Act 047 of 2016 : Taxation Laws (Amendment) Act, 2016

SOR Statement of Objects and Reasons

Prefatory Note-Statement of Objects and Reasons.- The existing provisions of the Income Tax Act, 1961 provide for tax neutrality in matters relating to transfer of capital asset, carry forward of loss, claim of certain deductions, etc., in case of demerger of entities. The definition of the term "demerger" contained in clause (19-AA) of Section 2 of the Income Tax Act, 1961, does not include in its scope, the splitting up or the reconstruction of a company, which ceased to be a public sector company as a result of transfer of its shares by the Government, into separate companies, even if such split up or reconstruction has been made to give effect to the conditions attached to the said transfer of shares by the Government.

2. With a view to facilitate the splitting up or the reconstruction of erstwhile public sector companies and to give effect to the conditions attached to the transfer of shares by the Government, there is a need to bring these types of splitting up or the reconstruction within the scope of definition of the term "demerger".

3. Section 80-JJAA of the Income Tax Act, 1961, was substituted by the Finance Act, 2016, so as to provide that in the case of certain assessees, in computing profits and gains derived from business, deduction shall be allowed of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year for the specified period, subject to the fulfillment of certain specified conditions. One of the conditions provides that the employee should be employed for a period of not less than two hundred and forty days during the previous year. In view of the seasonal nature of the business of manufacturing of apparel, there is a need to reduce the period of employment of an employee who is employed in this business from two hundred and forty days to one hundred and fifty days during the previous year.

4. Presently, imports of marble blocks/slabs and granite blocks/slabs are subject to a combination of non-tariff measures, namely, Quantitative Restriction (QR) and Minimum Import Price (MIP) and tariff measure, that is, customs duty at the rate of 10% levied under the First Schedule to the Customs Tariff Act, 1975.

5. The present tariff rate of customs duty under the First Schedule to the Customs Tariff Act, 1975 as well as the effective rate for marble and travertine blocks/slabs and granite blocks/slabs is 10%. In order to have a greater flexibility in terms of tariffs, the Bill seeks to amend the First Schedule to the said Act so as to increase the tariff rate of customs duty from 10% to the WTO bound rate of 40% on all goods falling under specified tariff items including goods, namely, rough marble and travertine blocks/slabs and granite blocks/slabs.

6. The enactment of the proposed Bill will enable the Government to fix appropriate effective rate of customs duty on marble and travertine blocks/slabs and granite blocks/slabs.

7. The Bill seeks to achieve the above objectives.