Budget offers three cheers to taxpayers

WITH all the sprinklings of wisdom from Chanakya, the finance minister presented his Budget 2009-10 and related tax proposals.
    Three things stand out among the proposals:
    1) The proposals relating to the introduction of alternative dispute resolution mechanism and bringing certainty to tax payers are indeed welcome. The Finance Bill proposes that in respect of transfer pricing and in relation to adjustments that may be proposed to the income of a foreign company, instead of an assessing officer making adjustments, he would need to obtain approval from a panel of commissioners. This proposal, together with the plan to provide safe harbour for transfer pricing, will allay fears of foreign investors. The devil will of course be in the implementation of the proposal.
    2) The commitment of the finance minister to stick to the GST roadmap with effect from April 1, 2010, is, again, very welcome. Given the fact that timely implementation requires consent of the state governments, there continues to be a lingering doubt about the viability of a c h i e v i n g the implementation by the scheduled date.
    3) The proposal to introduce a simplified Income-Tax Act, after throwing open the bill for discussions, is welcome and one hopes that it will indeed eventually lead to simplified tax laws.
    There are several positive proposals. The law relating to taxation of limited liability partnerships (LLPs) and the conversion of a partnership into an LLP will help operationalise the Limited Liability Partnership Act. The current regime of treating monetary gifts as income in the hands of the recipient has been expanded to include nonmonetary gifts also.
    The IT/ITES sector has a lot to cheer. One is glad that the boogie of the Fringe Benefit Tax has been buried. However, one would have expected that the reintroduced provisions relating to perquisites being taxed in the hands of the employee would have been applicable, as in the past, only on realisation.
    Similarly, the extension of tax exemption under Section 10A/10B by one more year would be welcomed by the Industry. Finally, the clarification of exemption of excise duty on packaged software would be very welcome.
    The extension of weighted deduction for expenditure on research and development to a very broad category of industries is welcome. This should, hopefully, provide an impetus to the manufacturing sector.
    The clarificatory amendment in Section 10AA provides that profits of SEZ will be exempt from tax in proportion which turnover of SEZ undertaking bears to the total turnover of the company. This amendment could have been given retrospective effect.
    All in all, a very positive Finance Bill on the tax front which possibly lays down a foundation for a very positive new Income-Tax Act.

DINESH KANABAR Executive Director, PWC