Amendment to Section-28 w.e.f. Assessment Year 2019-2020 under Income Tax Act.
The following amendments have been made to the scheme of section 28 with effect from the Assessment year 2019-20 —
• Compensation received for modification/termination of business contract - Section 28, inter alia, provides that certain types of compensation receipts as set out in sub-clauses (a) to (cof clause (ii) of the said section are taxable under the head “Profits and gains of business or profession”.
A new sub-clause (e) has been inserted in the said clause (ii) so as to provide that any compensation due (or received) by any person (by whatever name called) at or in connection with the termination (or the modification of the terms and conditions) of any contract relating to his business, shall be chargeable to tax under the head “Profits and gains of business or profession”.
• Conversion of inventory into capital asset - Further, section 28 has been amended to provide that the fair market value (determined in the prescribed manner) of the inventory as on the date of its conversion or treatment as capital assets shall be chargeable to tax under the head “Profit and gains of business and profession”.
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