SECTION 10(26BBB) OF THE INCOME-TAX ACT, 1961 - CORPORATION ESTABLISHED FOR WELFARE AND ECONOMIC UPLIFTMENT OF EX-SERVICEMEN - REQUIREMENT OF TAX DEDUCTION AT SOURCE IN CASE OF CORPORATIONS WHOSE INCOME IS EXEMPT UNDER SECTION 10(26BBB) - EXEMPTION THEREOF CIRCULAR NO.7/2015 [F.NO.275/50/2006-IT(B)], DATED 23-4-2015
The CBDT Circular No.4/2002, dated 16-7-2002 provides that in case of such entities, whose income is unconditionally exempt under section 10 and who are statutorily not required to file return of income, there would be no requirement for tax deduction at source from the payments made to them since their income is anyway exempt.Section 10(26BBB) came into existence after the issue of the said Circular dated 16-7-2002. The said section was inserted in the Income-tax Act vide Finance Act, 2003 (w.e.f. 1-4-2004) unconditionally exempting any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen being the citizens of India. The corporations covered under section 10(26BBB) are also statutorily not required to file return of income as per section 139 of the Act. References have been received in the Board requesting for extension of the aforesaid exemption from TDS granted vide Circular No.4/2002 to the corporations covered under section 10(26BBB) as well.
The CBDT has now clarified that there would be no requirement for tax deduction at source from payment made to corporations enjoying exemption under section 10(26BBB).
SNIPPETS OF CHANGES MADE IN FINANCE BILL, 2015 AS PASSED BY THE LOK SABHA
The Hon’ble Finance Minister had presented the Finance Bill, 2015 in Lok Sabha on February 28, 2015. Now the Lok Sabha has passed the Finance Bill, 2015 with certain changes. Originally, the Finance Bill, 2015 proposed to provide relief from MAT only to FIIs without extending such relief to foreign companies. Now exemption from MAT has been proposed to be provided to foreign companies as well. Key changes made to the Finance Bill, 2015 are given hereunder :
(1) MAT exemption to foreign companies : The Finance Bill, 2015 proposed to provide relief from MAT only to FIIs without extending such relief to foreign companies. Thus, the foreign companies were liable to pay MAT on capital gains arising from transfer of securities and income arising from royalty, interest or FTS even if such income was not chargeable to tax or was taxable at lower rate in India by virtue of applicable Double Taxation Avoidance Agreements (DTAA) or any provision of the Income-tax Act,. Therefore, the Finance Bill, 2015 as passed by Lok Sabha proposes to provide relief from MAT to foreign companies as well. Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign companies have been proposed to be excluded from chargeability of MAT if tax payable on such income is less than 18.5%.
(2) Increase in limit of Section 80D deduction to Individuals : The Finance Bill, 2015 had increased the limit of deduction under section 80D to Rs. 25,000/- for any member of HUF. It omitted to increase such limit for individuals. Accordingly, necessary changes have been proposed to rectify such omission.
(3) Residential status of company : The Finance Bill, 2015 presented earlier proposed to amend Section 6 to provide that a company would be deemed to be resident in India if its place of effective management, at any time in that year, was in India. In other words, the concept of Control or Management (wholly in India) was replaced with Place of Effective Management (at any time in India).Now the Finance Bill, 2015 as passed by the Lok Sabha has proposed to omit the words ‘at any time’ which leads to a company being deemed to be resident in India if its place of effective management is in India.
(4) Subsidies included in definition of Income : Any subsidy which is not reduced from the actual cost of the asset in view of provisions of Explanation 10 to Section 43(1) has been proposed to be included in the definition of income.
(5) Interest on loan taken to acquire an asset : Interest on borrowings used for acquisition of an asset has been proposed to be disallowed as revenue expenditure till the date on which asset is put to use.