In the historic Budget-2021, the Honourable Finance Minister has addressed number of issues which loom large from a very detailed narrative Memorandum of 79 pages. Here is an attempt to deal with some of the provisions assigned to me.

Section-43CA – Clause-10 of the Finance Bill, 2021 (relating to safe harbour)

As per proposed amendment to section 43CA, safe-harbour limit of 10% of consideration is proposed to be raised to 20% of the transfer consideration. In the Press-release (part of Aatma Nirbhar Bharat Package 3.0 dated 13th Nov 2020), CBDT has declared intent to make legislative amendment to this effect. The said promise has been given effect to now. The increased limit of 20% is extended for providing boost to pursuit of liquidating unsold inventory of the developers. Clear intent is to give a impetus to quick sale / transfer of flats from the unsold inventory. This is indeed a welcome measure considering the slow-down in the realty sector at present. It is relevant to note, no parallel amendment in made in section 50-C of the ITA, 1961. Further, four cumulative conditions are injected i.e.

  • Eligibility to only “residential unit”

  • Period of transfer is between 12th Nov 2020 till 30th June 2021

  • Coverage of only “first time allotment” and

  • Consideration being less than ₹ 2 CR

As such, intent is clear that, the said safe-harbour limit of 20% is only for developers or those assesses for whom, sale of residential units is a business. Though a welcome provisions, some issues of concern also creep in.

Issue-1 – A buyer may book the flat today, but transfer may happen after 30th June 2021 (due to say, loan getting delayed or legal compliances result into consumption of crucial time, etc.). In such cases, though, intent of the amendment gets fulfilled, procedure of satisfaction of all conditions in a cumulative manner remains unfulfilled. uncertainty remains at the end, as to availability of the safe-harbour limit of 20%.

Issue-2 – Though not expressly retrospective, whether, this amendment will act retroactive. For example, assume a case where, a residential unit was allotted in (say) year 2018 where, difference between stamp duty value and consideration was (say) 18% and the said residential unit gets transferred in the above referred period (i.e. between Nov-20 to June-21). In such cases, conditions will get fulfilled, though the intent not, to which, a tax officer may object.

Issue-3 – If intent of the Government is to extend boost to liquidation of inventory of unsold residential units, can such endeavour be assumed to be expressly not existing in the legislative thinking at all? One can note the relaxation given in taxation of notional income on unsold residential units in section 23 of the ITA, 1961. Initially, this relaxation was for one year from getting completion certificate, which was extended to two years. The said relaxation was considering business exigencies. A business exigency is to be understood as some hardship / constraint, etc. As such, Legislature appears compassionate to the cases of unsold inventory of developers. Assuming that the intents of removal of hardship of realty developers exists, present amendment, though effective for transfers between 12th Nov 2020 to 30th June 2021; could be argued to be going retrospective in cases, where, present conditions match on a cumulative basis.

Section 44AB – Clause 11 of Finance Bill 2021 (relating to tax audit)

As per the proposed amendment, the tax audit threshold limit of “sales / turnover / receipts” is extended from ₹ 5 Cr to ₹ 10 CR of annual sales / turnover. Vide Budget-2020, the threshold tax audit was extended from ₹ 1 Cr to ₹ 5 Cr. It is relevant to note the thinking behind i.e. giving of a fillip to non-cash transactions. As tax audit is dispended with in all such cases, burden will start mounting on the assesses as regards accuracy or otherwise of the mentions in tax Returns, since, audit typically aims to settle inaccuracies and mistakes. If an assessee, having eligible turnover of ₹ 8 Cr for AY 2021-22, and having availed tax audit compliance already, will find himself in some uncomfortable situation. Some other cases of relaxation may also emerge for present AY 2021-22. Despite resolve of the present Government not to endeavour in retrospective amendment, present amendment is retrospective of present year.

Section 44ADA Clause 12 of Finance Bill 2021 (presumptive taxation)

From the list of eligible professional assesses, who can opt for presumptive taxation scheme, LLPs have been conspicuously omitted from AY 2021-22. Earlier, any assessee, engaged into any prescribed profession was eligible for claiming benefit of presumptive taxation. It is learnt, some LLPs and other juridical persons have also claimed this benefit in past. This position is now clarified explicitly by permitting only individuals, HUFs and firms who can claim presumptive taxation regime under this section. LLPs have been removed from the said list of eligible assesses. For Income-tax purpose, an “LLP” is considered as a “firm”. This general analogy is changed for the purpose of this section. Reason for the same is stated as mandate under the respective LLP Act as regards maintenance of books of account. It appears, the endeavour of strict regulatory compliance with no adverse leverage under any other enactment is increasing. Indeed, we are entering into digital environment.

Section 142 – Clause 33 of Finance Bill 2021 (authority of enquiry)

As per present section 142, only the jurisdictional Assessing Officer can issue notice u/s 142 for making enquiries of any issue such AO deems appropriate. Considering the virtual dynamic faceless environment, this authority is to be assumed by various officers at the same time. Once the situation changes to faceless era, relevance of any particular AO is as it is lost. Above provision is only consequential.

Section 139 – Clause 32 of Finance Bill 2021 (due dates of returns)

In a lucidly explained Memorandum, the extended dates of filing of returns for such assesses, whose computation of income depends on some other assessee, are provided. At the same time, and despite COVID pandemic, resolve of the law-makers to enter the high-tech and speedy compliance era is clearly discerning from amendments made to section 139(4) for belated returns and 139(5) for revised returns. Earlier, time limits for both these actions were reduced to 12 months form end of the relevant previous year. Now, it is proposed to shorten this period of 12 months to 9 months. This is a welcome provision, though, likely to increase work-load at an early stage.

Section 153 – Clause 41 of Finance Bill 2021 (time limit to AO)

In the same spirit of shrinking the time periods for filing of belated returns / revised returns, the time available to the Assessing authorities has also been steadily reduced. As of present date, scrutiny selection notices for AY 2019-20 are yet to be received in many cases as the time limits stand extended due to COVID issues and related declarations. However, due date is 31/3/2021. Now, we are told that, assessments will be concluded within 9 months from end of assessment year. Earlier, the time available for assessments was 21 months, which was scaled down to 18 months and then to 12 months; and now, to 9 months. Next 2 years period is going to be extremely challenging for asessees and for the counsels and professionals. Consider the following last dates chart –

  1. AY 2018-19 – Last date for scrutiny assessment was 30/9/2020 (18 months rule) (Now, extended to 31/3/2021 due to COVID)

  2. AY 2019-20 – Last date for scrutiny assessment is 31/3/2021 (12 month rule)

  3. AY 2020-21 – Last date for scrutiny assessment will be 31/3/2022 (12 months rule)

  4. AY 2021-22 – Last date for scrutiny assessment will be 31/12/2022 (9 months rule)

Further, issues of regular returns, belated returns and revised returns are also certain to co-exist. Indeed, next 19-20 months are going to test the real metal of the professionals.

Section 194P – Clause 47 of Finance Bill 2021 (senior citizen)

An altogether new regime is promised to the senior citizen as regards filing of their returns. If conditions stipulated are satisfied, then, the specified bank of the specified senior citizen is to compute taxable income of such senior citizen and such senior citizens need not file tax return. This is indeed a welcome provision since, all efforts and responsibilities of compliances for the senior citizen, gets shifted to their specified banks. It appears, outsourcing of work in has reached the provisions of scrutiny assessment related sections too. Manner of declaration of information to be made by assesses is to be prescribed in the days to come. Once such compliances get concluded, the computation of income is to be the mandate of the specified bank. Albeit, specified banks may charge for the same as a service cost, etc.; but a new era is unfolding. Days are not too far, when, slowly, routine returns may also get outsourced to reputed entities and so on. Department officials can certainly focus their energies on serious aspects instead of getting vexed in passing routine scrutiny orders in large number of cases. For sake of completeness, procedure for challenges to such income computations needs to be provided, which is presently not available per se.


Never stop fighting until you arrive at your destined place – that is, the unique you. Have an aim in life, continuously acquire knowledge, work hard, and have the perseverance to realize the great life.

Dr. A. P. J. Abdul Kalam

Dear Members,

Hon’ble Finance Minister has presented Budget for the fiscal year 2021-22 on 1st February, 2021 in the back drop of the sever disruption of the economic activity across the globe. Hon’ble Finance Minister has presented a Budget which has been cheered by the markets as never before. She has based her proposals on the following six pillars:-

  1. Health and well-being,

  2. Physical financial capital & infrastructure,

  3. Inclusive development for aspirational India,

  4. Reinvigorating human capital,

  5. Innovation R & D,

  6. Minimum government and maximum governance.

The proposals have been appreciated and applauded by the experts. We, at AIFTP, also appreciate the same. However, we have some reservations with respect to certain proposals of the Finance Bill, 2021. Especially, those pertaining to the Income Tax Appellate Tribunal. A separate representation is being made to the Hon’ble Finance Minister under the able guidance of the seniors in the profession and Past Presidents of AIFTP. I am confident that the same will be considered by the Hon’ble Finance Minister favorably.

The Journal committee of the AIFTP has put in lots efforts to bring out the present special issue on the important proposals pertaining of Direct and Indirect Tax of the Finance Bill, 2021. I place on record my appreciation of the efforts of the Journal committee chairman Mr. Mitesh Kotecha and his team. I extend my special thanks to all the authors, who are experts in the respective fields, for giving their valuable time to the Journal of the AIFTP.

AIFTP (WZ) in association with local sister associations, hold a Virtual National Tax Conference on 17th & 18th February, 2021 on Zoom Platform. The said conference was inaugurated by Hon’ble Justice Shri P. P. Bhatt, President, Income Tax Appellate Tribunal and was well attended by the members.

Our next and first Physical National Tax Conference is scheduled to be held in Puri on 10th & 11th April, 2021 and will be hosted by Eastern Zone and due arrangements are being made to obtain the blessings of Lord Jaganath.

As decided in the NEC, we have restructure the Membership Fees to ₹ 2,500/- plus taxes upto 30th June, 2021. Hence, I would personally like to request the members to set up a target of Each One Get One that is every member is requested to enroll at least one member so that we have a better strength in our life membership.

We have come out with AIFTP Indirect Tax Journal. The said Journal is free of cost in hard copy to the members of AIFTP who opt for the hard copy by clicking the link on the website of AIFTP i.e. The said Journal would be circulated in soft copy through email and WhasApp to all Members.

Place: Eluru 
Dated: 18/02/2021 

M. Srinivasa Rao
National President, AIFTP

Reform not Change is the constant in the world in flux

The Hon’ble Prime Minister, in an addresses to the nation during the COVID-19 induced lockdown, mentioned that every crisis comes with an opportunity to transform ourselves. Hence, an effort was made by initiating reforms in different sectors. When the entire nation was still under lock down, a series of five restructuring phases were announced, providing stimulus package for economic relief to industries affected by COVID-19 pandemic. On 16th May 2020, the fourth announcement initiated reform measures in coal mining, mineral mining, power distribution, atomic energy, defense, civil aviation, space and social infrastructure sectors.

The Hon’ble Finance Minister has kept up the steam of reforms going on, in her budget proposals also. She has been appreciated by economists and fiscal policy experts for resisting the temptation to introduce new cess or levy to offset the strain caused on the exchequer due to the slide, in the global economy, caused by the pandemic and the halting of domestic economic activity. Her frank confession of not being able to contain the deficit and putting the same at 9.5% in a transparent manner is described as a courageous move. The stimulus, to trigger demand, as proposed through asset creation, is a very bold step in the right direction. The stress for health and infra, if implemented in right earnest, with in 3 or 4 years, down the line, lo and behold the face of the country may change.

Now, turning to the Finance Bill, 2021, I regret to say, it does not inspire similar positive vibes that the proposals of Budget 2021 do. Proposals of the Finance Bill, 2021 do carry the reform process to the direct and indirect tax legislations, but certain proposals disappoint us, professionals, as they may not be in the right spirit.

  1. The Temptation to unsettle law of the land, laid down by the Apex Court.

    Through Clause 7, 18 and 20 of the Finance Bill, 2021 the decision of the Supreme Court in the case of Smiff Securities Limited (2012) 348 ITR 302 (SC) is neutralized. The goodwill is not a depreciable asset. Again Clause 5 and 6 of the Finance Bill, 2021 reverse the law which had reached finality with the decision of the Apex Court in the case of CIT(E) v. Subros Educational Society (2018) 303 CTR 1 (SC).

  2. Not in the spirit to rationalization.

    The Clauses 8 and 9 of the Finance Bill, 2021 deal with the provisions of payment by employer of an employee’s contribution to a fund on or before the due date. There are contrary decisions of the High Courts. Bombay High Court in the cases CIT v. Hindustan Organics Chemicals Ltd (2014) 366 ITR 1 (Bom) and CIT v. Ghatge Patil Transports Ltd (2014) 368 ITR 749 (Bom) has taken view in favour of the assessee, whereas Gujarat High Court in the case of Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj) decided this issue in favour of the department. This issue is sub judice before the Apex Court. The proposed amendment is in the nature of a clarification; thus, it would be deemed to be construed as it has always existed. The disallowance in the hands of the employer assesse is permanent as the same is not covered by the provisions of section 43B of the Income tax Act,1961. The default may be due to reasons beyond the control of the assesse. The permanent nature of the disallowance, to say the least, is regressive.

  3. Faceless is Opaque – It won’t bring Transparency, Efficiency and Accountability.

    The Appellate Tribunal, being a court, inspires confidence among the citizens as it operates beyond the control of the Income tax department and the department is also a litigant, before it, like the assesse. From the inception of ITAT, i.e., since January, 1941, it was manned by persons of integrity and caliber to acquire the status of a nonpartisan judicial body, in which citizens of this country reposed faith. The Bench has produced many High Court and Supreme Court judges. It may not be out of place to mention that the Bar consisted of professionals, who appeared before it, with persons like the legendary Jurist N.A. Palkhivala in the yesteryears and now, the present stalwarts like Dr. Y.P. Trivedi, Mr. S.E. Dastoor, Mr. V.H. Patil, the list is long. The Income Tax Appellate Tribunal, whose orders are final with respect to the facts, is proposed to be made faceless vide Clause 78 of the Finance Bill, 2021 to ensure efficiency, transparency and accountability. The proposed amendment is not in the right direction because law pertaining to taxation is not Predictive Justice; also, facelessness does not always lead to transparency and accountability. Transparency and accountability cannot be sacrificed at the altar of the so called efficiency. Questions also arise as to the constitutional validity as these provisions are violative of the Fundamental Rights, enshrined in the Constitution. However, the bureaucracy may achieve what it wanted to do since long i.e., kill an independent judicial body called the Income Tax Appellate Tribunal.

In the introductory chapter of the book “The Post-American World”, published in the year 2008, the well-known author Mr. Fareed Zakaria , at page 2 observed “We are living through the third great power shift of the modern era. It could be called “the rise of the rest”. Over the past few decades, countries all over the world have been experiencing rates of economic growth that were once, unthinkable. While they had booms and bursts, the overall trend has been unambiguously upward. This growth has been most visible in Asia but is no longer confined to it.” In these lines, the reference to ‘Asia’ was China-centric in specific and in general, was a reference to the Far East countries; we as a nation, were part of the bandwagon by default and not by design. Now our leadership is conscious of the emerging new world order, post the covid-19 pandemic. The opportunity is before us; we should reform ourselves to grab it and be at the forefront of the fourth power shift. The word Reform should be substituted in the phrase “Change is the only constant in this world in flux.”

This issue of the journal carries articles of experts, in the field direct and indirect taxes, who have commented on the important provisions of the Finance Bill, 2021. I thank all the esteemed professionals for taking out time for the journal out of their busy schedule.

K. Gopal,