NEW PROVISIONS 

Other than Corporate/Business 

Sec 16: - 

This section provides for deduction from income chargeable to tax under the head Salaries. A new clause (ia) is inserted which provides for Standard Deduction of Rs. 40K subject to the amount of salary as deduction. 

Read more: Changes in Income Tax Act - Budget 18

Every taxing statute provides for an event upon the occurrence of which, the respective tax will get attracted. This is popularly called taxable event. For example, excise duty is a levy on manufacture of excisable goods. The liability to pay excise duty under Excise law arises immediately upon manufacture of excisable goods. Similarly, Service tax is a levy on provision of services and VAT is a levy on sale of goods. In case of Goods and Services Tax(GST), it is a tax on supply of goods or services or both. Therefore, GST is a levy on ‘Supply’. Thus, it is important to understand the meaning and scope of the word ‘Supply’ used in GST law. 

The word ‘Supply’ is defined under section 7 of Central Goods and Services Tax Act, 2017. Accordingly, the meaning and scope of ‘Supply’ includes the following :- 

• Inclusive part of the definition under section 7(1)(a) of CGST Act, 2017 

• Import of Services for Consideration whether or not in the course or furtherance of business as provided under section 7(1)(b) of CGST Act, 2017 

• Activities listed in Schedule I as provided under section 7(1)(c) of CGST Act, 2017
• Activities listed in Schedule II as provided under section 7(1)(d) of CGST Act, 2017

  Read more: Meaning and Scope of Supply-2018

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The judgment of apex court in the case of Formula One World Championship Limited vs Commissioner of Income-Tax (International Taxation)-3, Delhi reported in [2017] 80 taxmann.com 347 (SC) (FOWC)has far reaching implications not only the income tax, but also under the service tax laws or Good & Services Tax (GST) laws. In this article, we try to explore the judgment of the apex court in the said case from the perspective of GST laws. 

The concept of ‘Permanent Establishment’ (PE) under the Income Tax laws is maturing day by day as the matters requiring interpretation of tax treaties are reaching the doors of apex court. The said concept of ‘Permanent Establishment’ even appears in the service tax laws or GST laws, the same was not used or tested by the indirect tax authorities, since the said concepts were brought into the statute book only from 01.07.2012, through place of provision of service rules or under GST laws through Section 2 read with Section 12 and Section 13 of Integrated Goods & Services Tax Act, 17 (IGST Act). Since, the concept of PE is attaining maturity under one law, it is only matter of time, when such concept would be used under the indirect tax laws to garner the revenue.

Read more: GST Perspective on Apex Court Judgment in Formula One World Championship Limited

The term ‘income’ defined under Section 2(24) of Income Tax Act, 1961 (ITA/Act) is inclusive one. Charge of tax on income is subject to exemptions provided in Section 10 of ITA, 1961. The receipts mentioned in various clauses of Section 10 are not included in computing gross total income there by not part of taxable income for computing tax liability. 

First receipt mentioned in Section 10, is income from agriculture. Sec 2(1A) has defined term ‘agricultural income’.Explanation 1 of this section provides that transfer of rural agricultural land is agriculture income. 

Section 45 of Act provides that transfer of capital asset as defined under Section 2(14) is chargeable to tax in the year in which year in which transfer takes place. The definition of term ‘capital asset’ excludes rural agricultural land from its scope. Hence transfer of rural agricultural land is not subject to tax under Section 45 of Act. 

Full value consideration arising from transfer of capital asset must be considered for the purpose of computing capital gain under Section 48 of Act. Sec 50C of Act provides that for the purpose of computing capital gains the value adopted or assessed or assessable by the Stamp Duty Authority or higher amount is deemed to be full value consideration for computing capital gains. 

Read more: Different Treatment of Receipt - Assessment of Income and Levy of Penalty