Amendments Cast Wider Taxation Net

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: The fifth successive Budget of Mr Yashwant Sinha is on predictable lines; he has continued with the reform process which he started earlier but without coming up with dynamic measures needed to increase the rate of economic growth from five per cent to nine per cent.

While industry did not get what it expected, namely, reduction in the corporate tax rate to bring it on level with the maximum marginal rate of 30 per cent on individuals, the removal of the minimum alternate tax and other incentives to spur investment, the increase in the rate of depreciation will hardly bring any cheer considering the fact that Indian industry already suffers from problems of excessive capacity.

Section 28 of the Income-tax Act, 1961 has been amended to bring within the tax net, compensation received for entering into a restrictive covenant not to carry on any activity in relation to business or not to share any knowhow, patent, copyright, trademark, licence, franchise or any other business or commercial right of similar nature or any information or technique likely to assist in the manufacture of goods or provision of services.

The finance minister has provided additional depreciation of 15 per cent only for the first year in which the asset is installed in a new industrial undertaking which begins to manufacture or produce any article after 1st April, 2002.

This cannot be considered to be a substitute for investment allowance because that was in addition to 100 per cent depreciation allowance.

Section 43-A of the Act has been amended to permit increase or reduction in the actual cost of an asset as a result of fluctuation in the rates of foreign currency. The amended section clarifies that the adjustment would be made for the financial year in which the whole or part of cost of the asset is paid in which installment of loan for acquiring the asset is paid.

In other words, the adjustment to the actual cost of asset has not to be made for every financial year depending on foreign exchange fluctuations, but it is to be made only for the financial year during which the payment for the cost of machinery or the installment of loan is actually made.

A new provision which is quite revolutionary in nature is that employees can now file their returns of income with their employers.