Finance (No. 2) Bill 2023 proposes that New Chapter 9 be introduced.
Part III of the Income Tax Act 1967 is amended by inserting after Chapter 8 the following chapter: “Chapter 9 – Gains or Profits from the Disposal of Capital Asset"
Application of Chapter 9
Section 65D. (1) This Chapter shall apply for ascertaining the chargeable income of a company, limited liability partnership, trust body or co-operative society which receives gains or profits from the disposal of capital asset on or after 1 January 2024.
(2) In a case where any provision of this Chapter applies, the foregoing Chapters shall also apply but shall be modified in their application to the extent necessary to conform with that provision; and, if in that case there is any inconsistency between that provision and any provision of the foregoing Chapters, that provision of those Chapters shall be void to the extent of the inconsistency.
Overview
The Finance (No. 2) Bill 2023 introduces a new chapter, Chapter 9, into the Income Tax Act 1967, focusing on gains or profits from the disposal of capital assets.
This chapter provides a framework for determining the chargeable income of entities such as companies, limited liability partnerships, trust bodies, or co-operative societies arising from the gains or profits obtained through the sale or transfer of capital assets.
Section 65D outlines when Chapter 9 is applicable. It applies to companies, limited liability partnerships, trust bodies, or co-operative societies that receive gains or profits from the disposal of capital assets on or after January 1, 2024.
In simple terms, if a company sells a capital asset and makes a profit in February 2024, Chapter 9 rules would apply to determine the tax on that gain.
It also addresses the interaction with other chapters, ensuring consistency and avoiding conflicts under Section 65D(2).
Explanation:
When any provision of Chapter 9 applies, the existing chapters of the Income Tax Act will also apply.
However, these existing chapters will be adjusted to align with the rules of Chapter 9.
If there is any conflict between the provisions of Chapter 9 and the existing chapters, the Chapter 9 provisions will prevail to the extent of the inconsistency.
Illustration:
Suppose a company has been using a certain method to calculate gains on the sale of assets before the introduction of Chapter 9.
Now, with Chapter 9 in effect, the company needs to adjust its approach to conform to the new rules.
If there is a conflict between the previous method and the new rules, the Chapter 9 rules will take precedence.
In essence, Section 65D ensures that the new rules introduced in Chapter 9 are applied to relevant entities for gains or profits from the disposal of capital assets, and any conflicts with existing rules are resolved in favour of the specific provisions outlined in Chapter 9.
Tax Impact:
The introduction of Chapter 9 clarifies the taxation of gains or profits from the disposal of capital assets.
Entities subject to this chapter must meticulously calculate their adjusted income, considering various factors.
The new provisions aim to ensure a fair and comprehensive assessment of tax liabilities associated with the disposal of capital assets, promoting transparency and accuracy in taxation.
Affected entities must familiarise themselves with these provisions to comply with the updated tax regulations and make informed financial decisions regarding the disposal of capital assets.
