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Mapping significant changes made b the Finance Act, 2011 V.K.SUBRAMANI CA The Finance Bill, 2011 af e i pa age b lo e and ppe ho e of Pa liamen go he a en of P e iden of India on 08.04.2011 and h i became Finance Ac , 2011. Some of he change e pec ed a , ollback of Minim m Al e na e Ta (MAT) on Special Economic Zone(SEZ) ni , Al e na e Minim Ta (AMT) on Limi ed Liabili Pa ne hip (LLP) fi m ha e been e ained, m ch o he di appoin men man . Thi a icle map ome of he ignifican change made a ** Long-term infrastructure fund 2. Income of long-term infrastructure fund set up in accordance with the guidelines as may be prescribed and which is notified by the Central Government in the official gazette would be exempt from tax by means of newly inserted sub-section (47) to section 10. This provision is intended for encouraging non-residents to deposit money bearing low interest cost (i.e. 5 percent) and with long lock-in period. On such interest, tax is deductible as tax at source at 5 percent under the newly inserted section 194 LB of the Act. Further, non-residents to whom such tax is deducted at source are exempted filing income-tax return subject to the conditions contained in section 115A. Long-term infrastructure fund yielding low interest with tax deduction at source at 5 per cent of the interest amount (which is equal to the rate of tax in respect of such income), the non-residents prima facie are enticed to route their funds for India s infrastructure growth. It is perplexing, as to why such a concessional treatment is accorded to non-resident taxpayers without similar such benefit being extended to resident assessees. The scheme of things looks like an amnesty scheme for illegal money stashed outside India being brought back to India in the guise of investment in long term infrastructure fund. ** Pension scheme of Central Government 4. Contribution of employer and employee together were deductible under section 80CCD prior to the amendment. Also, both the contribution of employer and employee fell within the cap of Rs.1 lakh prescribed in section 80 CCE. Now the Finance Act, 2011 provides for excluding the contribution of employer from the limit of Rs.1 lakh provided under section 80CCE. The contribution of employer not exceeding 10 per cent of salary is deductible separately. In other words, the employer s contribution to new pension system will be included as salary income of employee. Later such contribution not exceeding 10 per cent of employee s salary is deductible under section 80 CCD separately in addition to overall limit of Rs.1 lakh prescribed in section 80 CCE which would cover only employee s contribution to pension scheme in addition to other eligible deductions under sections 80C and 80CCC .
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ega d hei need and p ac ical applica ion . **

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** Liberal measures for hotels and hospitals

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6. Section 35AD meant for giving incentive to hotels (two star and above category) and hospitals (with 100 beds or more) has been given a further push by liberal set-off provisions. Assessees already engaged in such activities could set-off their income against the capital expenditure of the specified business for which, deduction under section 35AD is allowable. For example, if A Ltd engaged in running hotels has income of Rs.25 lakhs and has incurred Rs.300 lakhs towards capital expenditure (excluding cost of land) in establishing a three star hotel (which is eligible for deduction under section 35AD), the assessee can set-off the income from existing business (Rs.25 lakhs) against eligible deduction under section 35AD (Rs.300 lakhs). This would mean that the assessee need not pay tax in respect of income from existing business though such business may not fall in the category of specified business. The scheme thus permits recouping the entire project cost of specified business by allowing positive income from similar line of activity being given tax relief indirectly by allowing adjustment (set off) against the project cost of specified business. ** Conclusion The Finance Act, 2012 is no different or path breaking when compared with the preceding Finance Acts. The provisions of law have been amended here and there. Why such changes have been made and what is the desired or expected impact of the change? could not be inferred as such. Long term measures include encouraging non-residents to contribute to long term infrastructure fund and short term measures could be found in concessional rate of tax in respect of foreign company dividend which is applicable for only one year. It is high time that the law makers take upon themselves the responsibility of explicitly stating the reasons behind the policy changes, whenever any tax relief is granted or withdrawn. Only then budgeting could be called as sincere intellectual pursuit for over all welfare and as of now, it looks like, we are still caught with the habit of colonial rulers who changed the laws without any rhyme or reason. [Full te t of the Article ill be published in forthcoming issues of CORPORATE PROFESSIONALS TODAY - A FORTNIGHTLY ANALYTICAL MAGAZINE ON TAX & CORPORATE LAWS] ** **

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