MEASURES TO CHECK EVASION AND TAX AVOIDANCE

Computation of actual cost of assets in the case of Non-Residents

Under the existing provisions of section 43 (6), in computing the written down value of an asset or a block of assets, interalia, only the depreciation actually allowed under the Indian Income tax Act, either existing or repealed, is reduced from the actual cost of such asset. The Bill proposes to provide that in the case of an asset, which was acquired outside India by an assessee, being a non-resident, is brought by him to India and used for the purposes of his business or profession, the actual cost of the asset to the assessee shall be the actual cost to the assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used in India for the said purposes since the date of its acquisition by the assessee.

The proposed amendment will take effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years.

Taxing profits and gains arising from insurance claim received for damage or destruction of a capital asset as capital gains

Various courts have held that there is no transfer when the asset is destroyed as the asset has to exist in the process of transfer. The money received under insurance policy is compensation by virtue of contract of insurance and not consideration for transfer.

It is proposed to provide that the profits and gains arising from the receipts of an insurance claim on account of destruction or damage of a capital asset as a result of fire, flood, earthquake, civil disturbance and war, etc. shall be deemed to be capital gains for the purposes of section 48 and taxed in the year of receipt.

The proposed amendment will take effect from 1st day of April 2000 and will accordingly apply to assessment year 2000-2001 and subsequent years.

Modification in respect of provisions regarding non-residents

Section 9 of the Income-tax Act details the income which is deemed to accrue or arise in India. Under the existing provisions, it is stated that income which falls under the Head "Salaries", \, if it is earned in India will be deemed to accrue or arise in India. It is proposed to expand the existing Explanation which states that salary paid for services rendered in India shall be regarded as income earned in India, so as to specifically provide that any salary payable for rest period or leave period which is both preceded and succeeded by service in India, will also be regarded as salary earned in India.

The proposed amendment will take effect from 1st April, 2000, and will accordingly, apply in relation to assessment year 2000-2001 and subsequent years.