For the AIFTP to lose two of its stalwarts in a short period of one month is unbearable one for any institution and AIFTP cannot be an exception to the same.

I recall my first visit to Ranchi way back in 1995 or thereabout for enrolling new members of AIFTP. Mr. S. K. Poddar was the first to be enrolled alongwith a few others from Jamshedpur as well as Ranchi. Mr. Poddar happened to be the first preferred individual by the collegium, to lead the Federation as its President during 2012 & 2013. During his tenure, he planned all the programmes well in advance and executed the same on time. He was instrumental to the amendments carried out to the Constitution of AIFTP at Mumbai on 25th December, 2013. I had the privilege of working with him for a quite long time during which I found him to be a person who maintained highest tradition of legal profession and followed standard of ethics. On direct taxes he was master of his own right. Being a Rotarian he also had the inclination of helping the needy, financially as well as in the legal field. Though he is no more with us I am confident his absence would always be felt by one and all.

My sincere homage to the departed soul. I pray Almighty to grant him eternal peace and enough strength to his family members to withstand such a bolt from the blue.

— P. C. Joshi, Advocate, Past President

Late Shri S. K. Poddar was a highly renowned leader from Ranchi, who was well known for his ethics, professionalism and knowledge.

I had the pleasure and privilege of interacting with Late Shri S. K. Poddar for a long time. He was quite fond of travelling, exploring new places and sharing his insights in the field with both experts and novices. I had the opportunity of visiting Bali with Shri Poddar to attend the AOTCA conference. He had an amicable and calm personality. One of his endearing traits was that despite his immense knowledge and expertise in the field he was down to earth. He will remain as a great source of inspiration to the young and upcoming tax professionals.

I pray to Almighty that his soul may rest in peace.

— Dr. K. Shivaram, Sr. Advocate, Past President

I was saddened to know that Shri S. K. Poddar, Advocate has gone to his heavenly abode on 18th June, 2019. He was a very learned, sober & simple man and having in-depth knowledge particularly of Income Tax law. He will always be remembered for his services rendered to the Federation as a Lifetime Member of the Federation. He was a man who will be remembered by the tax fraternity for the years together because of his qualities of firm determination, humbleness and promoting young generation in the field of law.

He selflessly promoted the Federation and served the tex fraternity. The Federation lost a sincere, devoted, dedicated, determined, courteous member, who promoted and spread the Federation all over the country. The Federation, AIFTP shall never forget him and his name would be stamped in golden words in the history of the AIFTP for his dynamic leadership and spreading the light of AIFTP. He will also be remembered for the amendment made in AIFTP Constitution to reduce the tenure from 2 years to 1 year for the office bearers.

I shall always cherish the sweet memories when I was National President of the Federation and he was National Dy. President and gave charge to him as National President at Ranchi in December, 2011.

In this critical hour of grief, I express my heart-felt condolences and pray to the Almighty to give peace to the departed soul and strength to the members of the bereaved family. We hope that his family members will follow the path paved by him, support the activities of the Federation and glorify his name.

— M. L. Patodi, Advocate, Past President

Shri S. K. Poddar, a very pertinent name in the All India Federation of Tax Practitioners, was one of the pillars of AIFTP.

He was like a fiend, philosopher and guide to me and I could move back to him in case of any support.

He was also one of my support pillars during my Presidentship, who always encouraged me to accept the responsibility of the National President of AIFTP, inspite of my health issues.

He has been an Advocate of repute in the matters of Direct Taxes and was well known and respected in the profession, a very learned and knowledgeable person who has presided over various sessions on matters relating to Direct Taxes.

An avid listener and a very good orator, who used to capture the audiences with his oratory skills and knowledge of the subjects he spoke on.

During his stint as National President of AIFTP, he took the Federation to greater heights.

He was equally a good social worker, who was always ready to donate for the social causes and helped the society in many ways.

It is difficult to absorb that Shri Poddarji is no more amongst us and is a great loss to the Federation and to me personally and I pray to God that his soul rest in peace.

Om Shanti Shanti Shanti

— J. D. Nankani, Advocate, Past President

It’s a very unfortunate time for the Federation to notice that within a span of 21 days two star lights of the glorious institution have made exit from this mortal world leaving all of us without guidance and direction. Really it’s a big blow to the movement of the organisers as both Dr. N. M. Ranka, and Shri Sheoji Kumar Poddar as Past Presidents as also great leaders led the Federation to the best appreciation of all the concerned. Both the Past Presidents have proved themselves as the most loved sons of Rajasthan and Jharkhand states in all respects and it’s a proven fact that they had taken the federation to greater heights in their respective tenures as National Presidents.

It is really a wonderful experience for me to associate with the two great leaders who provided me great and best direction light and guidance to me as from me only the tenure of the office of the president was reduced to one year. I have seen a true Gandhian president in Dr. Navrathan Ranka ji while I have experienced a real rebel star in Shri Poddar ji who strived hard for value based discipline in all administrative aspects with only object of ever marching Federation. Thus, we have all been denied by the Almighty of the association of both the leaders whose absence from us is incapable of being compensated and I am sure both would state at with their kind heavenly blessings. Simultaneously, let all of us convey our heartfelt grief to the members of the bereaved family and pray God to grant eternal peace to the departed souls of the great stalwarts of the Federation.

— Dr. M. V. K. Moorthy, Advocate, Past President

A TRIBUTE TO SHRI S. K. PODDAR – A DOYEN OF THE FEDERATION

On 18th June 2019, Federation was stunned by painful reality of passing away of our former President Shri S. K. Poddar who left for his heavenly abode, leaving behind a multitude of grief stricken members of the Federation. As the Federation had not come out of the profound grief caused by the painful death of Shri N. M. Ranka Ji that the another blow was suffered by the Federation by the sad demise of Shri S. K. Poddar Ji.

Shri Poddar Ji was one of the finest luminary, rose higher and higher through his inhumanly hard work. He always led an ethical and moral life.

He was not only a model lawyer but also a symbol of inspiration to the young lawyers and a role model of all the professionals.

He was practicing in direct taxes. His contribution in getting the law laid down by the Judiciary is note-worthy and rememberable.

He was a man of principles. His thoughts were valuable and his decisiveness was remarkable which had solved many problems cropped up while conducting affairs of Federation.

Though Mr. Poddar is not with us in flesh and blood, his relentless perseverance, compassion and dedication to the practice of law will live on for all time to come. He will be remembered with great reverence and feeling of indebtedness. To adopt the ethics and moral values set by him will be the great Tribute to him.

May the departed soul rest in peace in the vicinity of God and we pray Almighty to give strength to the family, to the legal fraternity and to the members of Federation to bear this irreparable loss.

— Smt. Prem Lata Bansal, Sr. Advocate, Past President

Shri Shivkumar Ji Poddar, Past President of All India Federation of Tax Practitioners left for his heavenly abode on 18-6-2019.

It is a great loss to the fraternity of Tax Practitioners and the Organization at large. His contribution in building the AIFTP and promoting it in Eastern Sector in particular is unforgettable. Late Shri Shiv Babu had a very pleasant personality and affectionate nature. When he mix with his fellow members of the AIFTP, one could never imagine the stature of the persona of Shri Shivkumar Ji Poddar. He would never let you feel that he is an acclaimed Advocate in the field of taxation at Ranchi. Whenever one met Shiv Babu he felt comfortable and Shiv Babu always bestowed his love and affection to fellow members one and all and we always enjoyed his company. Shiv Babu has in-depth knowledge of the Tax Laws and was always willing to help his fellow Tax Advocates whenever and wherever needed. He had been instrumental in bringing the Organization to new heights. It is unfortunate for our organization that we lost two stalwarts Late Shri N.M. Ranka and Late Shri Shiv Babu Poddar in a short span of time in this year.

I convey my condolences to the family members and pray the almighty to accord the eternal piece to the departed soul.

— G. N. Purohit, Sr. Advocate, Imm. Past President

OBITUARY

Shri Sheo Kumar Poddar, popularly known as “Sheoji” an Advocate and Past President of All India Federation of Tax Practitioners has left for his heavenly abode on June 18, 2019 at Ranch at the age of 79 years. He was a practicing lawyer over five decades. During his professional career he had represented cases at Kolkata, Patna, Delhi, Hyderabad, Bangalore, Cuttack, Guwahati, Jamshedpur, Dhanbad besides permanently at Ranchi. He had been awarded many awards during his carrier and was awarded Life Time Achievement Award in December, 2018 at National Convention of All India Federation of Tax Practitioners held at Guwahati by Hon’ble Judge of Supreme Court of India. He had evinced many social and culture achievements. So far as the Federation is concerned, it is great loss for all of us. I had a privilege working with him as a Treasurer, when he was National President of AIFTP. I had fond memories with him.

— H. N. Motiwalla, Editor, AIFTP Journal

The idea of Golden Jubilee celebration of setting of Indore Bench of Income Tax Appellate Tribunal was conceived during the 78th Foundation Day of ITAT event on 25th January 2019.

Tax Bar at Tribunal, Indore caught on the idea and worked extensively with the Hon’ble Judicial Member Shri Kul Bharat and Hon’ble Accountant Member Shri Manish Borad to bring it into reality.

His lordship Hon’ble President ITAT, Justice Shri P. P. Bhatt and Hon’ble Vice President – Ahmedabad Zone, Shri Pramod Kumar guided and mentored the execution to the minutest detail.

Indore Bench of ITAT was set up on 2nd June 1969 and completed glorious 50 years discharging its function efficaciously and effectively in the justice delivery mechanism on direct tax matters. There have been several landmark decisions which have held their fort right up to the Apex Court.

The theme of the event was conceptualised as “Road Travelled and the Road Ahead…”. Everything was worked around this theme with thematic approach on all aspect of creating an event logo, invitation cards, souvenir and Bar members directory, video presentation, guests introduction, symposium for all the stakeholders which included professionals, Department authorities and students, banquet ambience, mementos to the guests, gifts to the Bar members of tie and lapel pin.

Standing left to right are

  1. CA Vijay Bansal, Treasurer, Tax Bar

  2. Adv. Girish Agrawal, Organizing Secretary, Tax Bar

  3. Hon’ble Judicial Member, ITAT Indore, Shri Kul Bharat

  4. Hon’ble Pr. CCIT, MP & CG, Shri A. K. Chauhan

  5. Hon’ble Vice President, Mumbai Zone, Shri G. S. Pannu

  6. Hon’ble President ITAT, Justice Shri P. P. Bhatt

  7. Hon’ble Vice President, Ahmedabad Zone, Shri Pramod Kumar

  8. Hon’ble Accountant Member, ITAT Indore, Shri Manish Borad

  9. CA S. S. Deshpande, President, Tax Bar

  10. Sr. Adv. Sumit Nema, Hon. Secretary, Tax Bar

  11. CA Hitesh Mehta, Souvenir Committee, Tax Bar

  12. Adv. Hitesh Chimnani, Executive Committee Member, Tax Bar

Hon’ble President ITAT, Justice Shri P. P. Bhatt presided over the function as the Chief Guest who was joined by Hon’ble Vice President – Ahmedabad Zone Shri Pramod Kumar and Vice President – Mumbai Zone Shri G. S. Pannu and Principal Chief Commissioner of Income Tax, MP & C. G. Shri A. K. Chauhan.

All the Hon’ble Members of ITAT from Ahmedabad Zone, Hon’ble current and past Members ITAT who had been posted at Indore Bench, all attended the function and made it an unforgettable experience for all.

A video presentation showcasing 50 glorious years of Indore Bench of ITAT made everyone nostalgic and led to an overdrive of emotions.

Shri S. S. Deshpande, President, Tax Bar welcomed all the guests. Shri Girish Agrawal, Organizing Secretary, Tax Bar took all through the entire event with everlasting impressions and Shri Sumit Nema, Secretary extended hearty vote of thanks to all in making it a grand success in the history of set up of ITAT.

Speaking at the Golden Jubilee function, Hon’ble President ITAT, Justice Shri P. P. Bhatt who inaugurated the e-court of Indore Bench said e-courts prove to be a milestone in the judiciary. He assured for the setting up of own infrastructure for Indore Bench of ITAT very soon with land already having been identified and proposal underway for further approvals.

Both the Hon’ble Vice Presidents also addressed on the occasion and expressed their best wishes for the functioning of Indore Bench of ITAT.

A souvenir cum directory was released on the occasion along with holding of blood donation camp, plantation at CA Garden and a Press Conference by the Hon’ble President ITAT, Justice Shri P. P. Bhatt.

This event of Golden Jubilee celebration of setting up and functioning of a bench of ITAT has created a landmark in the history of ITAT since 1941 with a high level of bench-marking for the ensuing years.

Thanks,

CA. Shri Subhash Deshpande, President of ITAT Indore Bar.

CA. Sumit Nema, Secretary

CA. Shri Girish Agrawal, Joint Secretary

Other photographs of the event:

Sitting on the dais, left to right are

  1. Adv. Girish Agrawal, Organizing Secretary, Tax Bar

  2. Hon’ble Judicial Member, ITAT Indore, Shri Kul Bharat

  3. Hon’ble Pr. CCIT, MP & CG, Shri A. K. Chauhan

  4. Hon’ble Vice President, Mumbai Zone, Shri G.S. Pannu

  5. Hon’ble Vice President, Ahmedabad Zone, Shri Pramod Kumar

  6. Hon’ble Accountant Member, ITAT Indore, Shri Manish Borad

Sitting on the dais, left to right are

  1. Adv. Girish Agrawal, Organizing Secretary, Tax Bar

  2. Hon’ble Judicial Member, ITAT Indore, Shri Kul Bharat

  3. Hon’ble Pr. CCIT, MP & CG, Shri A. K. Chauhan

  4. Hon’ble Vice President, Mumbai Zone, Shri G. S. Pannu

  5. Hon’ble President ITAT, Justice Shri P. P. Bhatt

  6. Hon’ble Vice President, Ahmedabad Zone, Shri Pramod Kumar

Figures of institution, Disposal and Pendency of Appeals as on 01-07-2019

Bench

No. of Benc.

No Mem.

Institution

Disposal

Pendency

SMC Pendency

Mumbai

11

17

590

687

16132

2166

Pune

3

6

119

285

5442

282

Nagpur

1

0

16

0

1012

184

Raipur

 

0

20

1

1080

69

Panji

1

0

24

0

929

183

Delhi

9

13

707

310

23987

2263

Deharadun (Circuit )

 

 

27

0

27

27

Agra

1

2

48

12

1116

204

Bilaspur

0

Lucknow

2

2

89

22

1193

92

Allahabad

1

0

8

0

564

171

Varanasi (Circuit Bench)

 

 

18

29

355

81

Jabalpur

1

1

30

0

758

75

Kolkatta

5

7

244

350

3534

597

Patna

1

0

26

96

495

154

Cuttack

1

2

59

27

1033

45

Guwahati

1

0

58

29

812

179

Ranchi (Jhark Hand) Circuit Bench

1

0

8

19

648

172

Chennai

4

5

276

291

5505

314

Bangalore

3

6

283

295

5655

149

Cochin

1

2

19

123

548

7

Ahemdabad

4

7

234

297

7259

1819

Surat

1

1

23

43

3031

780

Indore

1

2

117

141

2374

106

Rajkot

1

0

28

31

1657

403

Hyderabad

2

4

163

64

5090

785

Vishakha

1

2

124

100

958

282

Patnam

 

 

 

 

 

 

Chandigarh

2

4

97

75

2122

*381

Amritsar

1

1

47

53

1743

569

Jaipur

2

3

206

81

1777

811

Jodhpur

1

0

32

0

536

132

Total

63

87

3740

3461

97372

13101

 

 

39

Vacancy

 

 

 

Nos. of Members

126

126

 

 

 

 

Query 1

Nature of sale when the claim of exempted sale u/s 6(2) of CST is disallowed

A dealer makes exempted sales u/s 6(2) of the CST Act, 1956 to the buyer dealer, who is within same state. The form ‘E1’ is not received from the seller, though ‘C’ form is received from the buyer. The assessing authority suggests that since the exemption is not allowable, the sale will be local sale and benefit of ‘C’ form also can not be given. Whether the view of the assessing authority is correct?

Reply

The elaborated facts can be mentioned as under:

The dealer purchases goods in the course of inter-state trade from other state vendors. When the goods are in movement, the dealer effects the sale of such goods (referred to as ‘in transit sale’). The buyer includes buyers situated within same state. For exempted ‘in transit sale’ dealer obtains form ‘E1’ from his vendors and form ‘C’ from his buyers. In few cases, dealer receives ‘C’ forms but does not receive ‘E1’ forms in relation to sale made to intra state buyers. Therefore, the sale is not exempt but taxable. The issue for reply is under above circumstances, whether the tax will be attracted under CST Act or local Act.

Before we give reply, it will be useful to refer to relevant legal back ground.

The inter state sales are covered by CST Act. As per the Scheme of CST Act, every inter state sale is taxable. However, under CST Act, there are two kinds of inter state sales. The nature of inter state sale transaction is defined in section 3 of the CST Act. The said section reads as under;

“S.3. When is a sale or purchase of goods said to take place in the course of inter-State trade of commerce.- A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-

  1. occasions the movement of goods from one State to another; or

  2. is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation1.– Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2.– Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of the goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State…….”

As per section 3(a) the direct inter state sale between two parties is covered.

There is extension of inter state sale by section 3( b). As per this section the sale effected by transfer of documents of title to goods, when the goods are in inter state movement. As per Explanation -1, to section 3(b), the movement commences, when the goods are loaded in transport and it terminates upon taking delivery from the transport. Any sale made during above movement is inter state sale. They are also referred to ‘in transit sale’ in the market.

Section 6(2) of the CST Act seeks to give exemption to such ‘in transit sale’. Section 6(2) is reproduced below for ready reference.

6 Liability to tax on inter-State sales

(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-state trade or commerce has either occasioned the movement of such goods from one state to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the

goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act.

Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,-

  1. a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority, and

  2. if the subsequent sale is made to a registered dealer, a declaration referred to in sub-section (4) of section 8.

Provided, further that it shall not be necessary to furnish the declaration referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if, –

  1. the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent or such reduced rate as may be notified by the Central Government, by notification in the Official Gazette, under sub- section ( 1) of section 8 (whether called a tax or fee or by any other name); and

  2. the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in this sub-section.”

As per Scheme of section 6(2), the subsequent sale effected by transfer of documents of title to goods during inter state movement is exempt subject to production of form ‘E1’ as obtained from vendor and form ‘C’ as obtained from buyer.

If any of above two forms is not available then the exemption claim will not be allowable. However, the nature of transaction still remains inter- state sale. This is so because, the transaction is basically covered by section 3(b) which defines the inter state sale, as discussed above. Simply because one form is not available, the nature of transaction can not change but the exemption will get denied. The transaction will become taxable under CST Act. The tax is to be levied as per provisions of CST Act. In case, ‘C’ form is received, then, the tax will be attracted at lower rate of 2% under CST Act.

The above situation is also well covered by other connected provisions. For example, against the assessment order, the dealer can go in appeal and also produce missing forms in appeal. Similarly, dealer can also file rectification on getting the forms. If the transactions are not assessed under CST Act but under Local Act than the above subsequent proceedings will become redundant. Only if, the transactions are taxed under CST Act then in subsequent proceedings, the missing forms can be produced and exemption benefit can be availed.

Further, the local buyer in state obtains ‘C’ form from the sales tax department of the same state, which is supplied to them. In his case, it is inter state purchase that is why he is able to obtain the ‘C’ form. Thus, the nature of transaction remains to be inter state, in spite of one of the forms is not received. Under above circumstances, taxing selling dealer under Local Act will be contradictory and illegal. The same department can not treat the same transaction in opposite manner.

Thus the nature of transaction in the given circumstances will be inter-state sale and should be taxable accordingly under CST Act, 1956.

 

  1. Do the provisions of section 44ADA apply to an actor, who is acting only in TV serials? What if he is acting only in web serials, available only on Netflix or Amazon Prime? Would it make any difference if he has acted in a small role in one film during an earlier year, where he earned a small fraction of his total earnings?

    Ans: S.44ADA applies to a resident assessee who is engaged in a profession. The term “profession” has been defined in s.44A. The profession of film artist (actor, etc) is notified under s.44A for the purpose. The notification is not that of an actor, but of an actor who is a film artist. Since the person in this case is an actor, but does not act in films, but in serials broadcast on TV or on the web, he does not qualify as carrying on a profession.

  2. Mr A has booked a flat on allotment letter in 2012. The project is not completed. Now the builder is offering another flat under- construction on surrender of original allotment letter. Can Mr. A claim benefit of long term gains and investment in new flat?

    Ans. The right to obtain a house under the allotment letter is a capital asset, which is a long term capital asset, since such right was acquired in 2012. This is however not a residential house, but the right to obtain a residential house. Therefore, Mr A can claim benefit of exemption under s. 54F, and not s. 54.

  3. Sitting fees and Commission are earned by a Non Executive Director, on which the Company has deducted tax @10% u/s194J. Should this be taxed as income from other sources or as business income? The company is a Public Ltd. Co. and the amount is large, about ₹ 85

    lakh. If it is business income, then whether presumptive tax is applicable?

    Ans. Directorship is not a profession as defined in s.44A. The issue of whether the director is carrying on a business or not depends upon various factors – whether he is engaged in acting as a director in any other companies, whether he carries on any other activity, the time he spends on his role as a director and in the other activities, etc. Based on these tests, if he is regarded as engaged in a business, then the provisions of s. 44AD would apply, and he would have to offer to tax 8% of his gross receipts or the actual income that he has earned, whichever is higher.

  4. Mr and Mrs B have obtained a divorce. Under the consent terms filed before the Family Court, and under the terms of the divorce as decreed by the Family Court, Mr A has transferred one house to Mrs A, and has paid her a lump sum amount of ₹ 1 crore. Such amounts were received by Mrs A after the decree of divorce. Are such amounts taxable?

    Ans. As held by the Bombay High Court in the case of Princess Maheshwari Devi v. CIT 147 ITR 258, lumpsum alimony received on divorce is a capital receipt, which is not taxable. Though such amounts would not be regarded as having been received from a relative, since the receipt was after the divorce, the provisions of section 56(2)(x) would not apply to such amounts, since the assets and money is being received in consideration of agreeing to divorce, and cannot be said to have been received without any consideration.

     

Introduction:

In the month of April 2019 the New Delhi bench of the AAR on an application filed by Rod Retail Pvt. Ltd. has held that the supply of goods to the international passengers going abroad from ‘Duty Free’ shops may be taking place beyond the customs frontiers of India under Integrated GST Act, however, the said shops are within territory of India under the Central GST Act. This ruling resulted created an unfair situation in the hands of such ‘duty free’ shops leaving them uncompetitive.

To overcome this issue faced by a class of persons, the government notified such class of registered persons and laid down provisions exempting certain supplies made by such persons and grant of refund of tax charged on the inward supplies of goods received by them subject to the conditions as prescribed.

Notification No. 11 /2019 – Integrated Tax (Rate) issued on 29- 6- 2019 applicable w.e.f. 1-7-2019:

Exemption to any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist, from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Services Tax Act, 2017. Also, the

term “Outgoing international tourist” has been specified to mean a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes. This has carved out the supplies made to person who does not fit in the definition and therefore, supplies made to a person other than an outgoing international tourist shall still be chargeable to GST.

For making supplies without payment of tax, the following documents and declaration are required:

  1. Details of passport;

  2. Details of boarding pass;

  3. A passenger declaration in the prescribed format;

  4. Copy of invoice evidencing that no tax is charged.

The retail outlets are required to prominently display a notice that tourist is eligible for purchase of goods without payment of domestic taxes.

Also, the records with respect to duty paid indigenous goods being brought to the retail outlets and their supplies to eligible passengers shall be maintained as per Annexure A in electronic form. Annexure is a statement correlating the inward supplies procured from domestic market on which tax is paid and supply of goods to the eligible passenger.

Since the outward supplies by retail outlets are exempt, they will not be eligible to claim input tax credit. Thus, it is clarified that the refund to be granted to retail outlets is not on account of the accumulated input tax credit but based on the invoices of the inward supplies of indigenous goods received by them.

Notification No. 11 /2019 – Central Tax ( Rate) issued on 29- 6- 2019 applicable w.e.f. 1-7-2019:

Specifying retail outlets established in the departure area of an international airport, beyond the immigration counters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund of applicable central tax paid on inward supply of such goods, subject to the conditions specified in rule 95A of the Central Goods and Services Tax Rules, 2017.

Eligibility and Conditions for claiming refund of tax paid on inward supplies:

  1. Registration under CGST Act: The retail outlets applying for refund shall be registered under the provisions of section 22 of the CGST Act read with the rules made thereunder and shall have a valid GSTIN.

  2. Location of retail outlets: Such retail outlets shall be established at departure area of the international airport beyond immigration counters.

    1. the inward supplies of goods were received by the said retail outlet from a registered person against a tax invoice;

    2. the said goods were supplied by the said retail outlet to an outgoing international tourist against foreign exchange without charging any tax;

    3. name and Goods and Services Tax Identification Number of the retail outlet is mentioned in the tax invoice for the inward supply;

Duty Free Shops and Duty Paid Shops:

“Duty Free Shops” which are point of sale for goods sourced from a warehoused licensed under Section 58A of the Customs Act, 1962 and duty paid indigenous goods. The procedure for procurement of imported/ warehoused goods is governed by the provisions contained in Customs Act. The procedure and applicable rules as specified under the Customs Act are required to be followed for procurement and supply of such goods.

“Duty Paid Shops” retailing duty paid indigenous goods. There is no special procedure for procurement of indigenous goods for sale by DFS or DPS. Therefore, all indigenous goods would have to be procured by DFS or DPS on payment of applicable tax when procured from the domestic market.

Manner of filing refund application: Till the time the online utility for filing the refund claim is made available on the common portal, the retail outlets shall claim refund manually, to the jurisdictional proper officer, in Form GST RFD10B on a monthly or quarterly basis, as the case may be.

The refund application shall be accompanied with the following documents:

  1. An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been received by such retail outlets;

  2. An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been sold to eligible passengers;

  3. Copies of the valid return furnished in FORM GSTR – 3B by the retail outlets for the period covered in the refund claim;

  4. Copies of FORM GSTR- 2A for the period covered in the refund claim; and

  5. Copies of the attested hard copies of the invoices on which refund is claimed but which are not reflected in FORM GSTR- 2A.

The manner of processing and sanctioning refund claims by proper officer has also been prescribed in the circular it is in lines with manner in which refunds are granted under GST. Due to absence of utility on the GST portal, all the procedures are manual.

The detailed procedure for refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange are clarified in Circular No. 106/25/2019-GST dated 29-6-2019.

Government’s move to exempt supplies by retail outlets at the airport and allowing refund of taxes paid on inward supplies is likely to benefit both, the supplier and the outgoing international tourist. However, in allowing the benefit to outgoing international tourist, the government seems to have adopted a different path by exempting supply made by retail outlets. Treating such supplies as zero rated thereby allowing refund of input tax credit in respect of all eligible procurement of goods and services could have been more beneficial.

 

Truth, Purity, and unselfishness —

wherever these are present, there is no power below or above the sun to crush the possessor thereof. Equipped with these,

one individual is able to face the whole universe in opposition.

Swami Vivekanand

 

The Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman made her maiden Budget Speech today and presented the Union Budget 2019-20 before the Parliament. The key highlights of Indirect Tax proposals of Finance Bill 0.2 of 2019 are as follows:

Make In India

  • Basic Customs Duty increased on cashew kernels, PVC, tiles, auto parts, marble slabs, optical fibre cable, CCTV camera etc.

  • Exemptions from Custom Duty on certain electronic items now manufactured in India withdrawn.

  • End use based exemptions on palm stearin, fatty oils withdrawn.

  • Exemptions to various kinds of papers withdrawn.

  • 5% Basic Custom Duty imposed on imported books.

  • Customs duty reduced on certain raw materials.

Other Indirect Tax provisions

  • Export duty rationalised on raw and semi-finished leather

  • Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by ₹ 1 per litre on petrol and diesel

  • Custom duty on gold and other precious metals increased

  • Legacy Dispute Resolution Scheme for quick closure of pending litigations in Central Excise and Service tax from pre-GST regime.

Salient features of Legacy Dispute Resolution Scheme 2019:

GST has just completed two years. An area that concerns is that we have huge pending litigations from pre-GST regime. More than ₹ 3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on. Therefore, a Legacy Dispute Resolution Scheme has been proposed that will allow quick closure of these litigations.

It is a dispute resolution cum amnesty scheme for resolution and settlement of legacy cases. It covers past disputes of taxes which have got subsumed in GST namely Central Excise, Service Tax and Cesses. All persons are eligible to avail the scheme except a few exclusions. Scheme shall become available from a date to be notified.

Relief available under Scheme:

Sr. No

Details

Amount

Relief

A

Tax dues relatable to SCN or appeal arising out of such SCN which is Pending as on 30.06.2019 and the amount of duty is;

<50 Lakhs

70% of Tax dues

>50 Lakhs

50% of Tax dues

B

Tax dues relatable to SCN for late fee or penalty only and the amount of duty has been paid or is nil

NIL

Entire amount of late fee or penalty

C

Tax Dues are relatable to amount in arrears* or Tax Dues are relatable to a mount in arrears and the declarant has indicated an amount of duty as payable but not paid it and the amount of duty involved is;

<50 Lakhs

60% of Tax dues

>50 Lakhs

40% of Tax dues

D

Tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before 30th June

<50 Lakhs

70% of Tax dues

>50 Lakhs

50% of Tax dues

E

Tax dues are on account of voluntary disclosure by the declarant

NIL

NO Relief

Important Definitions:

Sr. No

Scenario

Meaning of Tax Dues

A

Where a single appeal arising out of order is pending as on 30.06.2019

Total amount of duty which  is disputed

B

Where more than one appeal arising out of an order, one by the decedent and other a departmental appeal where such an appeal has not been heard finally on or before 30.06.2019

Sum total of amount disputed by both decedent and department

C

Where SCN has received on or before 30.06.2019

Amount of duty payable as per SCN

D

Where enquiry or investigation or audit is pending

Amount of duty payable which has been quantified on or before 30.06.2019

  1. Amount in Arrears: It means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of—

    1. no appeal having been filed by the declarant against an order or an order in appeal before expiry of the period of time for filing appeal; or

    2. an order in appeal relating to the declarant attaining finality; or

    3. the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it.

  2. Amount of Duty: It means the amount of central excise duty, the service tax and the cess payable under the indirect tax enactment.

  3. Appellate Forum: It means the Supreme Court or the High Court or the Customs, Excise and Service Tax Appellate Tribunal or the Commissioner (Appeals).

  4. Enquiry or Investigation: It includes search of premises, issuance of summons, requiring the production of accounts, documents or other evidence, recording of statements.

Eligibility and Exclusions:

All persons shall be eligible to make a declaration under this scheme except:

  • where appeal filed before the appellate forum and final hearing has taken place on or before 30.06.2019.

  • where SCN has been issued AND final hearing has taken place on or before 30.06.2019.

  • who have been convicted for any offence under any provision for the matter for which he intends to file a declaration.

  • who have been subjected to any enquiry or investigation or audit AND amount of duty involved has not been quantified on or before 30.06.2019.

  • who have been issued a show cause notice for an erroneous refund or refund.

  • persons making a voluntary disclosure (i) after being subjected to any enquiry or investigation or audit, or (ii) having filed a return wherein he has indicated an amount of duty as payable, but has not paid it.

  • who have filed an application in the Settlement Commission.

  • persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944.

 

The more this power of concentration,

the more knowledge is acquired, because this is the one and only method

of acquiring knowledge.

Swami Vivekanand

The Finance (No. 2) Bill, 2019 has introduced and amended important incentive provisions under the Income tax Act which will give impetus to the growth story of India. It is often seen that after tax incentives are provided governments try to make conditions for such incentives stringent . However, the tax incentives provided in the Bill have in most cases expanded the scope of already available tax incentives. Further, the new tax incentives introduced are industry specific with a great potential of garnering investments and generating employment.

INCENTIVES TO INTERNATIONAL FINANCIAL SERVICES CENTRE (IFSC)

In order to promote the development of world class financial infrastructure in India, some tax concessions have already been provided in respect of business carried on from an IFSC by Finance Act, 2018.

Amendment to Section 47

Existing Provision:

Under the existing provisions of the section 47(viiab) of the Act, any transfer of a capital asset, being bonds or Global Depository Receipts or rupee denominated bond of an Indian company or derivative, made by a non- resident through a recognised stock exchange located in any IFSC and where the consideration for such transaction is paid or payable in foreign currency shall not be regarded as transfer.

Proposed Amendment

The Finance Bill proposes to expand the scope of Section 47( viiab). With a view to provide tax-neutral transfer of certain securities by Category III Alternative Investment Fund (AIF) in IFSC, it is proposed to amend the said section so as to provide that any transfer of a capital asset, specified in the said clause by such AIF, of which all the unit holders are non-resident, are not regarded as transfer subject to fulfilment of specified conditions.

It is further proposed to widen the types of securities listed in said clause by empowering the Central Government to notify other securities for the purposes of this clause.

Effective From

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

Amendment to Section 10

Proposed Amendment

With a view to facilitate external borrowing by the units located in IFSC, it is proposed to amend section 10 of the Act so as to provide that any income by way of interest payable to a non-resident by a unit located in IFSC in respect of monies borrowed by it on or after 1st day of September, 2019, shall be exempt.

Effective From

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

Amendment to Section 115O

Existing Provision

The existing provisions of the section 115-O of the Act, provide that no tax on distributed profits shall be chargeable in respect of the total income of a company, being a unit of an IFSC, deriving income solely in convertible foreign exchange, for any assessment year on any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2017, out of its current income, either in the hands of the company or the person receiving such dividend.

Proposed Amendment

To facilitate distribution of dividend by companies operating in IFSC, it is proposed to amend the provision of the said section to provide that any dividend paid out of accumulated income derived from operations in IFSC, after 1st April 2017 shall also not be liable for tax on distributed profits.

Effective From

This amendment will take effect from 1st September, 2019.

Amendment to Section 115R

Existing Provision

The existing provisions of the section 115R of the Act, provide that any amount of income distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and such specified company or Mutual Fund shall be liable to pay additional income-tax on such distributed income.

Proposed Amendment

In order to incentivize relocation of Mutual Fund in IFSC, it is proposed to amend the said section so as to provide that no additional income-tax shall be chargeable in respect of any amount of income distributed, on or after the 1st day of September, 2019, by a specified Mutual Fund i.e a mutual fund located in IFSC of which all the unit holders are non-residents and which fulfills certain other specified conditions.

Effective From

This amendment will take effect, from 1st September, 2019.

Amendment to Section 80LA

Existing Provision

The existing provisions of the section 80LA of the Act, inter alia, provide profit linked deduction of an amount equal to one hundred per cent of income for the first five consecutive assessment years and fifty per cent of income for the next five consecutive assessment years, to units of an IFSC.

Proposed Amendment

With a view to further incentivize operation of units in IFSC, it is proposed to amend the said section so as to provide that the deduction shall be increased to one hundred per cent for any ten consecutive years. The assessee, at his option, may claim the said deduction for any ten consecutive assessment years out of fifteen years beginning with the year in which the necessary permission was obtained.

Effective From

This amendment will take effect, from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

Amendment to Section 115A

Existing Provision

Section 115A of the Act provides the method of calculation of income-tax payable by a non- resident (not being a company) or by a foreign company where the total income includes any income by way of dividend (other than referred in section 115-O), interest, royalty and fees for technical services; etc. Section 80LA, provides for deduction in respect of certain incomes of a unit located in an IFSC. However, sub-section (4) of section 115A prohibits any deduction under chapter VIA which includes section 80LA.

Proposed Amendment

In order to ensure that units located in IFSC claim full deduction, it is proposed to amend section 115A of the Act so as to provide that the conditions contained in sub-section (4) of section 115A shall not apply to a unit of an IFSC and accordingly deduction under Section 80LA will be allowed.

Effective From

This amendment will take effect from the 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent years.

INCENTIVES TO NON-BANKING FINANCE COMPANIES (NBFCS)

Amendment of Section 43D

Existing Provision

The existing provisions of section 43D of the Act, inter-alia provides that interest income in relation to certain categories of bad or doubtful debts as may be prescribed [Rule 6EA & 6EB of I.T. Rules 1962] having regard to the guidelines issued by RBI in relation to such debts, received by public financial institutions, scheduled banks, cooperative banks, State financial corporations, State industrial investment corporations and public companies like housing finance companies, shall be chargeable to tax in the previous year in which it is credited to its profit and loss account actually received, whichever is earlier. This provision is an exception to the accrual system of accounting. Said provision does not include NBFCs. However, recently Supreme Court in CIT v. Vasisth Chay Vyapar Ltd (2019) 410 ITR 244(SC) held that interest on Inter-Corporate Deposits (ICDs) which had become Non-Performing Asset (NPA) in terms of Prudential Norms issued by RBI, having not accrued, would not be taxable in hands of a non- banking financial company.

Proposed Amendment

With a view to provide a level playing field to certain categories of NBFCs who are adequately regulated, the finance bill proposes to amend section 43D of the Act so as to include deposit- taking NBFCs and systemically important non deposit-taking NBFCs within the scope of this section.

Consequentially, as per matching principle in taxation, it is proposed to amend section 43B of the Act to provide that any sum payable by the assessee as interest on any loan or advances from a deposit-taking NBFCs and systemically important non deposit-taking NBFCs shall be allowed as deduction if it is actually paid on or before the due date of furnishing the return of income of the relevant previous year.

As regards other NBFCs they will be governed by the ratio of decision of Supreme Court in CIT v. Vasisth Chay Vyapar Ltd (Supra).

Effective From

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent years.

RELAXATION IN CONDITIONS OF SPECIAL TAXATION REGIME FOR OFFSHORE FUNDS

Amendment of Section 9A

Existing Provision

Section 9A of the Act provides for a safe harbour in respect of offshore funds. It provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager located in India and acting on behalf of such fund shall by itself not constitute business connection in India of the said fund. Further, an eligible investment fund shall not be said to be resident in India merely because the eligible fund manager undertaking fund management activities on its behalf is located in India. The benefit under section 9A is available subject to the conditions provided in sub-sections (3), (4) and (5) of the said section. Sub-section (3) of section 9A provides for the conditions for the eligibility of the fund. These conditions, inter-alia, are related to residence of fund, corpus, size, investor broad basing, investment diversification and payment of remuneration to fund manager at arm’s length.

Proposed Amendment

Some of the conditions prescribed under sub- section (3) were found to be onerous by off shore funds.

On account of various Representations for relaxing certain conditions in the implementation of regime of fund managers and to give an impetus to fund management activities in India, certain constraints are proposed to be removed.

Firstly, under the existing provisions of section 9A(3)(j), the monthly average corpus of the eligible investment fund is required to be more than INR 100 crore by end of the financial year in which such fund is established/ incorporated. This provision was onerous as it became impracticable where a eligible investment fund is established/ incorporated close to the end of the tax year (say, in March). The Bill proposes to retrospectively amend the above requirement by providing that the cut-off date shall be (a) six months from the end of the month of fund’s establishment or (b) end of previous year, whichever is later.

Secondly, under the existing provisions of section 9A(3)(m) the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the arms length price of said activity. The Bill proposes to amend section 9A(3)(m) to provide that the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the amount calculated in such manner as may be prescribed.

Effective From

These amendments will take effect retrospectively from 1st April, 2019 and shall apply to the assessment year 2019-20 and subsequent assessment years.

TAX INCENTIVE FOR ELECTRIC VEHICLES

Insertion of new Section 80EEB – Deduction in respect of purchase of electric vehicle.

Proposed Amendment

Clause 25 of the Finance Bill has inserted new Section 80EEB to incentivise individuals who purchase electric cars. This new section is done with a view to improve environment and to reduce vehicular pollution. New section 80EEB provides for a deduction to an individual in respect of interest on loan taken for purchase of an electric vehicle from any financial institution up to one lakh fifty thousand rupees if the loan has been sanctioned by a financial institution including a non-banking financial company during the period beginning on the 1st April, 2019 to 31st March, 2023.

It is also proposed that where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year.

Electric vehicle is defined as under

“electric vehicle” means a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy”

The memorandum to the Finance Bill contains an additional condition that the assessee does not own any other electric vehicle on the date of sanction of loan. However, this condition is not part of Section 80EEB in the Finance Bill. We will thus have to wait for the Finance Act for full clarity.

Effective From

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-2021 and subsequent assessment years.

EXEMPTION OF INTEREST INCOME OF A NON-RESIDENT ARISING FROM BORROWINGS BY WAY OF ISSUE OF RUPEE DENOMINATED BONDS REFERRED TO UNDER SECTION 194LC.

Insertion of section 10(4C)

Existing Provision

The existing provisions of section 194LC of the Act provide that the interest income payable to a non-resident by a specified company on borrowings made by it in foreign currency from sources outside India under a loan agreement or by way of issue of any long-term bond including long-term infrastructure bond, or rupee denominated bond shall be eligible for TDS at a concessional rate of five per cent.

Proposed Amendment

In order to incentivise low cost foreign borrowings through Off-shore Rupee Denominated Bond, the press release dated 17th September, 2018, inter alia, announced that interest payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect of rupee denominated bond issued outside India during the period from September 17, 2018 to March 31, 2019 shall be exempt from tax. Consequently, no tax was required to be deducted on the payment of interest in respect of the said bond.

Subsequent to the press release there was confusion as Press release had itself stated that the contents of the press release would be incorporated in the Act but no such amendments had taken place.

Thus, the exemption announced through the said press release is now proposed to be incorporated in the law by amending section 10 of the Act so as to provide exemption to income payable by way of interest to a non-resident by the specified company in respect of monies borrowed from a source outside India by way of issue of rupee denominated bond, as referred to in section 194LC, during the period begining from the 17th day of September, 2018 and ending on the 31st day of March, 2019.

Effective From

This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

TAX INCENTIVE FOR AFFORDABLE HOUSING

Insertion of new Section 80EEA

Proposed Amendment

At present, Section 80EE provides for deduction of interest upto ₹ 50,000/- for acquisition of a residential property whose value does not exceed ₹ 50,000/-

In order to provide further impetus to the ‘Housing for all’ objective of the Government and to enable the home buyer to have low-cost funds at his disposal, the Finance Bill proposes to insert a new section 80EEA in the Act so as to provide a deduction to an individual assesse in respect of interest up to ₹ 1,50,000/- on loan taken for residential house property from any financial institution subject to the following conditions:

  1. loan has been sanctioned by a financial institution during the period beginning on the 1st April, 2019 to 31st March 2020.

  2. the stamp duty value of house property does not exceed forty-five lakh rupees;

  3. assessee does not own any residential house property on the date of sanction of loan. It is also proposed that where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year.

Though the finance Minister in her speech mentioned that the deduction u/s 80EEA will be over and above the deduction under section 24(b), there is no clarity about the same under Section 80EEA.

Effective From

This amendment will take effect from 1st April, 2020 and will accordingly apply in relation to assessment year 2020-21 and subsequent assessment years.

Amendment to Section 80IBA

Existing Provision

The existing provisions of the section 80-IBA of the Act, inter alia, provide that where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to certain conditions, be allowed, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business.

Proposed Amendment

With a view to align the definition of “affordable housing” under section 80-IBA with the definition under GST Act, it is proposed to amend the said section so as to modify certain conditions i.e conditions under clause (d) to (i) are substituted with new clause (d) to (i). The new conditions will be applicable to the housing project approved on or after 1st day of September, 2019.

The modified conditions are as under:

  1. the assessee shall be eligible for deduction under the section, in respect of a housing project if a residential unit in the housing project have carpet area not exceeding 60 square meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, 12 Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); and

  2. the stamp duty value of such residential unit in the housing project shall not exceed forty five lakh rupees;

Effective from

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years.

INCENTIVES TO NATIONAL PENSION SYSTEM (NPS) SUBSCRIBERS

With a view to benefit employees particularly of the Central Govt, the Finance Bill has Amended Section 10(12A), Section 80CCD and Section 80C to increase the ambit and scale of incentive.

Amendment to Section 10(12A)

Existing Provision

(i) Under the existing provisions of section 10(12A) of the Act, any payment from the NPS Trust to an assessee on closure of his account or on his opting out of the pension scheme referred to in Section 80CCD, to the extent it does not exceed forty per cent of the total amount payable to him at the time of such closure or on his opting out of the scheme, is exempt from tax.

Proposed Amendment

With a view to enable the pensioner to have more disposable funds, it is proposed to amend the said section so as to increase the said exemption from forty per cent to sixty per cent of the total amount payable to the person at the time of closure or his opting out of the scheme.

Effective From

This amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years.

Amendment to Section 80CCD

Existing Provision

Under the existing provisions of section 80CCD of the Income-tax Act, in respect of any contribution by the Central Government or any other employer to the account of the employee in a notified pension scheme, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government or any other employer, as does not exceed ten per cent of his salary in the previous year.

Proposed Amendment

The Central government has enhanced its contribution to employees account in the National pension Scheme from 10% to 14% as per Notification F No. 1/3/2016 dtd 31/1/2019.

Thus, in order to ensure that the Central Government employees get full deduction of the enhanced contribution, the finance bill proposes to increase the limit from ten to fourteen per cent. of contribution made by the Central Government to the account of its employee.

This amendment applies only to Central Government employees.

Effective From

This amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years.

Amendment to Section 80C

Proposed Amendment:

To enable the Central Government employees to have more options of tax saving investments under National Pension System, the Finance bill proposes to amend section 80C so as to provide that any amount paid or deposited by a Central Government employee as a contribution to his Tier-II account of the pension scheme shall be eligible for deduction under the said section.

Effective From

This amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-21 and subsequent assessment years.

INCENTIVES FOR START-UPS

Section 79 – Carry forward and Set off of Losses in case of certain companies. Existing Provision

Section 79 of the Income Tax Act provides conditions for carry forward and set off of losses in case of a company not being a company in which the public are substantially interested. Clause (a) of this section applies to all such companies, except an eligible start-up as referred to in section 80-IAC, while clause
(b) applies only to such eligible start-up.

Thus for Companies other than eligible start- ups, under clause (a) of Section 79, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, unless on the last day of the previous year, the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred.

As far as eligible start-ups are concerned, under clause (b) of Section 79, the loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, if :

  1. all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and

  2. such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated.

The clause (b) was inserted vide Finance Act, 2017 in order to facilitate ease of doing business and to promote start-up India.

Proposed Amendment

In-order to further facilitate ease of doing business in the case of an eligible start-up, the Finance Bill provides that loss incurred in any year prior to the previous year, in the case of closely held eligible start-up, shall be allowed to be carried forward and set off against the income of the previous year on satisfaction of either of the two conditions stipulated currently at clause (a) or clause (b). Thus, an eligible start up for carry forward and set-off of losses may satisfy in a particular year either of the following :

  1. on the last day of the previous year, the shares of the company carrying not

    less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred.

    Or

     

  2. (i) all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and

(ii) such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated.

This amendment will boost fresh investment in Start-ups.

For other closely held companies, there would be no change, and loss incurred in any year prior to the previous year shall be carried forward and set off only on satisfaction of condition currently provided at clause (a).

Effective From

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

Amendment of Section 54GB

Existing Provision

The existing provisions of the section 54GB of the Income-tax Act, inter alia, provide for roll over benefit in respect of capital gain arising from the transfer of a long-term capital asset, being a residential property owned by an eligible assesse i.e individual or HUF.

To be able to get benefit of this provision, the assessee is required to utilise the net consideration for subscription in the equity shares of an eligible company before the due date of filing of the return of income. Post subscription, the assessee is required to have more than fifty per cent share capital or more than fifty per cent voting rights in the eligible company. Further, the said section, puts restriction on transfer of assets acquired by the company for five years from the date of acquisition.

Currently the benefit of this section was only available for investment in the equity shares of eligible start-ups and that period also got over on 31st March 2019. Thus, at present no benefit is available for residential property transferred after 31st March 2019.

Proposed Amendment:

In order to incentivise investment in eligible start-ups, following amendments are proposed :

  1. extend the sun set date of transfer of residential property for investment in eligible start-ups from 31st March 2019 to 31st March 2021;

  2. relax the condition of minimum shareholding of fifty per cent of share capital or voting rights to twenty five per cent.

  3. relax the condition restricting transfer of new asset being computer or computer software from the current five years to three years.

Effective From

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

INCENTIVES FOR CATEGORY II ALTERNATIVE INVESTMENT FUND (AIF)

Amendment to Section 56(2)(viib)

Existing Provision

The existing provisions of the said section 56 of the Income-tax Act, inter alia, provide that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be charged to tax. However, exemption from this provision has been provided for the consideration for issue of shares received by a venture capital undertaking from a venture capital company or a venture capital fund or by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Currently the benefit of exemption is available to Category I AIF.

Proposed Amendment:

With a view to facilitate venture capital undertakings to receive funds from Category II AIF, it is proposed to amend the said section to extend this exemption to fund received by venture capital undertakings from Category II AIF as well.

Effective from

This amendment will take effect, from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

 

  1. After the Elections season in our great country the next most anticipated act of the Government was the appointment of the new cabinet of Ministers especially the new Finance Minister and the consequent budget proposal by the new Finance Minister. The new Government has taken certain bold steps in the present budget in order to move towards a more digitized financial economy. Some sections of the public are even hailing the budget as growth and infrastructure focused. One of the most peculiar features of the new budget is the introduction of a slew of amendments for promoting a digital less cash economy. In this section, we will highlight the direct tax proposals made in the new budget in respect of achieving the cherished goal of becoming an economy largely dependent on cashless transactions.

  2. It is a well known fact that over the past few years there have been a number of amendments to the Income Tax Act, 1961 (the Act for short) discouraging cash as a medium of transacting and promoting the use of banking facilities so as to make banking as an indispensable and integral part of business in the country. The said amendments have by and large been successful in deterring the indulgence in cash transactions though, they have their own limitations. The present budget seeks to overcome certain voids and vacuums created by those earlier amendments and thereby paving the way to a largely digitized financial economy.

  3. The most important amendment made in the present budget is by way of introducing amendments in various sections whereby the Central Board of Direct Taxes (CBDT or the Board) has been authorised to prescribe various other electronic modes of payment or receipt which shall be the permissible modes of effecting the transactions so as not to attract the rigours of certain specific anti abuse provisions. These amendments, it appears, are particularly directed at providing a fillip to startups by widening the available platform to various new players in digital payments sector for example various types of mobile wallets, mobile payment systems, unified payment interface (UPI), etc. These amendments apart from increasing the convenience of the assessees would also provide a larger business opportunity to various start- up companies in the digital payments sector said. In fact, the primary amendment to most of the sections which initially provided that only payments through account payee cheque or account payee bank draft or electronic clearing system would only save the assessee from the rigours of those specific anti abuse provisions has now being diluted by permitting receipts and payments through other prescribed electronic modes of payment. To start with clause (d) of the proviso to section 13A which earlier provided that any donation exceeding ₹ 2000/- was to be made only by way of an account pay cheque or an account payee bank draft or use of electronic clearance system or through electoral bond is now amended to include any other prescribed electronic modes of payment of donation to a political party so that a large section of public who have access to digital payments could be included as potential donors to a party fund. Likewise Section 35 AD, 40 A and 43 which initially provided only 3 modes viz. an account payee cheque, an account payee bank draft and use of ECS are now amended to include the other prescribed electronic modes of payment so as to prevent the rigours of disallowances in these sections for making payments in cash exceeding ₹ 10,000/-. Likewise, subsection (4) of section 43CA has also been amended to include receipt of consideration or a part thereof by way of other prescribed electronic modes
    of payment in order to avail benefit of sub-section (3) of section 43CA. Sub section 3 of section 43CA is aimed at toning down the rigours of that section by providing that where the date of agreement for transfer of asset and the date of registration are different then the stamp duty value as on the date of the agreement would be taken for the purpose of computing the full value of consideration as per section 43CA. This sub-section was [by virtue of sub- section (4) to section 43CA] subject to the initial consideration or part thereof being received by an account payee cheque, account payee bank draft or any other electronic clearing system of a bank account. Post amendment, any other prescribed electronic mode of receipt of the consideration has been included so as to enable an assessee to take the benefit os sub-section (3). Likewise, the proviso to section 44AD
    (1) has now been sought to be amended to include any other prescribed electronic modes of receipt which will be taxed at 6% instead of the usual 8% which treatment is similar to that initially given only to turnover or gross receipts received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account. Likewise even for the purpose of making payment to the employees in claiming accelerated deduction under section 80 JJ AA in respect of payment to new employees, the payment through other prescribed electronic modes has been included as a valid mode of payment of emoluments to new employees.

  4. Similar amendments have been made to sections 269 SS and 269 T whereby the board is empowered to make rules to prescribe any other electronic mode for accepting or repaying certain loans, deposits and any specified sum as per those sections. The amendments are welcome since with the advent of new modes of electronic payments, it was indeed a need of the hour since the said sections were interpreted far too literally by the judiciary, instead of looking at the basic purpose of the introduction of these section. A similar amendment has been made to section 269 ST whereby again the board is empowered to make rules to prescribe any other electronic mode of undertaking transactions. However, it needs specific mention that the expectation of certain sections of the assessees has not been met by this budget by toning down the rigours of this section in certain situations. For example in the case of hospitals the provisions of section 269 ST should have been or could have been completely done away with since many a times it is almost impossible to avoid paying the hospitals in cash and also complying with section 269ST. However, no specific amendment facilitating the above has been made in this budget.

  5. Another interesting amendment proposed in this budget is by way of insertion of a new section 269 SU whereby it has been proposed that every person carrying on business and having total sales, turnover or gross receipts exceeding ₹ 50 crores shall be required to provide a facility for accepting payments through prescribed electronic mode in addition to the facility for other existing electronic modes for accepting payments. A non compliance of this section is sought to be penalized by proposed new section 271 DB whereby failing to provide such a facility may attract a penalty of 5000 rupees for everyday during which such failure continues unless the failure is occasioned because of good and sufficient reasons.

  6. The budget has also proposed insertion of a new section 194N whereby withdrawal of an amount exceeding ₹ 1 Crore during the year from an account maintained with a banking company or a co-operative society or a post office shall attract Tax Deductions at Source (TDS) equal to 2% of the sum exceeding ₹ 1 Crore. The said TDS shall be treated as Income Tax. This proposed amendment is similar to the earlier Banking Cash Transaction Tax (BCTT) introduced in the Finance Act, 2005 with effect from June 1, 2005 which was ultimately withdrawn with effect from April 1, 2009 in the Finance Act, 2008. Though the BCTT was not liked by various sections of the public it appears to have been re-introduced by introduction of section 194N.

  7. This proposed insertion of section 194N appears to be aimed at controlling and reducing the amount of cash circulating in the economy and also keeping a track of very high value cash withdrawal transactions. However, as noble as the object of this provision may seem, it is a shift from the conventional levy of tax under the Income Tax Act on the income earned to taxing of the withdrawal of probably already taxed income. The provision appears to be adversarial in nature since it leads to further collection and recovery of tax in advance of certain incomes which may have already suffered tax. For example incomes credited in bank accounts net off TDS may again be taxed on withdrawal thereof. However, the area that raises greatest concern is once such a section is introduced it could be amended any number of times to a number less than ₹ 1 crore or increasing the rate of TDS thereon which may lead to a big squeeze in cash circulation in the economy. This, in my humble opinion may act as a deterrent to keeping the money in banks especially for the rural sector which largely depends on cash for i ts day to day business activities. Another aspect that needs to be seen is that the amount withdrawn may not necessarily be the income of the person withdrawing the amount but which may still be taxed on account of withdrawal which leaves ambiguity as to the person who could take credit of such TDS. Hence, suitable amendments in section 198, 199 and the Income Tax Rules are also expected in order to streamline the working of the said provision.

  8. The above mentioned measures are introduced to achieve the target of a highly digitized and less cash economy. To conclude the present budget is a mix of the growth and control oriented approach of the Government. While some provisions would really benefit a large section of public as well as start-ups, some failed to address the grievances of certain section of the public and some others may lead to the greater inconvenience to another section of the public.

Clause 7 – Amendment of section 12AA –Trusts –

Granting of Registration – sub-section (1) Section 12AA prescribes the procedure to be followed for granting registration of trust or institution, u/s 12A of the Act and withdrawal thereof.

The sub-section (1) deals with granting registration and authorises the Principal Commissioner or the Commissioner before whom the application is made, in Form 10A – Rule 17A, to:

  1. call for such documents or information as he thinks necessary, to satisfy himself about the genuineness of the objects of the trust, and make such inquiries, as he may deem necessary, in this behalf.

  2. after satisfying himself about the genuineness of objects, he is required to pass an order in writing, either granting the registration or refusing registration.

It is the general practice that the inquiries were made even on aspects other than the mandated ones. The courts have time and again held that at the stage of granting registration, the inquiry has to be restricted to genuineness of the objects of the trust only and that the trust or institution exits for charitable purpose only.

The application for registration is to be disposed off within a period of six months from the end of the month in which the application is made.

Sub-section (1) is sought to be substituted by a new sub-section(1) authorising the Principal Commissionr or Commissioner, to also satisfy himself the compliance of such requirements of any other law, as are required for the purpose of achieving the objects, besides calling for the documents or information about geninueness of the objects.

Compliance of conditions of any other law may generally take place after the period of six months of making the application. How would this requirement be complied with would be a subject of debate and litigation in future.

Cancellation of Registration – sub- section (4)

If the Principal Commissioner or the Commissioner, notices that a trust or institution, which has been granted registration, carries out its activities in a manner that section 13(1) gets attracted and exemption u/s 11 and 12 are denied, the registration granted u/s 12A can be cancelled.

Sub-section (4) is sought to be substituted by a new sub-section (4) authorising the Principal Commissionr or Commissioner, to cancel registration, besides on the grounds of being covered u/s 13(1), also on the ground of non compliance of any other law, and any other order, direction or decree which is not disputed.

This is bound to create disputes as finality of non compliance of any other law may take substantially long time.

Clause 39 – Amendment of section 139 – Filing of Return of Income

Section 139 mandates that every company or a firm or any person other than a company or firm, whose total income exceeds the maximum amount which is not liable to tax, shall furnish the return of income by due date in the prescribed form and verified in the prescribed manner.

Through Provisos 1 to 6, persons other than a company or firm even though their income may not exceed the maximum amount not liable to tax, are also required to file the return of income, if they satisfy certain conditions.

Sixth proviso requires filing of return of income by persons whose income does not exceed the maximum amount not liable to tax after allowing deduction under section 10(38), 10A, 10B, 10BA or chapter VIA to file the return of income by the due date.

The scope of sixth proviso is sought to be extended to the persons who claim deduction under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB. The

persons in whose case, if the total income, before allowing deduction under the sections mentioned, exceeds the maximum amount not liable to tax, would also be required to file their return of income by the due date.

A new proviso is sought to be inserted, requiring certain persons other than a company or a firm, who is not required to file return of income on account of his total income does not exceed the maximum amount not chargeable to income-tax, also to file the return of income, by the due date, if the following conditions are satisfied:

  1. who deposits an amount or aggregate of amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank;

  2. has incurred expenditure on foreign travel exceeding two lakh rupees for himself or any other person;

  3. has incurred expenditure on consumption of electricity exceeding one lakh rupees;

  4. fulfils such other conditions as may be prescribed.

The amended section casts a responsibilty on assessees, who claim exemption from capital gains by reinvestment of capital gain or consideration received to file the return of income by due date. The category of persons, who satisfy the prescribed conditions, are also required to file the return of income by due date.

Clause 40 – Amendment of section 139A – PAN

Section 139A prescribes the category of persons who are required to apply for permanent account number and quote such number in the specified transactions.

Persons entering into specified transactions to apply for PAN

It has been observed by the government that in many cases persons enter into high value transactions like purchase of foreign currency or huge withdrawal from banks and such persons do not have PAN.

In order to keep an audit trail of such transactions and widening and deepening the tax base, the scope of sub-section (1) is being extended by providing a new clause (vi) which empowers the Board to prescribe the category of persons who enter into specified transaction, shall apply for PAN.

Wide power is being given to the Board to specify the nature of transactions, which would require PAN.

Inter-changeability of PAN & Aadhar

Sub-sections (5E), (6A) and (6B) are proposed to be inserted.

There may be instances where a person required to furnish or intimate or quote PAN has not been allotted PAN but holds Aadhar number.

It is proposed that Aadhar number can be quoted instead of PAN by a person who has not been allotted PAN. Such peson shall thereafter shall be allotted a PAN.

It is also proposed that a person who holds Aadhar number and the PAN is linked with Aadhar number, shall be at liberty to quote Aadhar number instead of PAN.

Duty has been cast upon the person receiving a document which requires PAN or Aadhar to be mentioned (in specified transactions), to ensurethat PAN or Aadhar is duly quoted. The PAN or Aadhar number shall be required to be authenticated in the prescribed manner.

The inter-changeability of PAN and Aadhar is a welcome step and would ease the carrying of transactions in many cases, especially for persons in rural area, who may not be holding PAN at the required point of time of executing the transaction.

Clause 41 – Amendment of section 139AA – Linking of PAN with Aadhar

Sub-section (2) of section 139AA mandates linking of PAN with Aadhar on or before specified date. Proviso to the sub-section states that failure to intimate the Aadhar number, would invalidate the PAN. The person might have used the PAN in respect of certain transactions during a period before the mandatory linking of Aadhar with PAN.

It is proposed that failure by the person to intimate Aadhar number shall result in making the PAN inoperative.

A show cause notice should be given to the person before it is made in-operative and proceedure for revival is desirable.

Clause 41 – Amendment of section 139AA – Linking of PAN with Aadhar

Section 195 of the Act mandates deduction of income tax at prescribed rates from payments made or credit given to non-residents. It keeps in check the possible loss of revenue as a result of tax liability in the hands of a foreign resident. This also obviates the difficulty in chasing such non-residents for recovery of their tax dues. The deduction is to be made on the gross amount.

The tax to be deducted u/s 195 may many a time exceed the tax liability in India. In order to provide for deducting only the appropriate amount of tax at source, sub-section (2) provides for making an application by the payer to the Assessing Officer to quantify the amount on which tax is decuctible or rate at which the same is deductible. Similarlry an application can be made by the payee, as per sub-section (3), for determinaion of appropriate amount of tax at source. Sub-section (7) authorises the Board to issue notification specifying the class of persons or cases who can apply to the Assessing Officer for determination of sum chargeable to tax and deduction of tax thereon. The applications are presently to be made in manual form.

Sub-section (2) & (7) are sought to be amended to provide for the application to be made to the Assessing Officer in prescribed form and manner, to determine the appropriate amount chargeable to tax and tax to be deducted. It is proposed that the applications shall be made in elctronic form
i.e online.

Making online application shall reduce the time for disposing the application as well as help the Department to collate the information in respect of assessees. Similar application to be made by the payee, as pse sub-section (3) should also be included, which seems to have been inadvertantly missed.