Union Budget 2014-15: The Modi Era Budget 2020

Disappointment on retrospective tax

High-level committee to scrutinise future cases

For the corporate sector, there is more a promise of concessions and reform than major giveaways in the Budget. The promises relate to the much-discussed issue of retrospective taxation, implementation of Direct Tax Code and to changes in Transfer Pricing rules.

On the retrospective tax issue, Finance Minister Arun Jaitley disappointed those who were expecting him to announce a repeal of the provision introduced in the 2012 budget by then Finance Minister Pranab Mukherjee.

All that Mr. Jaitley would say was his government would “not ordinarily bring about any change retrospectively” and that it was committed to a “stable and predictable taxation regime that would be investor-friendly and spur growth”.

The Finance Minister also said all fresh cases arising out of the 2012 amendment would be scrutinised by a high-level committee to be constituted by the Central Board of Direct Taxes.All ongoing cases, he said would reach their logical conclusions.

Talking of the Direct Tax Code, Mr. Jaitley merely said it would review the comments received from stakeholders on the revised code and take a view. He did not specify a time frame to do this.

In the case of transfer pricing, Mr. Jaitley has signified his intent to reform by announcing that the arm’s length price would be determined by the “range concept” as opposed to the existing practice of arithmetic mean.

He also promised to amend the regulations to allow use of multiple year data for comparable analysis of pricing.

The Budget also proposes to gross up dividends for the purpose of calculating tax; presently, companies pay tax on dividend net of taxes.

Among other not so favourable proposals is this one on corporate social responsibility (CSR). The Explanatory Memorandum to the Finance Bill is clear that CSR spending as mandated under the Companies Act cannot be deemed as business expenditure as it is not incurred for the purpose of carrying on business. Therefore, it cannot be allowed as deduction for tax purposes. The Budget argues that allowing CSR spend as deduction would result in subsidising of about one-third of the expense by the government, which is not the intent of the provision in the Companies Act.

The sunset date for concession under Section 80IA of the Income Tax Act for power generation and distribution companies has been extended up to March 2017. Investment allowance will now be available to companies that invest as little as Rs.25 crore in plant and machinery and this will extend for the next three year until March 2017.

Why you should pay for quality journalism - Click to know more

Recommended for you
This article is closed for comments.
Please Email the Editor

Printable version | Apr 7, 2020 5:06:58 AM | https://www.thehindu.com/business/budget/disappointment-on-retrospective-tax/article6198860.ece

Next Story