ChemOtech Fabcon Pvt Ltd.

FOR BOTH THE ASSESSEE

1. An artificial disallowance in respect of expenditure on entertainment, advertisement, guest-house maintenance and traveling beyond prescribed limits are to be removed U/S 37. However, the disallowance in respect of advertisement in soverign of political parties U/S 37(2B) would continue.
2. 100% deduction would be allowed in respect of donation made to chief ministers relief fund or the lieutenant Governor's relief fund of any state/union territory U/S 80G.
   • The benefit of deduction U/S 80IA is to be extended to profits and gains derived from a business of providing telecommunication services and business of operating notified industrial parks, subject to certain condition.
   • Tax holiday is also proposed to be granted to hotels owned and run by companies, if the hotels start functioning during the period from 1.4.1998 to 31.03.2002. The deduction is 50% of profit of hotels located in hilly area, rural area, or place of pilgri- mage and 30% of profit of hotels located in any other place except in Metro cities.
3. Deduction from the business of poultry farming U/S 80JJ is to be withdrawn.
4. It is proposed to restrict deduction U/S 80-O to consideration for the use outside India of any patent invention, design or registered trade mark. Accordingly earlier deduction available on income arising in consideration for use of secret formula, etc or information concerning industrial, commercial or scientific knowledge, experience or skill or professional or technical services is to be withdrawn.
5. The voluntary disclosure of income and wealth scheme 1997 introduced in the finance bill 1997 will commence from the date of its notification in the Official Gazette and shall remain in force up to the 31st day of December 1997.

   The scheme shall have the following salient features :

   • It covers all persons corporate or non corporate assesses
   • Tax shall be payable @ 35% in case of corporate and firms and @ 30% in case of other declarents.
   • The tax on the voluntarily disclosed income or wealth would have to be paid before making declaration and proof of such payment must be attached along with the declaration. However, where tax is paid within three months of the filing of the declaration, interest @ 2%, for every month or part of a month will become chargeable and proof of payment of tax and interest will have to be filed within such period of three months.
   • The person making a disclosure would have to file a declaration in the prescribed form before the commissioner of Income tax.
   • The person making a disclosure would have to file a declaration in the prescribed form before the commissioner of Income tax.
   My Comments : This brings the idea to me that if the return of two years have not been furnished U/s 139(1), the same need not be furnished if 40% rate of tax is payable because under VDS scheme it comes to only 30% & 35% that means the saving of 10% & 5%.
6. INTEREST TAX
   Rate of interest tax on Institutions, Bank and NBFC, is to be reduced from 3% to 2% on the chargeable interest.
7. EXPENDITURE TAX
   Hotels exempts U/S. 80IA set up in hilly or rural areas or pilgrimage centre would be exempted from expenditure tax for a period upto 10 years (from 1.4.99 to 31.3.2009). The above said position is applicable to those hotels which starts functioning from 1.4.1998 to 31.3.2002
8. SERVICE TAX
   Service tax is to be extended to services rendered by
   • Transporters of goods by road
   • Consulting engineers
   • Custom house agents
   • Steamer agents
   • Air travel agents
   • C & F agents
   • Outdoor caterers
   • Pandal contractors and mandap keepers
   • Manpower recruitment agencies/consultants and
   • Tour operators including car rental.
   Tax on these activities would be at 5% advalorem.
9. FERA
   The limit of aggregate investment in a company by FIIs, NRIs and OCBs is increased from 24% to 30%.

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