Mar 31, 2016

CBDT notifies new ITR forms for AY 2016-17

6:49 PM 0
CBDT notifies new ITR forms for AY 2016-17
In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—

1. (1) These rules may be called the Income-tax (9th Amendment) Rules, 2016.

(2) They shall come into force with effect from the 1st day of April, 2016.

2. In the Income-tax rules, 1962,—
(1) in rule 12,—
(a) in sub-rule (1),—

(A) after the word, brackets, figure and letter "sub-section (4E)", the words, brackets, figure and letter "or sub-section (4F)" shall be inserted;

(B) for the figures "2015", the figures "2016" shall be substituted;

(C) in clause (ca), after the words "Hindu undivided family", the words "or a firm, other than a limited liability partnership firm," shall be inserted;

(D) in clause (g), after the word, brackets, figure and letter "sub-section (4E)", the words, brackets, figure and letter "or sub-section (4F)" shall be inserted;

(b) in sub-rule (5), for the figures "2014", the figures "2015" shall be substituted.

(2) in Appendix-II, for "Forms Sahaj (ITR-1), ITR-2, ITR-2A, ITR-3, Sugam (ITR-4S), ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V", the following forms shall respectively be substituted, namely:—

ITR 1
ITR 2
ITR 2A
ITR 3
ITR 4
ITR 4S
ITR 5
ITR 6
ITR 7
ITR V
Tags-income tax forms 2016-17,income tax forms ay 2016-17,new itr forms 2016-17,itr 1 2016-17,itr 2 2016-17,itr 3 2016-17,itr 4 2016-17,itr 5 2016-17,itr 6 2016-17,itr 7 2016-17,itr 2a 2016-17,itr 4s 2016-17,sahaj

Mar 30, 2016

Special Clearing operations on 30 and 31 March 2016

6:13 PM 0
Special Clearing operations on 30 and 31 March 2016
A reference is invited to the circular issued by our Department of Government and Bank Accounts (DGBA.GAD.No.2969/42.01.029/2015-16 dated March 17, 2016) on ‘Annual Closing of Government Accounts - Transactions of Central / State Governments - Special Measures for the Current Financial Year (2015-16)’.

2. With a view to facilitate accounting of all the Government transactions for the current financial year (2015-16) by March 31, 2016, it has been decided to conduct special clearing at all clearing houses across the country on March 30 and 31, 2016 as detailed below: 

Date
Type of clearing
Presentation clearing
Return clearing
30-Mar-16
Normal Clearing as followed on any working Wednesday
(Wednesday)
In addition, a Special Clearing exclusively for Government transactions (receipts and payments) with return clearing on the same day as per the schedule indicated below.
31-Mar-16
Normal Clearing as followed on any working Thursday
(Thursday)
In addition, a Special Clearing exclusively for Government transactions (receipts and payments) with return clearing on the same day as per the schedule indicated below.
Schedule for various types of clearing
a. CTS grid locations (Chennai, Mumbai and New Delhi)
Special Presentation clearing
on March 30 & 31, 2016***
P2F session timings for the instruments
presented through the Special Clearing
Return clearing for the instruments
presented through the special clearing
Between 20.00 and 20.30 hours
Between 21.00 and 21.30 hours
Between 22.00 and 22.15
*** Under the special clearing, single session will be run for both CTS-2010 and non-CTS-2010 standard instruments together. No segregation is required.

b. Special clearing in non-MICR/ECCS clearing houses
Presentation clearing
Return clearing
One hour after the extended business hours keeping in view the operational convenience at the local center
Half an hour/One hour after the presentation clearing keeping in view the operational convenience at the local center.

 3. It is mandatory for all banks to participate in the special clearing operations on these two days. All member banks of the Clearing House are required to keep their inward clearing processing infrastructure open during the Special Clearing hours and maintain sufficient balance in their clearing settlement account to meet settlement obligations arising out of the Special Clearing. However, participation in the outward clearing is left to banks depending upon the instruments received by them towards credit-to/payment-from Government accounts.

4. Member banks of Clearing Houses are advised to adhere to the instructions contained in this circular as well as the instructions received from the Regional offices of Reserve Bank of India and Presidents of respective Clearing Houses.

5. Member banks are also advised to be in readiness to participate in the Centralised Payment Systems (RTGS and NEFT) on these days (March 30-31, 2016). A separate broadcast message in this regard will be issued through the respective system indicating the extended time window.

Yours faithfully
(Nanda S. Dave)
Chief General Manager

New tax proposals of Delhi Value Added Tax

6:02 PM 0
New tax proposals of Delhi Value Added Tax
Sir, in the tax revenue, VAT constitutes the major part of our receipts, with nearly 65%- of total collections - and most of our developmental activities depend mainly on the buoyancy and elasticity of tax revenue from VAT. My taxation proposals are founded on the following principles:

123. The first and foremost principle of our taxation policy is to maintain the distributive character of Delhi's trade.

124. Secondly, it is simplification of the existing system and promotion of an all-round ease of doing business.

125. Thirdly, multiple entries relating to the same item or a common group of items are a great source of ambiguity and confusion, which leads to harassment of traders and create a window for reporting manipulation leading to undesirable behaviour. We have tried to simplify it by bringing them under one entry to the extent possible.

126. Fourthly, our Government is fully committed to reducing tax arbitrage and will attempt to keep a uniform rate with neighbouring states. In several items such as sweets - namkeen, watches, readymade garments, lower tax rate in neighbouring States was causing erosion in the same. We have made efforts to remove such imbalances in our VAT structure.

127. Last and most important principle which is the motive force behind our taxation policy is to encourage voluntary compliance, and forge a strong partnership with the trade and the public.

128. Having regard to the above objectives, I propose modifications in the VAT rate which can be classified into two parts :
Reduction in VAT rates
Rationalization of tax rates

Reduction in VAT rates
129. Our Government is committed to check rising pollution due to automobiles and to promote use of environment friendly vehicles, VAT rate on battery operated transport means i.e. e-rickshaws, battery operated vehicles and Hybrid Automobiles (i.e. Battery driven with other fuel option), is proposed to be brought down from 12.5% to 5%.

130. Sweets and namkeens are presently taxable @ 12.5%, while the tax rate in Haryana and Uttar Pradesh is 5%. With a view to avoid geographical tax arbitrage, I propose to reduce the VAT on Sweets and namkeens to 5%.

131. At present, readymade garments upto Rs. 5000/- are taxed at 5%, those above Rs. 5000/- are taxed at 12.5%. Again in neighbouring States (U.P. and Haryana) all readymade garments are taxed at 5%. I propose to rationalize the tax rate by taxing all readymade garments @5%.

132. Marble in Delhi is currently taxable at 12.5% being an unspecified item. Marble Trade Association of Delhi has been requesting for lower tax rate to encourage people to buy marble from Delhi Traders only. I understand reducing the tax rate of marble from 12.5% to 5% would be in the interest of revenue and I propose accordingly.

Rationalizing of tax rate
133. Watches in Delhi are taxed differentially at 12.5% (watches upto Rs.5000/-) and (20% watches above Rs.5000/-), while they are taxed uniformly at 12.5% in neighbouring states. I propose a uniform VAT rate of 12.5% on all kind of watches.

134. Textile and fabric are presently covered under several entries in the tax rate schedules - some under the exempted list, while others in the taxable category of 5%. I propose to simplify this system by levying a uniform tax rate of 5% on all variety of textiles and fabrics (including sarees) except khadi and handloom fabrics.

135. Plastic waste continue to be exempted whereas plastic raw materials i.e. plastic granules, plastic power and master batches are taxable @5%. Since, plastic waste can also be recycled and used as raw material to make plastic articles, it is proposed to tax plastic waste also @5%.

136. Presently, inverters and UPS are taxable at general un-specified rate of 12.5%. However, there is a duplicate entry i.e. UPS units in Schedule III, which is leading to confusion. Therefore, I propose to omit this entry.

137. Presently, footwear above MRP Rs.500/- are taxable @12.5%. I propose to rationalize the VAT rate on footwear by subjecting uniform rate of 5% to all footwear irrespective of price.

138. School Bags having MRP upto Rs.300/- and MRP above Rs.300/- are taxed at 5% and 12.5% respectively. I propose to rationalize by levying a uniform rate of 5% on all schools bags irrespective of price.

139. In the existing entry of Ferrous and Non-ferrous metals, there is no mention of aluminium or metal sheets, and some items are taxed at higher rate of 12.5%. To remove an ambiguity, I propose to modify the entry as "Ferrous and non-ferrous metals and alloys thereof including their sheets, foils and extrusions. Non-ferrous metals includes aluminium, copper, zinc etc."

140. Sir, the Tobacco and tobacco products are currently taxable @20%. The relevant entry reads as under :-
 "Tobacco and Gutkha, unmanufactured tobacco, bidis and tobacco used in manufacture of bidis and hooka tobacco".
 In order to make it more comprehensive, I propose to modify the entry as under :- "Un-manufactured tobacco, tobacco and tobacco products in all forms such as cigarettes (irrespective of form and length), chewing tobacco, gutkha, cigars, hookah tobacco, khaini, zarda, surti, bidis etc."

141. In addition to reforms related to the VAT rates, this government has given a powerful impetus to the public participation in tax management by launching a new scheme of 'Bill Banwao Inaam Pao'. Under this scheme, consumers in Delhi, while making any purchases can send the snapshot of retail bill / invoice to the department through a mobile application. This innovative scheme has promoted a unique partnership between the public and the VAT Department in the context of verification of sale / purchase transactions and compliance, which was based primarily on the visit of tax inspectors in the field only till now. Under the scheme 1% of the entries are shortlisted for award and prize money, thereby incentivizing the participation of consumers. The increasing success of the scheme can be measured from the fact that 8000 entries have been received in the month of February 2016 as against 4000 entries in the month of January 2016 when the scheme was launched.

142. The Government has also introduced a unique Reward scheme to acknowledge and further encourage market and trade associations contributing revenue over and above the targets set for the year. Such associations will get 10% of the revenue generated over and above the target set for the year. Besides this, top 10 performing market association will get cash reward of Rs.5 lakh each. The award money is to be utilized for the overall improvement of the market and maintenance of public conveniences, beautification, repairs etc.

143. Mr. Speaker Sir, it is evident from the above details that our Government is decisively moving away from the past traditions of command, control and penetration of markets by the interventionist government to the role of an enabler and facilitator.

Mar 16, 2016

New rule of fund manager regime u/s 9A of income tax

4:47 PM 0
New rule of fund manager regime u/s 9A of income tax
CBDT has issued a press release dated 16 March 2016 about Rules in respect of fund manager regime under section 9A of the Income-tax Act, 1961-reg.

Section 9A of the Income-tax Act, 1961 (the Act) provides for special taxation regime with effect from 01.04.2016 to facilitate location of fund managers of off shore funds in India. Under this regime, the fund management activity carried out through an eligible fund manager in India by an eligible investment fund does not constitute business connection in India of the fund and also does not lead to the residence of the fund in India.

The Rules for operationalisation of the provisions of section 9A of the Act have been inserted in the Income-tax Rules, 1961 (the Rules) vide Notification No. SO 1101(E) dated 15.03.2016. These rules, inter alia, provide for:

 a pre-approval mechanism under which a fund can seek approval at its option from CBDT and once approved, benefit of section 9A would not be denied unless approval is withdrawn under limited circumstances.

 Determination of number of members and the participation interest in the fund by looking through the entity where the investment in the fund has been made directly by an institutional entity.

 Relaxation from investor diversification condition in the period of eighteen months or final closing of the fund whichever is earlier, in setting up phase of the fund and in one year period in the winding up phase of the fund.

 Eligibility of the fund will not be impacted in case of temporary non-fulfilment of investor diversification conditions for period up to 90 days.

 Eligibility of the fund will not be impacted in case of any delay in furnishing the statement of activity, if delay does not exceed a period of ninety days.

 A fund shall be said to be controlling or managing a business carried out by any entity, if the fund directly or indirectly holds twenty six percent of voting right.

 The eligibility of the fund will be impacted only if the remuneration paid or payable by the fund to the fund manager has been determined to be not at arm’s length price for a period of three previous years in succession; or for any three out of the preceding four previous years. A chance transfer pricing adjustment will not impact the eligibility.

Notification No. SO 1101(E) dated 15.03.2016 is available on the website of the Department www.incometaxindia.gov.in.

(Shefali Shah)
Pr. Commissioner of Income Tax
(Media and Technical Policy)
and Official Spokesperson, CBDT

Income tax 5th amendment rule and new form 3CEJ and 3CEK

4:47 PM 0
Income tax 5th amendment rule and new form 3CEJ and 3CEK
In exercise of the powers conferred by section 9A read with section 295 of the Income-tax Act, 1961(43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (5 th Amendment) Rules, 2016.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), after rule 10UC the following rules shall be inserted, namely:-

“10V. Guidelines for application of section 9A.-(1) Where the investment in the fund has been made directly by an institutional entity, the number of members and the participation interest in the fund shall be determined by looking through the said entity, if it, -

(a) independently satisfies the conditions mentioned in clauses (c), (e), (f) and (g) of subsection (3) of section 9A;

(b) has been setup solely for the purpose of pooling funds and investment thereof; and

(c) is resident of a country or specified territory with which an agreement referred to in subsection (1) of section 90 or sub-section (1) of section 90A has been entered into.

(2) For the purposes of clause (c) of sub-section (3) of section 9A, where direct investor in the fund is a person other than a natural person, the fund shall undertake appropriate due diligence to ascertain the indirect participation, if any, of a person resident in India and the extent thereof:

Provided that where such direct investor is, the Government or the Central bank or a sovereign fund or a multilateral agency or appropriately regulated investor in the form of pension fund or University fund or a bank or collective investment vehicles such as mutual funds, the fund shall obtain a declaration in writing from the direct investor regarding the participation, if any, of a person resident in India and the indirect participation in the fund of any person resident in India may be determined by the fund on the basis of such declaration.

Explanation.– For the purposes of this sub-rule an investor shall be considered to be appropriately regulated if it is regulated or supervised by the securities market regulator or the banking regulator of the country outside India of which it is resident, in the same capacity in which it has made investment in the fund.

(3) A fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A, if, 

(a) non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of sub-section (3) of section 9A, -

(i) is for the reasons beyond the control of the fund and it does not exceed a period of ninety days;

(ii) does not exceed a period of eighteen months beginning from the date on which the fund is setup or is not beyond the final closing of the fund, whichever is earlier, and bonafide efforts are made to satisfy the conditions specified in the clauses (c), (d) and(e) of sub-section (3) of section 9A;

(iii)is for the reason that the fund is in the process of being wound up and it does not exceed a period of one year beginning from the date on which the process of winding has begun; or

(b) there is delay in furnishing the statement referred to in sub-section (5) of section 9A and such delay does not exceed a period of ninety days.

(4) For the purposes of clause (k) of sub-section (3) of section 9A, a fund shall be said to be controlling or managing a business carried out by any entity, if the fund directly or indirectly holds such rights in, or in relation to, the entity, which results in the fund holding the share capital or a voting power or an interest exceeding twenty six per cent. of the total share capital of, or as the case may be, total voting power or total interest in, the entity.

(5) Subject to the provisions of sub- rules (6), (7) and (8), for the purposes of determining the arm’s length price in respect of any remuneration, paid by the eligible investment fund to an eligible fund manager, referred to in clause (m) of sub-section (3) of section 9A, the provisions of the Act shall apply as if,-

(i) the transaction between the eligible investment fund and the eligible fund manager is an
international transaction; and

(ii) the eligible investment fund and the eligible fund manager are associated enterprises.

(6) The fund manager shall keep and maintain information and documents as required under section 92D and the rules made there under.

(7) The fund manager shall, in addition to any report required to be furnished by it under section 92E, obtain a report from the accountant in respect of activity undertaken for the fund and furnish such report on or before the specified date in the Form No. 3CEJ duly verified by such accountant in the manner indicated therein and all the provisions of the Act shall apply as if it is a report to be furnished under section 92E.

Explanation.- For the purposes of this sub-rule “specified date” shall have the same meaning as
assigned to “due date” in the Explanation 2 below sub-section (1) of section 139.

(8) Where the fund manager has either not maintained the document or information as required under section 92D and the rules made thereunder or not produced the document or information before the Assessing Officer or the Transfer Pricing Officer, as the case may be, then, the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall, before determining the arm’s length price for the purposes of clause (m) of sub-section (3) of section 9A, provide an opportunity to the fund to produce the information and documents necessary for the determination of the arm’s length price and the arm’s length price shall be determined after considering the documents or information, if any, provided by the fund.

(9) If in any previous year, it is determined that the remuneration paid or payable by a fund to the fund manager is not in accordance with the provisions of clause (m) of sub-section (3) of section 9A, then the benefits of section 9A shall not be denied to the fund which otherwise satisfies all other conditions specified in section 9A.

(10) Nothing contained in sub-rule (9) shall apply to a fund if the remuneration paid or payable by the fund to the fund manager has been determined to be not at arm’s length price, -

(a) for a period of three previous years in succession; or
(b) for any three out of the preceding four previous years.

10VA. Approval of the fund.- (1) An investment fund may at its option seek approval of the Board regarding its eligibility for the purposes of section 9A.

(2) The fund seeking approval may make an application in writing, enclosing relevant documents and evidence, to Member (Income-tax), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi.

(3) The application under sub-rule (2) shall be made three months before the beginning of the previous year for which the fund seeks the approval.

(4) A committee as notified by the Board, shall examine the application and submit its recommendations regarding grant of approval or otherwise and the conditions, if any, subject to which such an approval is to be granted.

(5) The committee referred to in sub-rule(4) shall be headed by a Principal Chief Commissioner or Chief Commissioner, as the case may be, and consist of two other Income-tax authorities not below the rank of Commissioner.

(6) The committee on behalf of the Board may, before giving its recommendation, call for such documents or information from the investment fund as it may consider necessary and may call for further details or information from the fund as well as from the Income-tax authorities and other Departments or agencies, as it may deem fit.

(7) The Board, on the basis of the recommendations of the committee, shall, within sixty days from the end of the month in which the application under sub-rule (2) has been made,-

(i) by an order in writing, grant approval to the fund subject to such conditions as it may deem fit; or
(ii) for reasons to be recorded in writing, reject the application.'

(8) The approval once granted, subject to any condition specified in this behalf, shall be applicable for the previous year referred to in sub-rule(3) and subsequent previous years unless it is withdrawn by the Board.

(9) The benefit of section 9A shall not be denied to an eligible investment fund, which has been granted approval, for any previous year for which the approval is in force and has not been withdrawn.

(10)The Board may withdraw the approval granted to any fund, if it is satisfied that, -
(a) the approval has been obtained on the basis of misrepresentation of facts or fraud ;or
(b) the conditions mentioned in section 9A are not fulfilled; or
(c) any condition subject to which approval was granted, has been violated.

(11)No order rejecting the application or withdrawing the approval, shall be passed without giving an opportunity of being heard.

(12)A copy of the order rejecting the application or withdrawing the approval shall be communicated to the fund as well as the Assessing Officer and the Principal Commissioner or Commissioner having jurisdiction over the fund.

10VB. Statement to be furnished by the fund.- (1) The statement required to be furnished under sub-section (5) of section 9A shall be furnished for every financial year by the eligible investment fund in Form No.3CEK duly verified in the manner indicated therein, to the Assessing Officer who has the jurisdiction over the fund or would have had the jurisdiction had such fund been assessable to tax in India but for the provision of section 9A.

(2) The annual statement referred to in sub-rule (1) shall be furnished electronically under digital signature.

(3) The Principal Director General of Income-tax (Systems) or the Director General of Incometax
(Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing of annual statement in the manner specified in sub-rule (2).”

2. In Appendix II to the said rules, after Form No. 3CEH, the following Forms shall be inserted, namely:-
Download Form 3CEJ
Download Form 3CEK
Tags-form 3cej income tax,income tax form 3cej and 3cek,3cek it form,it form 3cek,3cej form income tax,income tax form 3cek and 3cej,income tax form 3cej and 3cek,form 3cej income tax,income tax form 3cej and 3cek,3cek it form,it form 3cek,3cej form income tax,income tax form 3cek and 3cej,income tax form 3cej and 3cek

Mar 15, 2016

Strict amendments in penalty provisions of Income tax-Union budget 2016

1:00 PM 0
Strict amendments in penalty provisions of Income tax-Union budget 2016
Chapter XXI of the Income-tax Act, 1961 (ITA) embodies the penalties imposable for prescribed defaults. Of these, the penalty which concerns almost every taxpayer subjected to a scrutiny assessment, is that provided under section 271(1)(c) for concealing particulars of income or reporting inaccurate particulars of income. Presently, the penalty ranges between 100% to 300% of the tax sought to be evaded.

Proposed provisions:
With a view to rationalize and bring objectivity in the penalty provisions, the Union Budget 2016 has proposed that effective 1 April 2017 (i.e. from financial year 2016-17), a new section 270A would apply in place of section 271. The new provisions propose as under:
1. A penalty may be levied if a person has either under-reported income or misreported income.
2. The scope of under-reported income shall be as follows:

Covers
Excludes
Income assessed > income u/s 143(1)(a)
Income for which bonafide explanation and material facts are furnished
Income assessed > maximum amount not chargeable to tax, where no return is filed
Income based on an estimate, if the accounts are correct and complete but the method employed is such that the income cannot be properly deduced
Income reassessed > income assessed/ reassessed immediately before such reassessment
Income based on an estimate, where the taxpayer has estimated a lower amount and included such amount in his income computation
Deemed total income assessed/reassessed u/s 115JB or 115JC > deemed total income u/s 143(1)(a)
Income representing transfer pricing addition for which proper documents are maintained and material facts are disclosed
Deemed total income assessed u/s 115JB or 115JC > maximum amount not chargeable to tax, where no return is filed
Undisclosed income on account of search where penalty is leviable under other provisions
Income assessed/reassessed which results in reducing the loss or converting the loss into income



3. Misreporting shall cover:
- Misrepresentation or suppression of facts;

- Non-recording of investments in the books of account;

- Claiming of expenditure not substantiated by evidence;

- Recording of false entry in the books of account;

- Failure to record any receipt in the books of account having a bearing on total income; and

- Failure to report any transaction to which the transfer pricing provisions apply.

4. The penalty would be 50% of the tax payable on under-reported income and 200% of the tax payable on misreported income.

5. In cases where the under-reported income arises out of determination of deemed total income under section 115JB /115JC, the same shall be computed as (A – B)+(C – D); where

A = the total income assessed as per the general provisions of the ITA;

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income;

C = the total income assessed as per the provisions of section 115JB /115JC;

D = the total income that would have been chargeable if the total income chargeable under section 115JB /115JC would be reduced by the amount of under-reported income.

In cases where the under-reported income on any issue is considered both under the provisions of section 115JB/115JC and under the general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

6. In case of company, firm or local authority, the tax payable on under-reported income shall be calculated as if such under-reported income is the total income. In any other case (eg. individuals, HUF) tax at 30% of the under-reported income shall be payable.

7. An addition or disallowance for which penalty has already been levied for the same or another assessment year, shall not be subjected to penalty again.
 
Proposed immunity from penalty:
It is further proposed to insert a new section 270AA for granting immunity from imposition of penalty if an application is made to the tax officer within the time prescribed. Such immunity will be granted provided the assessed demand is paid within the period specified and the taxpayer does not appeal against the assessment/ reassessment.
Immunity is however not available in cases of misreporting.
 
Impact:
 i.  The present rates for penalty levy (at minimum 100% and maximum 300% of the tax sought to be evaded) have been in force since 1 April 1989 i.e. for close to three decades. A revision in rates was hence overdue. Accordingly, the proposed reduction to 50% of the tax payable on under-reported income, is in keeping with the Government's objective to promote 'ease of doing business in India' and a step to alter the perception of India being a relatively high tax regime.

 ii.   Except for the deeming fiction provided under Explanation 1, section 271 does not expressly guide on the distinction between 'concealment of particulars of income' and 'furnishing of inaccurate particulars of income'. Tax officers are hence known to initiate penalty proceedings in a vague manner, without making specific reference to whether the allegation relates to concealment, inaccurate reporting or coverage under the deeming provisions. This being despite court decisions requiring the tax officer to demonstrate application of mind when invoking penalty provisions.

Given the significant difference in the penalty rates under the two scenarios, the proposed provisions have spelt out instances which would qualify as under-reporting and those that would amount to misreporting. The same should compel the tax officer to give some thought before classifying a taxpayer's case either way. However, in view of the generic nature of some of these instances (eg: misreporting would cover 'misrepresentation or suppression of facts'), dispute around categorization cannot be ruled out.

 iii. The provision that under-reported income shall not include income for which the taxpayer gives bonafide explanation and discloses material facts, is along the lines of a recommendation by the Justice Easwar Committee and supports the view that so long as proper explanation and facts are furnished, penalty is not automatic even if an addition is accepted.

 iv. The following proposals aim to check potential / repetitive litigation:
  -  Immunity from penalty in cases of under-reporting, albeit on payment of demand and waiver of appeal,
  -  Imposition of penalty not permissible in respect of an addition or disallowance which has already formed the basis of penalty levy in the same or another assessment year.

 v.   Penalty levy in case of under-reporting by an individual/ HUF is proposed to be based on tax payable at 30% of such under-reported income. This could lead to a higher outflow in case of an individual/ HUF falling within the 10% or 20% tax bracket.

The proposals thus seek to carry out sweeping changes in the current law relating to penalty. While most of these appear to have a positive bearing, only time will tell whether the stated objective of bringing certainty and clarity would be met.

Mar 14, 2016

No enforcement of demand where TDS deducted but not deposited

6:15 PM 0
No enforcement of demand where TDS deducted but not deposited
CBDT has issued a press release dated 11 March 2016 about Non-enforcement of recovery of demand against the assessee wheretax has been deducted but not deposited by the deductor - regarding

The Central Board of Direct Taxes had issued directions to the field offices that taxpayers whose tax has been deducted at source but not deposited to the Government’s account by the deductor, will not be asked to pay the demand to the extent tax has been deducted from his income. A letter to this effect was issued on 01.06.2015. Through this letter an embargo had been put on direct demand against the assessees in cases where the tax demand is on account of tax-credit mismatch due to non-payment of TDS to the Government account by the deductor.

Instances have come to the notice of the Board that these directions are not being strictly followed in field offices. An Office Memorandum has therefore been issued on 11.03.2015 reiterating the contents of the letter. It has been reemphasized that the assessing officers shall not enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor.

The Office Memorandum dated 11.03.2016 is available on the website of the Department www.incometaxindia.gov.in.

(Shefali Shah)
Pr. Commissioner of Income Tax
(Media and Technical Policy)
and Official Spokesperson, CBDT

Mar 13, 2016

CBDT clarification on taxability of consortium members

3:57 PM 0
CBDT clarification on taxability of consortium members
Taxation of consortium of contractors formed to implement Engineering, Procurement and Construction (EPC) contracts/turn key projects has been a subject matter of disput  between Income-tax Department and the consortium. This has been particularly so in cases where each member of the consortium has a clear and district role in scope of work, responsibilities and liability of the consortium even though each member is jointly and severally liable to the contractee.

To bring about consistency in approach while handling cases of consortium, the Central
Board of Direct taxes has issued Circular No. 7/2016 clarifying the attributes of a consortium arrangement which may not be treated as an Association of Persons(AOP). The list of attributes is not exhaustive. There may be additional factors which may justify not treating a consortium as an AOP depending on specific facts and circumstances.

The Circular will not apply to cases where all or some of the members of the consortium are Associated Enterprises as defined in section-92A of the Income-tax Act.

This Circular is expected to reduce litigation with consortium of contractors implementing EPC contracts/turnkey projects.

Circular No.7/2016 is available on the website of the Department 
www.incometaxindia.gov.in.

(Shefali Shah)
Pr. Commissioner of Income Tax
(Media and Technical Policy)
and Official Spokesperson, CBDT