Date on which the code would have application
There are different interpretations as to when the Direct Taxes Code would have application, whether it becomes law for financial year 2010-11 or 2011-12?
The Code is only a draft Bill, which has not even been presented in Parliament. There is a promise that only the Bill, after taking into account all suggestions, will be placed before the Parliament with the intention that it should become law from the date proposed in the Bill.
In the present law, the law as it stands on the first day of the assessment year, covers the income of the previous year.
To take an example, the law that is to be effective from April 1, 2010 will be applicable for assessment year (AY) 2010-11 that is the income of the previous year/ financial year/ accounting year being 2009-10. The Code recognises only financial year replacing the concept of previous year/ accounting year, dispensing with the concept of assessment year. The effective date is mentioned in clause (7) of Sec. 2, which is the charging section, in the following words:
“(7) The liability to pay income tax or the chargeability thereof under the foregoing provisions, for any financial year, shall be determined in accordance with the provisions of this Code as they stand on the first day of April immediately succeeding the last day of the financial year.” (emphasis supplied)
The date that will be relevant under the Code is the first day of April succeeding the financial year so that if an amendment to the Code or the Code itself were to be effective from April 1, 2011, it will apply for financial year 2010-11 as the year immediately succeeding the last date of the financial year. This is the inference when Sec. 2(7) is read with clause 1(3) providing that the Code will come into force on April 1, 2011.
The Code revels with circuitous ways of expression, notwithstanding the claim in the Discussion Paper that the Code is drafted with the objective of “use of simple language”.
There have been representations from all quarters not to hurry with the proposal and implementation in view of many drastic changes proposed.
S. RAJARATNAM
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