DIRECT TAXES
| Amendment to Finance Bill, 2010 Mon, 31 May 2010 |
| The Hindu Amendment to Finance Bill, 2010 There have been further amendments to the Finance Bill, 2010, which have been passed when the Bill became law. These amendments may be explained to supplement your comments on the Finance Bill in the Tax Forum. In the Memorandum accompanying the Finance (No.2) Bill, 2009, it was explained that on conversion of partnership firm to Limited Liability Partnership (LLP), there would be no tax implications. However, there was no similar inference of non-liability on conversion of a company to LLP. This omission was sought to be removed by introducing Sec. 47(xiiib) in the Finance Bill, 2010, by deeming that there would be a transfer of assets by a company to LLP but limited to companies with turnover of Rs. 60 lakh reckoned at an average of three preceding years so as to make the exemption available only for smaller companies. There was, however, an omission in the draft Bill to deal with transfer of shares by the shareholder of the company to LLP on such conversion. This is made good by the amendment to the Bill to Sec. 47(xiiib). Sub-section (2AAA) was inserted as an amendment to the draft Bill under Sec. 49 to provide for adoption of cost for partnership interest in LLP as the value of the shares immediately before conversion, as for other cases in Sec. 49, where there is exemption under Sec. 47. Insertion of sub-section (4) to Sec. 47A in the Bill provided for adoption of withdrawal of exemption for capital gains for violation of conditions under Sec. 47(xiiib). The amendment to this provision in the Bill would cover the shareholder of LLP also. Two other amendments relate to two new incentives by way of deduction of capital expenditure other than for land. One is for the business of building and operating new hospitals with at least hundred beds for patients under clause (ab) in Sec. 35AD(5). The other is under clause (ac) of Sec. 35AD(5) for the specified business in the nature of developing and building a housing project under a scheme for slum re-development and rehabilitation framed in accordance with the scheme notified by the Board but subject to the guidelines thereunder. These two incentives are available with effect from April 1, 2011, or in other words for assessment year 2011-12. They add up to three other industries already eligible for such deductions. Those are more in the nature of accelerated depreciation but no right to adjust against other income in view of restriction under Sec. 73A. |
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