Apologies for the bad quality of the post.
Subject: Requirement of tax deduction at source in case
of corporations whose income is
exempted under Section
I0(268B8) of the Income-tax Act, 1961 - Exemption thereof.
The
Central Board of Direct Taxes (the Board) had earlier issued Circular NoAI2002
dated 16.07.2002 which laid down that in case of such entities, whose income is unconditionally
exempted und
er Section 10 of the Income-tax Act (the Act) and who are statutorily not required
to file return of income as per Section 139 of the Act, there would be
no requirement for tax
deduction at source
(TDS) from the payments made to them since their income is anyway
exempted under the Act.
2. Section
10(268B8) came into existence after the issue of the said Circular dated
16.07.2002. The said
Section was inserted in the Income-tax Act vide Finance Act, 2003 (w.e.f.
01.04.2004) unconditionally exempting any income of
a corporation established by a Central,
State or
Provincial Act for the welfare and economic upliftment of ex-servicemen being the
citizens of
India. The corporations covered under Section 10(26888) are also statutorily not
required to file return
of income as per Section 139 of the Act. References have been received
in the 80ard request
ing for extension of the aforesaid exemption from TOS granted vide
Circular No.
4/2002 to the corporations covered under Section 10(26BBB) as well.
3. The matter has been examined by
the 8oard. It has now been decided that since the
corporations covered under Section 10(26888) satisfy the two
conditions of Circular No.
412002 i.e. unconditional exemption of income under Section
10 and no statutory liability to file
return of income under Section
139, any corporation whose income is exempted under Section
10(26BBB) of the Act will also be enti
tled to the benefit of the said Circular. Hence there
would
be no requirement for tax deduction at source from the payments made to such
corporations since the
ir income is anyway exempted under the Act.
