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Tax Management  In Nature Of  The New Business

1.2.      TAX MANAGEMENT  IN NATURE OF  THE NEW BUSINESS

1.         Sec. [ 10(1) ] :         Agricultural Income– fully exempted (100%.

2.         Sec. [10(23FB)] : Dividend or Long-Term Capital Gain ( LTCG) accruing to Venture Capital or a Venture Company – 100% tax exempted.

“venture capital company” means such company—

(i)         which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992

“venture capital fund” means such fund—

(i)         operating under a trust deed registered under the provisions of the Registration Act, 1908 or operating as a venture capital scheme made by the Unit Trust of India established under the Unit Trust of India Act, 1963;

(ii)        which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 .

3.         Sec. [ 33 AB) ] :      Tea Development Account, Coffee Development Account and Rubber Development Account : Where an assessee carrying on business of growing and manufacturing tea or coffee or rubber in India has, before the expiry of six months from the end of the previous year or before the due date of furnishing the return of his income, whichever is earlier,—

-       deposited with the National Bank any amount or amounts in an account the assessee shall be allowed a deduction of—

(a)    a sum equal to the amount or the aggregate of the amounts so deposited ; or

(b)    a sum equal to 40% [forty] per cent of the profits of such business (computed under the head “Profits and gains of business or profession” before making any deduction under this section),
whichever is less :

4.     Sec. [ 35 D ] :  Amortization of Certain Preliminary Expenses :       Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2),—

(i)  before the commencement of his business, or

(ii)  after the commencement of his business, in connection with the extension of his [industrial] undertaking or in connection with his setting up a new [industrial] unit,
the assessee shall be allowed a deduction of an amount equal to

- one-tenth (1/10 th. ) of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or the new [industrial] unit commences production or operation :

5.   Sec. [ 35 E ] :    Profits from Prospecting Certain Minerals : Where an assessee, being an Indian company or a person (other than a company) who is resident in India, is engaged in any operations relating to prospecting for, or extraction or production of, any mineral and incurs, after the 31st day of March, 1970, any the assessee shall be allowed for each one of the relevant previous years a deduction of an amount equal to one-tenth (1/10) of the amount of such expenditure.

6.  Sec. [ 35 ABB ] :          Expenditure for obtaining licence to operate telecommunication services :          In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to operate telecommunication services  and for which payment has actually been made to obtain a licence, there shall be allowed a deduction equal to the appropriate fraction of the amount of such expenditure.

7.  Sec. [ 36(1)(viii) ] :       Special Reserve Created by Financial Corporation :            in respect of any special reserve created and maintained by a specified entity, an amount not exceeding 20% of the profits derived from eligible business computed under the head “Profits and gains of business or profession” (before making any deduction under this clause) carried to such reserve account:
Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess.

8.         Sec. [ 42 ] : Special provision for deductions in the case of business for prospecting, etc., for mineral oil :    For the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral, there shall be made in lieu of, or in addition to, the allowances admissible under this Act

9.         Sec. [ 44BB ] :        Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils :      If an assessee engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used in the prospecting for, or extraction or production of, mineral oils, then 10% of the aggregate of the amounts shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”

10.       Sec. [ 44 AD ] :       Special provision for computing profits and gains of business of civil construction, etc. :   in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to 8% of the gross receipts paid or payable to the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession":

11.       Sec. [ 44 AE ] :       Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages :        If an assessee engaged in the business of plying, hiring or leasing such goods carriages and who owns not more than 10 goods carriages  and, the income of such business chargeable to tax under the head "Profits and gains of business or profession" shall be deemed to be the aggregate of the profits and gains, computed as follows :
(i)         An amount equal to  Rs.3,500 [three thousand five hundred rupees] for every month or part of a month for a heavy goods vehicle.
(ii)        An amount equal to Rs. 3,150 ) [three thousand one hundred and fifty rupees] for every month or part of a month for other than a heavy goods vehicle.

12.      Sec. [ 44 AF ] :       Special provisions for computing profits and gains of retail business :      If the assessee engaged in retail trade in any goods or merchandise, a sum equal to 5% (five per cent ) of the total turnover shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

13        Sec. [ 44B ] :           Special provision for computing profits and gains of shipping business in the case of non-residents. :      in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to 7½ % (seven and a half per cent ) of the aggregate of the amounts shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

14        Sec. [ 44 BBA ] :    Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents :    in the case of an assessee, being a non-resident, engaged in the business of operation of aircraft, a sum equal to 5% ( five per cent ) of the aggregate of the amounts shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

15       Sec. [ 44 BBB ] :    Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects :      in the case of an assessee, being a foreign company, engaged in the business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project approved by the Central Government,  a sum equal to (10%) ten per cent of the amount paid or payable (whether in or out of India) to the said assessee or to any person on his behalf on account of such civil construction, erection, testing or commissioning shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

16         Sec. [ 44 D ] :          Special provisions for computing income by way of royalties, etc., in the case of foreign companies :    in the case of an assessee, being a foreign company,—

(a)  the deductions admissible under the said sections in computing the income by way of royalty or fees for technical services received shall not exceed in the aggregate 20% (twenty per cent)  of the gross amount of such royalty or fees ;

(b)  no deduction in respect of any expenditure or allowance shall be allowed under any of the said sections in computing the income by way of royalty or fees for technical services received.

17.       Sec. [ 80 IA ] :        Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. : Deductions allowed is 100% or 30% of profits from such eligible business. The profits from such business shall be computed as if such eligible business were the only source of income of the assessee .

Nature of Industry

Assessee

Period of commencement of business

Deductions

Infrastructure facility (new undertaking; agreement with the Central Govt.)

Indian Company

On or after  1-4-1995

100% for 10 years out of 20 years. In case of Port out of 15 years.

Telecommunication (New undertaking: new Plant)

Any undertaking . In case of domestic satellite Indian Company

1-4-95 to 31-3-2005

100% for first 5 years; 30% for next 5 years.

Industrial Park or SEZ

Any undertaking

IP- 1-4-97 to 31-3-2006
.                                                       .
SEZ- on or after 1-4-2001 to 31-3-2006

100% for 10 years out of 5 years

Power ( New undertaking : New Plant)

Any undertaking

New netword – 1-4-99 to 31-3-2006
.                                                       .
Substantial renova. – 1-4-2004 to 31-3-2006.

100% for 10 years out of 15 years

18.       Sec. [ 80-IA (2A) ] :            the deduction in computing the total income of an undertaking providing telecommunication services shall be 100% (hundred per cent) of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods and thereafter, thirty per cent. of such profits and gains for further five assessment years;

19.       Sec. [ 80-IB (11A) ] :          The amount of deduction in a case of an undertaking deriving profit from the business of processing preservation and packing of fruits or vegetables or from the integrated business of handling, storage and transportation of foodgrains, shall be 100% (hundred per cent) of the profits and gains derived from such undertaking for five assessment years and thereafter, 25% (twenty-five per cent)  or  30% (thirty per cent. where the assessee is a company) of the profits and gains derived from the operation of such business in a manner that the total period of deduction does not exceed ten consecutive assessment years.

20.       Sec. [ 80 –IB (11B) ] :        The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area shall be 100% (hundred per cent) of the profits and gains of such business for a period of five consecutive assessment years, beginning with the initial assessment year.

21.      Sec. [ 80- IB (11) ] :           the amount of deduction in a case of industrial undertaking deriving profit from the business of setting up and operating a cold chain facility for agricultural produce, shall be 100% (hundred per cent). of the profits and gains derived from such industrial undertaking for five assessment  years beginning with the initial assessment year and thereafter, 25% (twenty-five percent)  or 30% (thirty per cent)  where the assessee is a company) of the profits and gains derived from the operation of such facility in a manner that the total period of deduction does not exceed ten consecutive assessment years.
22.      Sec. [ 80-IB (7A) ] :            The amount of deduction in the case of any multiplex theatre shall be-
50% (fifty per cent) of the profits and gains derived, from the business of building, owning and operating a multiplex theatre, for period of five consecutive years beginning from the initial assessment year in any place:

23.       Sec. [ 80-IB (7B) ] :            The amount of deduction in the case of any convention centre shall be-
50% (fifty per cent) of the profits and gains derived, by the assessee from the business of building, owning and operating a convention centre, for a period of five consecutive years beginning from the initial assessment year;

24.       Sec. [ 80-JJA ] :     Deduction in respect of profit and gains from business of collecting and processing of bio-degradable waste.:      Where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power, or producing bio-fertilizers, bio pesticides or other biological agents or for producing bio-gas or], making pellets or briquettes for fuel or organic manure, there shall be allowed a deduction of an amount equal to the whole of such profits and gains for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences.

25.       Special Provisions under section 115A, 115AB, 115AC, 115AD, 115B, 15BB, 115BBA and 115D.

 
 
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> Tax Management in reference to Location & Nature of New Business
> Tax Management In Nature Of The New Business
> Tax Management with reference to -Deemed Dividend
> [ SEC. 2(22)(a) ] : Tax Management with reference to -Deemed Dividend- ( Any Distribution Entailing Release)
> [ SEC. 2(22)(b) ] : Any Distribution By Way Of Debenture Etc.
> [ SEC. 2(22)(c) ] : DISTRIBUTION TO SHAREHOLDERS ON LIQUIDATION
> [ SEC. 2(22)(e) ] : Payment By Way Of Advance Or Loan To Shareholders
> TAX PLANNING THROUGH ISSUE OF BONUS SHARES
> Tax Management with reference to –Lease or Buy Decisions
> Tax Management with reference to –Repair, Replace, Renewal Or Renovation
> Tax Management with reference to – ‘Make Or Buy’ Decisions
> [Sec.- 46] : Capital Gains on Distribution of Assets by Companies
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  Tax Management with reference to –‘Capital Structure'
> Conversion of Firm / Sole Proprietorship to Company
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