if any, to
the Valuation Officer
No specific enumeration
SEC 50C(3) differed in
as much as Stamp value if
lesser than DVO value,
former prevailed over later
48
Basic Computation Scheme- Section
47(1);48;49; 50;51;52
Change
Earlier scheme & other
provisions in 1961 Act
Definition of Full value of Deemed
Full value…….
(j) the higher of the stamp duty value of
the asset and the value of the asset
ascertained on reference, if any, to the
Valuation Officer
(3) The reference to the Valuation
Officer referred to in sub-section (2)
shall be made, at the option of the
assessee, if- (i) the asset is land or
building; and (ii) the consideration
accrued, or received, as a result of
the transfer of the asset is less than
the stamp duty value of the asset
SEC 50C(3) differed in
as much as Stamp value if
lesser than DVO value,
former prevailed over later
49
Basic Computation Scheme- Section
47(1);48;49; 50;51;52
Change
Earlier scheme & other
provisions in 1961 Act
In cost of acquisition u/s 51: it is
stated same shall be:
(a) the purchase price of the
asset, or
(b) at the option of the person,
the fair market value of the asset
on the 1st day of April, 2000, if
the asset is acquired by the
person before such date.
Special mode of acquisition 257 clause in section 284
where previous owner cost is
Section 48(1)
No specific enumeration:
Judicial decisions enabled
assessee to upload
interest costs in
acquisition cost if
borrowing directly for
relevant asset purchaseseems to be now diluted
Earlier base year was
1/4/1981
50
Basic Computation Scheme- Section
47(1);48;49; 50;51; XVII Sch
Change
Earlier scheme & other
provisions in 1961 Act
Refer Later Changes in
As transfer of immovable and
Finance Bill No 2 2009
other specified properties below
market value is taxable in hands
of individual for difference in
market value and stated
consideration – it is not clear
whether or not fair market value
earlier taxed will become deemed
cost u/s 51 read with Sch
XVII to new code as in Finance
Bill 2009 there is a provision for
the same
51
Basic Computation Scheme- Section
47(1);48;49; 50;51;52
Change
Earlier scheme & other
provisions in 1961 Act
51(5) The cost of acquisition of an
SC B.CShrinivassa
Sheety
SC PNB Finance
SC DP Sandu Bros
investment asset shall, regardless of
anything to the contrary contained in
this section, be nil, if,(a) the asset is acquired by selfgeneration; or
(b) the cost of acquisition of the asset to If Cost indeterminatethe person or previous owner, if any, is
charge will fail and no
incapable of being determined or
capital gains
ascertained, for any reason.
Further specific provision u/s 51 (4) for
determining cost in hands of retiring
partner for assets recd on retirement
52
Basic Computation Scheme- Section
47(1);48;49; 50;51;52
Change
Earlier scheme & other
provisions in 1961 Act
52. (1) The cost of improvement of an
investment asset shall be any
expenditure of a capital nature
incurred in making any additions or
alterations to the asset ,(a) by the person; or
(b) by the previous owner, if the asset is
acquired by any special modes of
acquisition.
No specific enumeration
Whether amount of
Mortgaged debt on
asset inherited &
created by deceased,
now cleared by
assessee, Same will
form part of cost of
improvement etc.
earlier SC rulings to
favor of assessee were
there
53
Concept: Rollover for transfer of asset after one
year of acquisition financial year end
(section 49(2) & 53(1))
Change
Earlier scheme & other
provisions in 1961 Act
-For agricultural land transfer reinvested Capital gains exemption
in agricultural land, to Individual/HUFu/s 54; 54B; 54EC; 54F
-Any asset reinvested in residential
etc
house (no other residential house except
new one) to Individual/HUF
-Deposit in capital gains scheme within
60 days of transfer of original asset
54
Concept: Rollover for transfer of asset after one
year of acquisition financial year end
(section 49(2) & 53(1))
Change
Benefit computations: A X (B+C+D)/E
Where A = the amount of capital gains arising from the transfer of
the original asset;
B = the amount invested for purchase or in construction of the new
asset within one year before the beginning of the financial year in
which the transfer of original investment asset is effected;
C = the amount invested for purchase or in construction of the new
asset during the financial year in which the transfer of
original investment asset is effected;
D = the amount deposited in an account in any post office in
accordance with the Capital Gains Deposit Scheme framed
bythe Central Government in this behalf, by the end of the
financial year in which the transfer of original investment
asset is effected;
E = the net consideration received as a result of the transfer
55
Special Computation of profits of business
of mineral oil and natural gas XI Schedule
56
Taxation scheme of Oil and Gas
 Applicable to business of mineral oil and
natural gas
 Mineral oil means crude oil, being petroleum in
its natural state before it is refined or
otherwise treated but from which water and
foreign substances have been extracted;
 ‘natural gas’ means any subsoil combustible
gaseous fossil fuel;
 ‘oil and gas right’ means any reconnaissance
permit, technical cooperation permit,
exploration right, or production right assigned
under the Oilfields (Regulation and
Development) Act, 1948, or any right
ornterest therein;
57
Taxation scheme of Oil and Gas
 Profits = Gross income – business
expense (-ve profit/loss allowed to be
c/fwd)
 Gross income includes
 accruals/receipts from subject business
 accruals/receipts from leasing/transfer of (or
part of) any interest in a) mineral oil/natural
gas right and b) asset used in subject
business
 accruals/receipts from demolition/transfer of
business capital asset for which depreciation
is allowable/allowed
 Deemed gross earnings in section 31(2)
58
Taxation scheme of Oil and Gas
 Business expense includes
 Operating expense u/s 33 incurred by assessee
 Permitted financial charges u/s 34
 Expense on license charges/ other charges if
actually paid
 Expense on lease/purchase of land/land
rights
 Any capital expense
 Expense on infructous/abortive
exploration of any area
 Above Expense if incurred prior to
business commencement

Amount of –ve profit from preceding financial year
59
Special Computation of profits of business
of SEZ Developers XII Schedule similar to
oil and gas excluding specifies to oil sector
60
XIII Schedule – Profits of Specified
Business- Investment Based Incentive
Section 35AD of 1961 Act by Finance Bill
2009 extended in Code
61
Taxation scheme of Specified Business
 Applicable to:
(a) business of generation, transmission or distribution of power;
(b) business of developing, or operating and maintaining, any
infrastructure facility (section 284 clause 146);
(c) business of operating and maintaining a hospital (section 284
clause 122) in any area, other than the excluded area;
(d) business of processing, preservation and packaging of fruits
and vegetables.
(e) business of laying and operating a cross country natural gas or
crude or petroleum oil pipeline network for distribution, including
storage facilities being an integral part of the network;
(f) business of setting up and operating a cold chain facility
(clause 55/section 284); and
(g) business of setting up and operating a warehousing facility for
storage of agricultural produce
62
Taxation scheme of Specified Business
 When:


Notified by Central Govt
Prescribed conditions fulfilled - inclusive
 Not setup by splitting up/reconstruction of business
in existence
 Not set up by transfer of used plant and machinery
 Specially I context of natural gas pipeline business:
 Business owned by Company formed under Companies
Act 1956/consortium of such companies established
under central act
 Approved by Petroleum and NATURAL Gas Board
 Made not less than 1/3 of total pipeline capacity
available for use on common carrier basis
 Fulfills other prescribed conditions
 The profits of every specified business shall be
63
computed separately under this Schedule
Taxation scheme of Specified Business
 Basic Objective Discussion paper
 …Since profit is the basis for exemption, there is no
incentive for investment and upgradation during
the period of tax holiday. Such profit-linked
incentives also lead to significant loss of revenue
and encourage rent-seeking behaviour. Hence, the
Code substitutes profit-linked incentives by a new
scheme. Under the new scheme, a person would be
allowed to recover all capital and revenue
expenditure (except expenditure on land, goodwill
and financial instrument) and he would be liable to
income tax on profits made thereafter. The period
consumed in recovering all capital and revenue
expenditure will be the period of tax holiday
64
Thank You
CA.KAPIL GOEL
9910272806
cakapilgoel@gmail.com