Recent circulars/ notifications/ rules/ clarifications
CBDT has clarified that small start-ups with turnover up to Rs. 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961, which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation- Seeking to dispel confusion over the eligible turnover limit, the CBDT said there was no contradiction in DPIIT’s February 19 notification (mentioning turnover of Rs. 100 crore) and the income tax provisions, as the notification clearly mentioned that a start-up shall be eligible to apply for the certificate from the Inter-Ministerial Board of Certification for claiming deduction only if they fulfil the conditions specified in Section 80-IAC (Clarification dated 22.08.2019).
In order to encourage investment in the capital market, enhanced surcharge levied on long/short term capital gains arising from transfer of equity shares/units u/s 111A & 112A has been withdrawn (Finance Minister press conference dated 23rd August 2019).
All tax notices will be issued from a centralised system. All old tax notices will be taken up by October 1 or will be uploaded again through a centralised system. (Finance Minister press conference dated 23rd August 2019).
Startups registered with commerce ministry get relief as angel tax provisions i.e. Section 56 (2)(viib) of the Income Tax Act shall not apply to startups registered with the commerce ministry. (Finance Minister press conference dated 23rd August 2019).
Additional 15 per cent depreciation on vehicles acquired from 23rd August 2019 till March 2020, taking the total to 30 %. (Finance Minister press conference dated 23rd August 2019).
All I-T notices will be cleared within three months of response.
The due date of filling of Income Tax Return for the assessment year 2019-20 has been extended to 31st August 2019 from 31st July 2019 for certain categories of Tax payers (Order u/s 119 dated 23rd July 2019)
CBDT increases income tax appeal limit before Tribunal, High court and Supreme Court to 50lacs, 1 crore and 2 crores respectively (Circular no. 17/2019 dated 8th August 2019).Further, revised monetary limits is applicable to all pending SLPs/ Appeals (Notification no. F. No.279/Misc/M-93/2018-ITJ dated 20.08.2019).
CBDT takes steps to ensure Transparency in Tax Administration by bringing in concept of DIN (Document Identification Number) in Notice/ Order/ Summons/ letter/ correspondence issued by the Income-tax Department, It will be Effective from 1st Oct 2019 (Circular No 19/2019 Dt 14.08.2019)
CBDT has issued Circular No. 18/2019 dated 8.8.2019 to clarify certain issues relating to ITRs of AY 2019 such as non-allotment of TIN (Taxpayer identification number) in case of NRI, Pan related issues in case of director in foreign company etc (Circular No. 18/2019 dated 8.8.2019). Consequently, further circular no. 21 of 2019 dated 27th August 2019 has been released, issuing clarifications in respect of ITR forms for the Assessment Year 2019-20.
CBDT has directed that, all validly filed returns up to Assessment Year 2017-18 with refund claims, which could not be processed under sub-section (1) of section 143 of the Act due to certain technical issues or for other reasons not attributable to the assessees concerned and have become time-barred, can be processed with prior approval of Pr. CCIT/CCIT by 31-12-2019. This relaxation is not applicable in case where ITR is selected for scrutiny or there is demand payable or likely to arise after processing it. (Order u/s 119 dated 5th August 2019)
Income Tax department launched ‘e-filing Lite’, a lighter version of online ITR filing facility, to facilitate the easy and quick filing of returns by taxpayers.
CBDT notified that it is mandatory to quote your Aadhaar number while filing ITR unless specifically exempted. The notification further specifies that tax return cannot be filed either electronically or manually without quoting Aadhaar number. To quote your Aadhaar number in your ITR, additional spaces have been provided.
CBDT has exempted, a non-resident, not being a company or a foreign company, from the requirement of furnishing a return of income under Section 139(1) of the Income Tax Act from Assessment Year 2019-20 onwards, who have any income chargeable under the said Act during a previous-year from any investment in an investment fund set up in an International Financial Services Centre (IFSC) located in India (Notification dated 26th July 2019).
Government notifies Multilateral Convention to implement Measures to prevent BEPS (Base Erosion and Profit Sharing) (Notification No. 57/20019 dated 9th August 2019)
Launch of Income Tax Business Application (ITBA), wherein the functionalities for Refund Blocking/Unblocking, Refund Revalidation and Refund Status in Refund Banker Module are available. (Notification no. ITBA- Refund Banker Instruction No.1 dated 07/08/2019). Further OLTAS function (The functionality for Search and Modify Challan) has been migrated to ITBA (Notification no. ITBA-OLTAS Instruction No. 1 dated 07/08/2019)
Extension of timeline for completion of assessments in OCM (Operation clean Money) cases where no return has been filed in response to notice u/s. 142(1) of the Income-tax Act,1961(‘Act’) and the assessments have to be completed u/s.144 of the Act (F.No.225/363/2017-ITA-11 dated 26.07.2019)
CBDT reduces tax collection target by Rs. 45K crores for the FY 2019-20 i.e. from Rs. 13,80,000.00 crore to 13,35,000.00 crores. (Notification no. F.No. 380/03/2019-IT(B) dated 05.08.2019)
CBDT rebuts incorrect reports about Income Tax notices to Durga Puja Committees in Kolkatta (Press release dated 13.08.2019)
Income Tax Searches in Tamil Nadu net more than Rs 700 crore (Press release dated 10th August 2019)
Income Tax Department detects Benami business of running of petrol outlets in Meghalaya (Press release dated 10th August 2019)
Search on a prominent Real Estate Group in Mumbai- evade income aggregating to about Rs.700 crore (Press release dated 2nd August 2019)
CBDT issues clarification on perceived differential taxation of FPIs and domestic investors- Differential regime between domestic investors (including AIF category III) and FPIs existed even prior to the 2019 budget (Press release dated 28th August 2019)
CBDT notifies the interchangeability of PAN with Aadhaar (Notification no. 59/2012 dated 30th August 2019)
CBDT notifies protocol amending India- Spain DTTA (Notification no 58/2009 dated 27th August 2019)
CBDT issues a clarification w.r.t. TDS on cash withdrawal above 1 crore from 1st September 2019- TDS @2% (Section 194N) to be deducted over cash withdrawals of Rs. 1 crore from Banks & post offices. Cash withdrawals before 1st September during FY 19-20, shall be considered counted for the limit of Rs. 1 crore, but would not be subject to TDS @2%
CBDT constitutes a cell for redressal of grievances related to Startups (Press release dated 30th August 2019)
Income Tax Compliance calendar – August 2019 & September 2019
For the month of September 2019
Date Things to remember
7th September Due date for deposit of Tax deducted/collected for the month of August, 2019. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income-tax Challan?
14th September Due date for issue of TDS Certificate for tax deducted under section 194-IA (Payment on transfer of certain immovable property other than agricultural land) and section 194-IB (Payment of rent by certain individuals or Hindu undivided family) in the month of July, 2019
15th September -Second instalment of advance tax for the assessment year 2020-21-Due date for furnishing statement in Form no. 3BB by a stock exchange in respect of transactions in which client codes been modified after registering in the system for the month of August, 2019?
30th September -Audit report under section 44AB for the assessment year 2019-20 in the case of a corporate-assessee or non-corporate assessee (who is required to submit his/its return of income on September 30, 2019).
-Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA & 194-IB in the month of August, 2019
– Statement by scientific research association, university, college or other association or Indian scientific research company as required by rules 5D, 5E and 5F (if due date of submission of return of income is September 30, 2019)?
– Annual return of income for the assessment year 2019-20 if the assessee (not having any international or specified domestic transaction) is (a) corporate-assessee or (b) non-corporate assessee (whose books of account are required to be audited) or (c) working partner of a firm whose accounts are required to be audited).?
– Application in Form 9A for exercising the option available under Explanation to section 11(1) (exemption of income from property held for charitable or religious purposes) (if the assessee is required to submit return of income on September 30, 2019).
– Statement in Form no. 10 to be furnished to accumulate income for future application under section 10(21) (exemption of any income of a research association) or 11(1) (exemption of income from property held for charitable or religious purposes) (if the assessee is required to submit return of income on September 30, 2019)
-Submit copy of audit of accounts to the Secretary, Department of Scientific and Industrial Research in case company is eligible for weighted deduction under section 35(2AB) (Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority) [if company does not have any international/specified domestic transaction]
-Due date for claiming foreign tax credit, upload statement of foreign income offered for tax for the previous year 2018-19 and of foreign tax deducted or paid on such income in Form no. 67. (if due date of submission of return of income is September 30, 2019).?
All about the new Direct Tax Law to replace the Income Act 1961- Key Expectations
The task force, under the Convenorship of senior IRS officer Mr. Akhilesh Ranjan and comprising of members representing different stakeholders, has submitted its report to the Finance Minister Ms. Nirmala Sitharam a short while ago, though the same is pending to be made available on public domain. Below are the Key expectations-
Simplification of law with lesser sections – The current Income Tax Act, has over 700 sections, whereas the draft of the new income tax law is expected to be half the length, containing around 350-400 sections, with every attempt being made to word it in a simple, lucid manner and keeping the Provisos and Explanations that dominate the 1961 Act, at a bare minimum in the new law.
Direct Tax task force recommends new personal income tax slabs- Recommended five tax brackets of 5 per cent, 10 per cent, 20 per cent, 30 per cent and 35 per cent, against the prevailing structure of 5 per cent, 20 per cent and 30 per cent.
Expected changes to the tax brackets that is likely to result in significant tax relief for middle class and upper middle class, i.e. those earning upto Rs. 45 – 55 lacs per annum.
Common Corporate Tax Rate for Foreign Cos & Domestic Cos.- 25% Corporate tax rate is expected for both Domestic as well as Foreign Companies, being a big slash in corporate tax rate for the foreign companies that currently are taxed at a whopping 40%. However, foreign companies will have to shell out a branch profits tax on the amount repatriated to their foreign headquarters.
Change in Tax Assessments Process: The concept of “Assessing Officer” will be replaced by “Assessment Units.” The big change in the new law however is the primacy being given to “Functional Units” that will be made up of IRS officers with Sectoral/Industry knowledge and expertise. Also envisages a Separate Technical Unit of IRS officers to assist the Functional/Assessment Units. Interaction with the tax department is likely to get a boost and facelift with the possible introduction of video-conferencing in certain areas.
Litigation Management units- A separate Litigation Management Unit to manage the entire tax litigation process, right from deciding in which cases the appeals ought to be filed, to devising the strategy to defend a case. In essence the officer who drafts the assessment order, will no longer be the one filing appeals.
Settlement Through ‘Mediation’-Introduction of the concept of ‘mediation’ for the first time in Indian tax law. Taxpayers will now be able to opt for a negotiated settlement before a Collegium of Commissioners once they receive the draft order. Assisting the negotiations will be mediators on both sides, that will be drawn from a panel. It will substantially reduce tax litigations time taken to resolve the cases.
Public Ruling Option for Taxpayers- For the first time again a concept of ‘public ruling’ is being introduced wherein the taxpayers will have the option of approaching the CBDT for clarification on any important point of law, that shall not be case or fact specific.
De-linking of transfer pricing assessments from regular assessments- The TP assessments will be carried out by a separate functional unit and they will be done for a block of 4 years. While there may be fewer TP audits based on risk profile of the MNE entities, they are likely to be more intense.
Dividend Distribution Tax Elimination- DDT may soon be going and the dividends may be taxed in the hands of shareholders.
Important cases decided
Re-depositing funds in assessee’s bank accounts by itself would not be taxable as per section 68, on the mere grounds that there is a gap in depositing the funds in Bank Account. There is no law that funds withdrawn from the banks cannot be held/retained in cash by the parties. There can also be no blanket period which can be judicially considered to be a reasonable time. (IN THE ITAT CHANDIGARH BENCH ‘SMC’- Baljit Singh v. Income-tax Officer, Ward-3(2), Ludhiana)
No Deemed Dividend [section 2(22)(e)] if Assessee was not a Shareholder when amount been advanced. (ACIT Vs M/s. Bhaawani Shankar Ginning Factory (ITAT Pune)).
Expense on foreign scholarship to promote Professional Profile is allowable as expense- Business expenditure – Allowability to be judged from mindset of the assessee (Shri Harish Narinder Salve Vs ACIT (ITAT Delhi))
Failure to issue notice u/s 143(2) renders assesstment order void even if assesse participated in proceeding. (CIT Vs Laxman Das Khandelwal (Supreme Court))
Interest payable u/s 234 A, 234 B & 234 C on delay in Tax Payment due to disclosure of STCG as LTCG (Tushin T. Mehta Vs CCIT (Madras High Court)
Expense on valuation of Know-how allowable under section 37(1) (M/s. Theis Precision Steel India Private Limited Vs ITO (ITAT Mumbai)
Interest awarded in Motor Accident claim cases not exigible to Tax (Shri Rupesh Rashmikant Shah Vs Union of India & Ors. (Bombay High Court))
Notice u/s 142(1) to amalgamating entity after amalgamation is void (Pr. CIT Vs Maruti Suzuki India Limited (Supreme Court)
Interest (notional) which is part of Purchase price is business income (AGR Matthey of Western Australia v. ADIT – ITA 1341/Del/2010, order dated 5-8-2019, ITAT, Delhi)
CMA Rakesh Bhalla
*Past chairman NIRC of ICAI (CMA), Ex-Member of ZAC & RAC – Central Excise, Service Tax & Customs Govt. of India, Chandigarh (now GST), Member of Indirect Tax committee SIAM, Member-ASSOCHAM National Indirect Taxes Committee & Special Task Force on GST, Chief General Manager Finance- SML Isuzu Ltd., Member-Chandigarh Branch of Indian Institute of Material Management, Winner Achiever Award 2015 by ICAI (CMA) In addition to above, also a member of 9 council committees of CMA institute.
Information Source- M/s Lks, Various internet websites including Income tax website, dailyhunt,Hindustan times related links and various notifications, circulars, orders, press releases etc.