Hon’ble Mr. Justice C. K. Thakker, Judge of the Supreme Court of India, Hon’ble Mr. Rajesh Balia and Mr. Vineet Kothari, Judges of the Rajasthan High Court, Shri J. K. Ranka, Chairman, Central Zone and Dr. K.L. Jain, Secretary General, RCCI and Shri R.S. Gemini, President, Federation of Rajasthan Trade & Industry, distinguished guests and delegates.

       I am indeed honored to have been invited to this inaugural Session of the National Tax Seminar of 2007 hosted by the all India Federation of Tax Practitioners, Central Zone jointly with Rajasthan Chamber of commerce and Industry, Federation of Rajasthan Trade and Industry, Rajasthan Tax Consultants Association, Jaipur Tax Bar Association and the Institute of Business Laws, New Delhi.

       I am doubly happy to be here on this occasion since I carry many pleasant memories of my postings in Rajasthan in Jaipur, Jodhpur and Udaipur.

       The theme of today’s Seminar is Economic Evolution through Tax Revolution. The Direct Taxes are major contributions to this Revolution. The economy contributes to the Direct Taxes and they in turn fuel the economic growth.

       I would like to take this opportunity to inform you that the tax compliance this year has been upbeat particularly from Rajasthan. I am glad that the members of the host associations have all contributed to this inflow into the Government coffers and I congratulate and am grateful to them all

• Budget 2007-08 is based on the philosophy of equity.

• Since the manufacturing and service sectors are virtually on auto allot the focus is on agricultural sector health, education & infrastructure sectors to promote inclusive growth.
   

• In the realm of direct taxes, the focus is also on equity consolidation and continuation of past policies. No new tax has been levied. However, the scope of DDT has been widened to include distribution of income to unit holders by Money Market Mutual Funds (MMMF) and Liquid Funds (LF).
   

• The direct tax budget focuses upon imparting equity across sectors, equity between large and small taxpayers and equity between honest and dishonest taxpayers. This is sought to be achieved without impairing growth. It emphasizes the need to crake infrastructure facilities

Tax Rates

• In personal income-tax, the basic exemption limit and exemption limits for women and senior citizens have all been raised by Rs. 10,000/-.
   

• Further, the surcharge of 10% on firms has been withdrawn in those cases where the taxable income is Rs. One Crore or less.

• In Corporate income-tax the surcharge of 10% has been withdrawn for all corporates having a taxable income of up to Rs. One Crore.
   

• The rate of Dividend Distribution Tax (DDT) for domestic companies on distribution of profits to share holders has been increased from 12.5% to 15%.
   

• DDT rates for Money Market Mutual Fund (MMMF) and Liquid Funds (LF) on distribution of income to unit holders have been specified by bringing them under the ambit of DDT.
   

• In order to fulfill the commitment of the Government to provide and finance secondary and higher education, an additional surcharge called the “Secondary and Higher Education Cess on Income Tax” at the rate of one percent of income tax and surcharge in all cases has been levied.

Widening of Tax Base:

• Some of the major proposals for widening the tax base are:

1. Expanding the MAT base by bringing the profits of STP units and Export Oriented Units within its ambit.
    

2. Restricting the allow ability of expenditure under Section 36 (1)(xii) only to notified corporations or body corporates.
    

3. Extending the applicability of Tax Deduction at Source (TDS) provisions in respect of payments made to contractors, to individuals and Hindu undivided families engaged in business and having turnover above a specified limit.
    

4. Restricting the non-chargeability of capital gain tax on sale of a long-term capital asset, by investing the same in certain bonds to a maximum amount of Rs. 50 lakhs in a year.
    

5. Bringing ESOPs within the ambit of FBT.
   
   Tax incentives:

• Interest on notified bonds issue on behalf of urban local bodies by a notified State Pooled Finance Entity, set up in accordance with the guidelines for the Pooled Finance Development Scheme in the Ministry of Urban Development for the purpose of raising funds for capital investment in urban infrastructure has been exempted.
   

• Income of notified investor protection funds by way of contributions received from commodity exchanges and the members thereof on the lines as is presently available to investor protection funds set up by recognized stock exchanges has been exempted.
   

• With a view to grant income-tax exemption to compensation received by victims and their families on account of disasters compensation received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir with retrospective effect from 1st April, 2005 has been exempted.
   

• Tax concessions under section 80-1A have been extended to cross-country natural gas distribution network, including gas pipelines and storage facilities; hotels and convention centres set up in the National Capital Territory of Delhi and districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad, and navigational channel in the sea.
   

• Weighted deduction under clause (1) of sub-section (2AB) of section 35 is to be allowed for five more years. The deduction is available against expenditure incurred till 31.3.2012.
   

• Deduction in respect of any provision for bad and doubtful debts has been extended to co-operative banks under section 36(1)(viia). This was necessary as co-operative banks, other than Primary Agricultural Credit Societies (PACS) and Primary Co-operative Agricultural and Rural Development Banks (PCARDBs), are now taxable entities following the withdrawal of the deduction under section 80P in Finance Act, 2006.
   

• The threshold limit in respect of interest payable by a banking Company or a co-operative society or on deposits in a post office scheme under Section 194A has been increased. The amendment proposes that the limit for deduction of tax at source under the aforesaid section shall be ten thousand rupees where the payer is a banking company or a co-operative society engaged in carrying on the business of business of banking or the interest is payable on deposits made in a post office scheme in other cases the threshold limit shall be retained at five thousand rupees.
   

• The scope of FBT has been reduced by keeping the expenditure on display of products and distribution of samples of any item out of the ambit of expenditure on sales promotion including publicity.
   

• In order to promote investments in thrust ventures, it is proposed to restrict the existing exemption for income of a venture capital company or venture capital fund only from investment in a venture capital undertaking engaged in the specified businesses or industries, namely, nanotechnology, information technology relating to hardware and software development, seed research and development, bio-technology, research and development of new chemical entities in the pharmaceutical sector, production of the fuels, building and operating composite hotel-cum-convention centre with minimum sating capacity of three thousand or dairy industry or poultry industry.

Simplification and Rationalization of Provisions:

• With a view to provide a comprehensive definition of “India”, it is proposed to define “India” in the Income-tax Act, 1961 and Wealth Tax Act, 1957 to mean the territory of India as referred to in article of the Constitution its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone and other maritime zone as referred to in the Territorial Waters Continental Shelf Exclusive Economic Zone and Other Maritime Zones Act, 1976 and the air space above its territory and territorial waters.
   

• The Department will shortly be framing guidelines for taxing the diamond trade industry on a presumptive basis.
   

• The existing requirement for a trust or Institution to file an application for income-tax registration within one year from the date of its creation or establishment has been done away with. Besides or such registration the discretion presently vested with the Commissioner to determine the period from which the exemption shall be allowed has been removed. Accordingly, such exemption shall only apply on prospective basis for applications filed on or after the 1st day of June, 2007.
   

• Exemption on income is allowed in respect of certain charitable and religious entities only if they are notified by the Central Government in the Official Gazette. As the procedure for such notification has been found to be trine-consuming. It has been decided to decentralize the said power by allowing the exemption to such entities as may be approved by the prescribed authority. Such prescribed authority will be the Chief Commissioner designated for this purpose by Central Board of Direct Taxes. No notification for such exemption will be issued by the Central Government on or after 1st day of June, 2007.
   

• The provisions relating to deduction in respect of creation and maintenance of special reserve under section 36(1)(viii) have been rationalized in the following manner:

– Deduction limited to 20% as compared to 40% earlier.

– Co-operative banks now included in its ambit.

– For Public Companies deduction now available only for profits derived from business of providing long term finance for development of infrastructure facility.

• The provisions relating to tax audit have been made tax payer friendly by directing that the post of the tax audit hitherto borne by the tax payer would be paid by the Government.
   

• Over the past few years, the Income-tax Department has gradually migrated to non-intrusive methods of collecting and collating information about financial transactions of tax payers. While the Banking Cash Transaction Tax (BCTT) and the Annual Information Return (AIR) are already in place, the electronic filing of returns by companies has added an entirely new dimension to the Departments Information bank. As more information about tax payers becomes available the Department would be able to band out better tax payers services while simultaneously targeting tax evaders.
   

• A revised settlement scheme has been introduced for expeditious disposal of cases pending for settlement with the Settlement Commission or those cases that would come under the ambit of the Commission in future.

       As you are aware, the Department has introduced a number of initiatives for Tax Payers Services prominently among them being the mandatory e-Filing of Returns for Corporates, Refund Bankers Scheme in a few Cities and is trying to bring in more and more transparency into the Department with less than 2% of the cases of the Returns filed being taken up for scrutiny.

       More than 33 lakhs of Refunds have been issued till date during the year. A number of Help Centres and Help Line have been set up.

       Once again I thank the organizers of the Seminar and appreciate the spirit and the purpose for which the Seminar has been organized.