Income Tax department gets new tech tool to identify, kill duplicate PAN

After years of labour, the Income Tax department has finally got a new technology tool to check the menace of duplicate PAN cards which also allows the taxman to 'kill' the second one.

An ambitious electronic smart platform called the Income Tax Business Application-Permanent Account Number (ITBA-PAN) has been operationalised by the department which will help the taxman and PAN issuing intermediaries identify such duplicate numbers every time a new application for generation of the fresh IT department-issued unique identity reaches their portals.

"The department earlier used to check against duplicity of PAN in a manual fashion which was not foolproof but the new electronic system is very accurate," a senior official said.

In cases of old PAN cards, he said, however, the manual system has to go on.

"There are not many such cases in the old system. Those are being weeded out as and when information is obtained," he said.

The department, in order to ensure that no entity is able to evade tax by way of holding two PAN cards, has been trying for a number of years to find a smart tool to check the menace. There have been numerous instances in the past when while probing tax evasion and black money cases, investigators found duplicate PAN cards were used to perpetrate the economic fraud .

"The new process will help identification and surrender of duplicate PAN allotted to a person so that further use of the same duplicate PAN allotted to a PAN holder could be stopped," a recent communication, accessed by PTI, from the systems wing of the department said informing field offices of the department about the new technology upgrade.

The new system, upon finding on the ITBA-PAN platform that a duplicate PAN exists, will direct the taxman to inform applicants to approach their respective assessing officer and surrender the duplicate identity and, in case the applicant does not do so, the system will check the bonafides and automatically 'kill' the duplicate identity.

As per latest data, while there are over 24.37 crore PANs registered in the country, there are no accurate figures on the number of duplicate ones.
PAN is a ten-digit alphanumeric number issued in the form of a laminated card by the IT department to any person, firm or entity.

A clean and error free PAN database is the need of the hour for the department which is trying to bring more taxpayers in the tax net and also curb generation of black money.

Government had late last year made quoting PAN mandatory for several transactions, including purchase of jewellery above Rs 2 lakh, since the beginning of this year.

The effort to popularise the use of PAN in financial transactions, the CBDT had said, is "expected to be useful in widening the tax net by non-intrusive methods.

"They (new PAN rules) are also expected to help in curbing black money and move towards a cashless economy," the Central Board of Direct Taxes had said.


Read more at:
http://economictimes.indiatimes.com

RBI revises liquidity measuring rules for Basel III

The Reserve Bank has revised certain rules on measuring liquidity for Basel III norms, providing exemption to branches of foreign banks from submitting statement with regard to foreign currency.

In view of developments since the issue of circulars regarding Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards, feedback received from the stakeholders and experience gained, it has been decided to amend certain provisions of these guidelines, RBI said in a notification.
The revision also includes asking banks to exclude certain loans backed by deposits from liquidity coverage ratio calculations.

As branches of foreign banks do not hold any foreign currency, they are exempted from submitting this statement with effect from the date of this circular, the revised guidelines said.

All banks in India, including branches of foreign banks are required to report this on a monthly basis, as per the existing norms.

The revised guidelines comes into effect from February 1, 2016.
Read more at:
http://economictimes.indiatimes.com

Enabling of Filing of Form 15G/15H for rental payments

The provision of sub-section 194-I of the Act, inter alia, provides for tax deduction at source (TDS) for payments in the nature of rent beyond a threshold limit. The existing provisions provide threshold of Rs. 1,80,000 per financial year for deduction of tax under this section. In spite of providing higher threshold for deduction tax under this section, there may be cases where the tax payable on recipient’s total income, including rental payments , will be nil. The existing provisions of section 197A of the
Income-tax Act, inter alia provide that tax shall not be deducted, if the recipient of certain payments on which tax is deductible furnishes to the payer a self- declaration in prescribed Form.No. 15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. In order to reduce compliance burden in such cases, it is proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194-I also eligible for fi ling self- declaration in Form no 15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A.

This amendment will take effect from 1st June, 2016.

Rationalization of Section 50 C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property

Under the existing provisions contained in Section 50C, in case of transfer of a capital asset being land or building on both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. The Income Tax Simplification Committee (Easwar Committee) has in its first report, pointed out that this provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. when an immovable property is sold as a stock-in-trade.

It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration.

It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property.

These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.

Offshore funds can take advance ruling from CBDT from April 1

NEW DELHI: To provide an element of certainty to offshore fund managers, the revenue department today said such fund managers from April 1 can take prior ruling from CBDT on whether they are liable to pay tax in India.

In a statement, the Central Board of Direct Taxes (CBDT) said the rules for operationalisation of the provisions of Section 9A of the I-T Act have been inserted in the Income-tax Rules, 1961.

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

From April 1, 2016, the offshore funds will attract a special taxation regime under Section 9A, under which the fund management activity carried out through an eligible fund manager in India would not lead to the residence of the fund in India.

"This is a very important step as it will provide much certainty to offshore funds while at the same time remove any discretion and tax adventurism by tax officers," Nangia & Co Partner Rahul Jain said.

Section 9A of the I-T Act facilitated location of fund managers of offshore funds in India without Indian tax implications subject to certain conditions mentioned in the said section.

The rules also say that even if a fund is not diversified during the first 18 months or at the time of closure, it can still avail of tax break.

Further, structures where the fund is owned by an institutional investor and not by broad-based investors directly will no longer be ineligible.

Also, even if the fund manager is paid an arm's length remuneration in 2 out of previous 4 years, the fund will not be disqualified.

The fund management industry has demanded some easing of the rules of Section 9A.

Deloitte Haskins & Sells LLP Partner Rajesh H Gandhi said "CBDT has also introduced an advance ruling mechanism where a fund can approach CBDT and get certainty on whether it will be eligible for the tax exemption".

These rules have been framed keeping in mind industry demand for removing some of the difficult conditions imposed in the 2015 proposals and could now encourage some of the funds to seriously look at setting up shop in India, Gandhi added.

According to EY Financial Services Tax Partner Tejas Desai, the guidelines provide some important clarifications in relation to the qualifying conditions for the fund-like manner of determining resident Indian ownership, permitting look-through approach in determining the number of investors and the like.

Girish Vanvari, National Head of Tax, KPMG in India said the rules clarify that the fund will not be able to own more than 26 per cent in an Indian entity to avail of the exemption.

"One can argue whether the requirement of owning 26 per cent or less in a company is adequate. All in all, a step in the right direction," Vanvari said.

Source: Economic TImes

Political, public outburst over Centre's move to slash PPF, NSS interest rates

NEW DELHI: The Centre's decision to slash the interest rates on public provident fund (PPF) from 8.7 per cent to 8.1 per cent has not gone down too well. Angry protests were seen across social media and within parties on Saturday, with many saying the move will create a big dent on small savings.

Congress spokesperson Randeep Singh Surjewala, in a statement, said: "It is a criminal breach of trust with hapless people who put their money in the custody of the government of India with the belief that they will not be cheated."

In case of PPF, the most popular scheme for middle-class savers, the reduction of 60 basis points (100 basis points equal a percentage point) is among the sharpest in nearly 15 years. Although the rates are to be reviewed every three months, if they remain unchanged during the next financial year, someone with Rs 5 lakh in his PPF account would face a hit of Rs 3,000 in 2016-17.

A reduction in rates on small savings is bad news for those with large balance in fixed deposits, especially senior citizens, as banks are now expected to follow government action with similar cuts.

For long, banks and RBI had urged the government to reduce small savings rates to ensure that banks cut deposit rates. This, in turn, will pave the way for lower lending rates and translate into lower EMIs in the coming months, should the banks decide to pass on the benefit. However, given that a two-three year fixed deposit (FD) with SBI fetches the highest rate of 7.5% a year, savings in PPF still remain more attractive, especially with tax benefits thrown in.

Though pressure had been building for several months, the government opted for a change from April, which is the annual date for reset. "It's normal practice for the last few years to change interest rates from April and we have followed that. The rates are linked to the yield on government securities and we have followed the same practice with a mark up for senior citizens, Sukanya Samridhi Scheme, PPF and NSC," economic affairs secretary Shaktikanta Das told reporters.

The interest rate for the national savings scheme was also reduced sharply from 8.5 per cent to 8.1 per cent, for Kisan Vikas Patra (KVP) from 8.7 per cent to 7.8 per cent and for five-year recurring deposit to 7.4 per cent from 8.4 per cent.

Even the girl child scheme Sukanya Samridhhi Account (SSA) was not spared. The cut: From 9.2 per cent to 8.6 per cent.

"The new rates will be effective from next fiscal (April 1, 2016). The interest will be calculated on quarterly basis," AK Chauhan, joint director in National Savings Institute (NSI), told IANS.

According to him, the main reason for the downward revision was the two year yield on government securities (G-Sec) had gone down.

The interest rates for various small savings schemes were recalculated with reference to the G-Sec yields of equivalent maturity for the period December 2015-February 2016, and based on it, rates on various schemes for 2016-17's first quarter have been notified.

Communist Party of India-Marxist (CPI-M) general secretary Sitaram Yechury hit out, tweeting: "Small savers are the backbone of our savings. With no social security net, they rely on such guaranteed returns."

Chauhan said the total corpus of all small savings scheme was around Rs.300,000 crore. The net accretion this year was around Rs.65,000 crore till January 31.

Earlier, the government had proposed a tax on 60 per cent of the PPF corpus on maturity if it was not invested in annuities - that is schemes that fetch periodic returns. Also proposed was a limit on monetary contributions of employers in provident fund to Rs.150,000 per annum for tax sops.

Both these were withdrawn. "Government's decision to cut PF interest rates is unfortunate.Why are they taking away one of the last avenues of savings in a depressed economy?" Congress leader Ahmed Patel tweeted.

Source: Economic TImes

How to update a minor's PAN card once he becomes adult

A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature.

Application
The applicant is required to fill up the "Request for new PAN card and/or changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab.

Information
The applicant must mention the existing PAN number in the application and check the 'photo mismatch' and 'signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs.

Documents
Identity and address proof in the form of a copy of the applicant's Aadhaar card, passport, voter ID or bank account statement should also be enclosed with the application form.

Fee
A fee of Rs 107 needs to be paid either through online banking or by credit/debit card. Alternatively, a demand draft of Rs 107 drawn in favour of NSDL-PAN must be enclosed with the application.

Process
Once the online form has been submitted, the applicant will receive an acknowledgement number. The completed application must be dispatched to the nearest NSDL or UTISL-approved centre.

Points to note
The applicant can find out the status of his application by quoting the acknowledgment number.

If necessary, the applicant can also make other changes to the PAN data (address or name correction, etc.) at the same time, by submitting the relevant documents.

The applicant should ensure that the proof of address, identity, etc. enclosed with the application is valid.

(The content on this page is courtesy Centre for Investment Education and Learning ( CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

Source: Economic TImes

OECD issues standardised e-format for info exchange on BEPS

LONDON: With India and other countries stepping up vigil against tax evasion, Paris-based OECD has prepared a standardised electronic format for information exchange to help tax authorities have a better understanding about the way multinational firms structure their operations.

The move is part of larger efforts, agreed upon by G-20 countries, including India, to clamp down on activities that leads to Base Erosion and Profit Shifting (BEPS).

The Organisation for Economic Cooperation and Development (OECD) today released its standardised electronic format for the exchange of Country-by-Country (CbC) reports between jurisdictions -- CbC XML Schema - along with the related user guide.

"CbC reports, to be electronically transmitted between competent authorities in accordance with the CbC XML Schema, will assist tax administrations in obtaining a complete understanding of the way in which Multinational Enterprises (MNEs) structure their operations," it said in a release.

Through this format, tax authorities would be annually provided key information on the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group.

"It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in," the release said.

CbC XML Schema is part of efforts to ensure the swift and efficient implementation of the BEPS measures, which was endorsed by the G-20 leaders as part of the final BEPS package in November 2015.

"First exchanges of CbC reports will start in 2018, with information on the year 2016. The country-by-country reporting template does not apply to groups with annual consolidated revenue in the immediately preceding fiscal year of less than 750 million euros," it noted.

The OECD/G20 BEPS Project seeks to ensure that profits are reported where economic activities are carried out and value created.

The overall aim is to close the gaps in existing international rules that allow corporate profits to disappear or be artificially shifted to low or no tax environments, where companies have little or no economic activity.

Information for the CbC report would be collected by the country of residence of the reporting entity for MNE group. Subsequently, the same would be exchanged under the relevant international exchange of information agreement, in particular the Multilateral Competent Authority Agreement on the Exchange of CbC reports in the format of the CbC XML Schema.

OECD said the CbC XML Schema has been primarily designed to be used for the automatic exchange of CbC reports between competent authorities.

In recent times, India and many other countries have strengthened their cooperation on tax matters as part of ways to prevent illicit fund flows.

Source: Economic TImes

Taxpayers told to file correct interest information

NEW DELHI: The revenue department has asked taxpayers to file correct details of interest income for the assessment year 2014-15 on or before March 31while filing their income tax returns (ITRs).

In a statement issued on Wednesday, the Central Board of Direct Taxes (CBDT) also asked the assessees to revise their ITRs for assessment years 2014-15 and 2015-16 if the returns filed did not include taxable interest income.

"Tax payers are advised to collect correct details of interest received or credited and file their return of income for assessment year 2014-15 (if not filed already) on or before March 31, 2016, in case their total income exceeds the maximum amount not chargeable to tax," CBDT said.

It asked assesses to file return of income for assessment year 2015-16, by including taxable interest income till March 31, if any, and avoid penalty under Section 271F. CBDT said interest income need to be filed even in cases where Form 15G/15H has been filed if the earning is not exempt under Section 10 of the Income-Tax Act and the total income of the person exceeds the maximum amount not chargeable to tax.

"Tax payers are advised to collect correct details of interest received or credited and revise their return of income for assessment year 2014-15/2015-16 if the return already filed does not include taxable interest income," CBDT said. It said Form 26AS reflects only those payments on which tax has been deducted.

Source: Economic TImes

I-T Department wants you to declare all interest income in your ITR

BENGALURU: In a circular released on Tuesday, the Central Board of Direct Taxes has warned the taxpayers who do not declare all their interest income in their ITRs to correct their ways. They have been asked to re-file and rectify their returns for FY 2013-14 onwards.

You'll have to declare even those interest incomes where Form 15 G/H have been filed and the total exceeds the maximum amount not chargeable to tax, that is, Rs 2.5 lakh. Only interest income up to Rs 10,000 exempted under Section 10 may be left out. The deadline for this is 31st March 2016. If missed, you will be liable to pay a Rs 5,000 penalty under avoid penalty Section 271F of the I-T Act.

While form 26AS reflects only those payments on which tax has been deducted, the department can track your other deposits and interest payments received without deduction of tax too via information received from banks and other financial institutions. "Information regarding interest earned by individuals and business entities on term deposit is filed with the Income Tax Department by banks including co-operative banks and other financial institutions and state treasuries, etc," said the circular.

In an online survey conducted by economictimes.com last August, 30% of the 2,168 respondentsbelieved that interest of up to Rs 10,000 from bank FDs is tax free in a year. However, as per the rules,the exemption under Section 80TTA is only for the interest on the savings bank accounts. What oneearns from on fixed deposits and recurring deposits is fully taxable. You also need to declare all those interest income where TDS has been deducted or you have filed Form 15 G/H.

Source: Economic TImes

Taxability of surplus on sale of shares and securities whether Capital Gains or Business Income - Instructions in order to reduce litigation

Taxability of surplus on sale of shares and securities whether Capital Gains or Business Income - Instructions in order to reduce litigation

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CIRCULARS

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Chidambaram offers son Karti's 'undisclosed assets' to govt for Re 1

Former finance minister P. Chidambaram has offered to give the government for Re 1 any undisclosed assets associated with his son Karti if it could come up with such a list.
“The allegation that he has undisclosed assets is preposterous, malicious and totally false,” Chidambaram said in a statement on Sunday, responding to allegations against his son.
“If the government is of the view that Karti Chidambaram has undisclosed assets, I would ask the government to make a list of such alleged undisclosed assets. Karti Chidambaram will voluntarily execute any document necessary to transfer those assets (allegedly undisclosed) to the government for a nominal consideration of Rupee 1. Let the government become the owner of the alleged undisclosed assets.”
Chidambaram asserted that Karti ran a legitimate business, apart from managing inherited property. The former minister said his son had been an income-tax assessee for many years and had regularly filed his returns, including a statement of assets and liabilities, every year.
“All his assets and liabilities have been duly disclosed in his tax returns. He has no undisclosed asset anywhere. He and his business are fully compliant with the laws and regulations of the income tax department and of all other regulatory authorities concerned. The allegation that he has undisclosed assets is preposterous, malicious and totally false.”
Chidambaram alleged that Karti was being targeted only because “he is my son and the real target is me”.
Stating that he understood the political motive behind the accusations, he said he had nothing but pity for those who made false accusations. “Ultimately, truth will prevail.”
The Centre has vowed a thorough probe into Karti’s alleged undisclosed assets after the issue was raised in Parliament by the AIADMK last week. Enforcement and IT officials had searched the offices of Karti and some business associates last year.
Refer: http://www.abplive.in/india-news

The Income Declaration Scheme, 2016

An opportunity is proposed to be provided to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totalling in all to forty-fi ve per cent of such undisclosed income declared.

The scheme is proposed to be brought into effect from 1st June 2016 and will remain open up to the date to be notifi ed by the Central Government in the official gazette. The scheme is proposed to be made applicable in respect of undisclosed income of any financial year upto 2015-16.

Tax is proposed to be charged at the rate of thirty per cent on the declared income as increased by surcharge at the rate of twenty five per cent of tax payable (to be called the Krishi Kalyan cess). A penalty at the rate of twenty five per cent of tax payable is also proposed to be levied on undisclosed income declared under the scheme.

It is proposed that following cases shall not be eligible for the scheme:

• where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C, or
• where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of the Act has not expired, or
•  where information is received under an agreement with foreign countries regarding such income,
• cases covered under the Black Money Act, 2015, or
• persons notified under Special Court Act, 1992, or
• cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988.

It is proposed that payment of tax, surcharge and penalty may be made on or before a date to be notified by the Central Government in the Official Gazette and non-payment up to the date so notified shall render the declaration made under the scheme void.

It is proposed to provide that declarations made under the scheme shall be exempt from wealth-tax in respect of assets specified in declaration. It is also proposed that no scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in respect of such declarations and immunity from prosecution under such Acts be provided. Immunity from the Benami Transactions (Prohibition) Act, 1988 is also proposed for such declarations subject to certain conditions.

It is proposed to provide that where a declaration under the scheme has been made by misrepresentation or suppression of facts, such declaration shall be treated as void.

It is also proposed that nothing contained in the Scheme shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under this Scheme. In cases where any declaration has been made but no tax and penalty referred to the scheme has been paid within the time specified, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made.

In cases where any income has accrued, arisen or received or any asset has been acquired out of such income prior to commencement of this Scheme, and no declaration in respect of such income is made under the Scheme such income shall be deemed to have accrued, arisen or received, or the value of the asset acquired out of such income shall be deemed to have been acquired or made, in the year in which a notice under section 142, section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly.

It is further proposed that if any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty by an order not after the expiry of a period of two years from the date on which the provisions of this Scheme come into force and such order be laid before each House of Parliament.

It is proposed that the Central Board of Direct Taxes under the control of Central Government be provided the power to make rules, by notification in the Official Gazette, for carrying out the provisions of this Scheme and such rules made be laid before each House of Parliament in the manner provided in the scheme.

FM rolls back Budget proposal to tax EPF

Finance Minister Arun Jaitley today said the government will roll back its Budget proposal that sought to levy tax on withdrawal of funds from Employee Provident Fund (EPF).

The move, he said, was taken in keeping with feedback recieved after the move's announcement. The proposal had led to a furore amongst salaried class and was termed as regressive by many.

Speaking in the Parliament, FM Jaitley today said he would withdraw proposals mentioned in points 138 and 139 of the Budget speech.

Point no 138 had mentioned: "In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40 percent of corpus to be tax free will apply in respect of corpus created out of contributions made after 1.4.2016."

Read more at: http://www.moneycontrol.com

Revised timeline for verification of arrear demand under section 245

F.No.312/109/2015-OT
Government of India
Ministry of Finance
Central Board of Direct Taxes (CBDT)
New Delhi, Dated 7th March, 2016

Office Memorandum
Sub: Revised timeline for verification of arrear demand under section 245 of the Income-tax Act, 1961.
Reference is invited to Office Memorandum of even number dated 29.01.2016 vide which the procedure to be followed in cases where notice u/s 245 has been issued for returns to be processed during FY 2015-16 was specified by the Board. It was prescribed in the O.M. under reference that-

a) In cases where that tax payer has contested the demand, CPC would issue a reminder to the assessing officer about the contention of the taxpayer, asking him to either confirm, or make appropriate changes to the demand within thirty days. In case no response is received from the AO within thirty days, CPC would issue the refund without any adjustment. The responsibility of non-adjustment of refund against outstanding arrears, if any, would lie with the assessing officer,

b) In cases where there is no response from the taxpayer, CPC would issue a reminder to the taxpayer, asking him to either agree or disagree with the demand and submit response on the e-filling portal within thirty in case no response is received from the taxpayer within thirty days, CPC would adjust the demand and issue the balance refund, if any, to the taxpayer.

2. In view of the large volume of pending refunds which are subject to proceedings u/s 245 and the timeline of 30 days for responding to the notice allowed to the assessee and the same time period allowed to the assessing officer to confirm/ correct the demand, it is taking too long for the demand to be verified and the refunds to be issued, leading to rise of grievances.

3. With a view to clear the pendency of refunds which are subject to verification under section 245, it has been decided that the timeline of 30 days for the assessee and the assessing officer specified in the O.M. dated 29.01.2016 may be reduced to 15 days with regard to the notices under section 245 to be issued in the balance period of the current financial year. This is a one-time measure to clear the backlog of refunds and accordingly the reduced timeline of 15 days shall be valid only till 31.03.2016.

4. This issues with the approval of Chairman, CBDT.

(Salil Mishra)
Director (OT/WT)
Tele fax:- 011-24101573

CBEC revises service tax return Form ST-3

SERVICE TAX (SECOND AMENDMENT) RULES, 2016 - AMENDMENT IN FORM ST-3

NOTIFICATION NO.20/2016-ST, DATED 8-3-2016

In exercise of the powers conferred by sub-sections (1) and (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:—

1. (1) These rules may be called the Service Tax (Second Amendment) Rules, 2016.

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

2. In the Service Tax Rules, 1994, in Form ST- 3,—

(i)

in Part B,—

(a)

in the Table "B1 FOR SERVICE PROVIDER", after serial number B1.21 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:—

	"B1.22	Swachh Bharat Cess payable based on entries in serial number B1.15
	B1.23	Swachh Bharat Cess payable based on entries in serial number B1.16
	B1.24	Total Swachh Bharat Cess payable B1.24 = B1.22+B1.23"

(b)

in the Table "B2 FOR SERVICE RECEIVER", after serial number B2.21 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:—

	"B2.22	Swachh Bharat Cess payable based on entries in serial number B2.15
	B2.23	Swachh Bharat Cess payable based on entries in serial number B2.16
	B2.24	Total Swachh Bharat Cess payable B2.24 = B2.22 +B2.23"

(ii)

in Part C, in the Table, after serial number C1 and the entries relating thereto, the following serial number and entries shall be inserted, namely:—

"C 1.1

Swachh Bharat Cess deposited in advance

(iii)		after Part D, after the Table "SERVICE TAX PAID IN CASH AND THROUGH CENVAT CREDIT", the following shall be inserted, namely:—
		"PART DA- SWACHH BHARAT CESS (SBC) PAID IN CASH AND THROUGH ADJUSTMENTS

		Month/Quarter	Apr/ Oct	May/ Nov	Jun/ Dec	July/ Jan	Aug/ Feb	Sep/ Mar
	DA1	Swachh Bharat Cess paid in cash
	DA2	By adjustment of amount paid as SBC in advance under rule 6(1 A) of the Service Tax Rules, 1994
	DA3	By adjustment of excess amount paid earlier as SBC and adjusted, by taking credit of such excess SBC paid, in this period under rule 6(3) of the Service Tax Rules, 1994
	DA4	By adjustment of excess amount paid earlier as SBC and adjusted in this period under rule 6(4A) of the Service Tax Rules, 1994
	DA5	By book adjustment in the case of specified Government Departments
	DA6	Total Swachh Bharat Cess paid DA6="DA1" +DA2+DA3+D A4+D A5

(iv)

in Part G, in the Table "ARREARS, INTEREST, PENALTY, ANY OTHER AMOUNT ETC PAID", after serial number G12 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:—

	"G13	Arrears of Swachh Bharat Cess paid in cash
	G14	Interest on SBC paid in cash
	G15	Penalty on SBC paid in cash
	G16	Total payment of arrears, interest, penalty on Swachh Bharat Cess G16="G13+G14+G15""

(v)

in PART H,-

(a)		for Table heading "H1 DETAILS OF CHALLAN (vide which service tax, education cess, secondary and higher education cess and other amounts have been paid in cash)", the following shall be substituted, namely:—
		"H1 DETAILS OF CHALLAN (vide which Service Tax,Swachh Bharat Cess, Education Cess, Secondary and Higher Education Cess and other amounts have been paid in cash)";
(b)		for Table Heading "H2 Source document details for payments made in advance/adjustment, for entries made at column D3, D4, D5, D6, D7; E3, E4, E5, E6, E7; F3,F4 F5,F6, F7; & G1 to G11", the following shall be substituted, namely:—
		"H2 Source document details for payments made in advance/adjustment, for entries made at column D3, D4, D5, D6, D7; DA1, DA2, DA3, DA4, DA5 ; E3, E4, E5, E6, E7; F3,F4, F5, F6, F7; and G1 to G11 and G13 to G15."

Tax on distributed income to shareholder.

The existing provisions of section 115QA of the Act provide for the levy of additional Income-tax @ 20% of the distributed income on account of buy back of unlisted shares by a company. The distributed income has been defined in the section to mean the consideration paid by the company on buy back of shares as reduced by the amount which was received by the company for issue of such shares. Buyback has been defined to mean the purchase of a company of its own shares in accordance
with the provisions of section 77A of the Companies Act, 1956.

Recently doubts have been raised regarding the effect of buybacks undertaken by the company under different provisions of the Companies Act, 1956 or the Companies Act, 2013 and applicability of provisions of section 115QA to such transactions. An issue has also been raised regarding lack of clarity in determination of consideration received by the company at the time of issue of shares being bought back by the company. There are situations where shares may have been issued by the company in tranches, for different considerations, at different point of time or may have been issued in lieu of existing shares of another company under amalgamation, merger or demerger.

For the purposes of section 115QA, it is the effect of buyback being in the nature of distribution of income which is relevant rather than particular provision of the law relating to companies under which it has been undertaken. Further, lack of clarity in the manner of determination of consideration received by the company would lead to avoidable disputes and also presents a tax arbitrage opportunity of scaling up of consideration particularly under a tax neutral business reorganisation followed by buyback of shares.

In order to provide clarity and remove any ambiguity on the above issues, it is proposed to amend section 115QA to provide that the provisions of this section shall apply to any buy back of unlisted share undertaken by the company in accordance with the provisions of the law relating to the Companies and not necessarily restricted to section 77A of the Companies Act, 1956. It is further proposed to provide that for the purpose of computing distributed income, the amount received by the Company in respect of the shares being bought back shall be determined in the prescribed manner. The rules would thereafter be framed to provide for manner of determination of the amount in various circumstances including shares being issued under tax neutral reorganisations and in different tranches.

The amendment will take effect from 1st June, 2016.

Widening of Tax Base -Tax Collection at Source (TCS) on sale of vehicles; goods or services

The existing provision of section 206C of the Act, inter alia, provides that the seller shall collect tax at source at specified rate from the buyer at the time of sale of specified items such as alcoholic liquor for human consumption, tendu leaves, scrap, mineral being coal or lignite or iron ore, bullion etc. in cash exceeding two lakh rupees.

In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of unaccounted money in the trading system and to bring high value transactions within the tax net, it is proposed to amend the aforesaid section to provide that the seller shall collect the tax at the rate of one per cent from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees and sale in cash of any goods (other than bullion and jewellery), or providing of any services (other than payments on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees.

It is also proposed to provide that the sub-section (1D) relating to TCS in relation to sale of any goods (other than bullion and jewellery) or services shall not apply to certain class of buyers who fulfil such conditions as may be prescribed.

This amendment will take effect from 1st June, 2016.

Payment of interest on refund

Section 244A inter alia provides that an assessee is entitled to interest on refund arising out of excess payment of advance tax, tax deducted or collected at source. It also provides that the period for which the interest is paid on such excess payment of tax begins from the 1st April of the assessment year and ends on the date on which refund is granted.

In order to ensure filing of return within the due date it is proposed to amend section 244A to provide that in cases where the return is filed after the due date, the period for grant of interest on refund may begin from the date of filing of return.

In the interest of fairness and equity, it is further proposed to provide that an assessee shall be eligible to interest on refund of self-assessment tax for the period beginning from the date of payment of tax or filing of return, whichever is later, to the date on which the refund is granted. For the purpose of determining the order of adjustment of payments received against the taxes due, the prepaid taxes i.e. the TDS, TCS and advance tax shall be adjusted first.

It is also proposed to provide that where a refund arises out of appeal effect being delayed beyond the time prescribed under sub-section (5) of section 153, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1) of section 244A, an additional interest on such refund amount calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted. It is clarified that in cases where extension is granted by the Principal Commissioner or Commissioner by invoking proviso to sub-section (5) of section 153, the period of additional interest, if any, shall begin from the expiry of such extended period.

These amendments will take effect from 1st day of June, 2016.

Rationalisation of advance tax payment schedule under section 211 and charging of interest under section 234C

As per the existing provisions of sub-section (1) of section 211, the advance tax payment schedule for a company is fifteen per cent, forty-five per cent, seventy-five per cent and hundred per cent of tax payable on the current income to be paid by 15th June, 15th September, 15th December and 15th March respectively. For other assessees, the advance tax payment schedule is thirty per cent, sixty per cent and hundred per cent of tax payable on current income to be paid by 15th September, 15th
December and 15th March respectively.

Based on the recommendations of Expenditure Management Commission clubbed with the fact that most of the advance tax is now paid electronically it is proposed to rationalise schedule for advance tax payment and prescribe the same advance tax schedule for all assessees other than an eligible assessee in respect of eligible business as referred to in section 44AD. The modifi cation in payment schedule will facilitate forecasting of revenue collections during a fi nancial year with greater accuracy.It is further proposed that an eligible assessee in respect of eligible business referred to in section 44AD opting for computation of profi ts or gains of business on presumptive basis, shall be required to pay advance tax of the whole amount in one instalment on or before the 15th March of the financial year.Consequential amendments are also proposed to be made to section 234C which provides for chargeability of interest for deferment of advance tax to bring it in sync with the amendments proposed in section 211.

It is also proposed that interest under section 234C shall not be chargeable in case of an assessee having income under the head “Profi ts and gains of business or profession” for the fi rst time, subject to fulfi llment of conditions specifi ed therein.

These amendments will take effect from 1st day of June, 2016.

AO is bound to follow CBDT’s circular even if CBDT’s interpretation is against legislative intent

There is no question of 'harmonious construction' of a CBDT Circular issued by the CBDT. At best, it is an external aid of construction of a provision in the Income-Tax Act. It is well settled that if a Circular issued by the Department favours an Assessee then it should be so done even where such interpretation goes contrary to the legislative intent. The contention of Revenue that the CBDT Circular 5 of 2010 has to be harmoniously construed with Section 201(3) of the Act to glean an intention to permit the Department to initiate cases four years earlier than 31st March, 2011.This contention cannot be accepted. The plain words in Circular "pending cases", in respect of which orders have to be passed in terms of the proviso to Section 201(3) before 31st March 2011" being favourable to the assessee must be given effect even if contrary to the legislative intent of the proviso to section 201(3)

Refer:[2016] 67 taxmann.com 124 (Delhi)

Rationalisation of time limit for assessment, reassessment and recomputation

The existing statutory time limit for completion of assessment proceedings is two years from the end of the assessment year in which the income was first assessable.

It is desirable that proceedings under the Act are fi nalised more expeditiously as digitisation of processes within the Department has enhanced its effi ciency in handling workload. In order to simplify the provisions of existing section 153 by retaining only those provisions that are relevant to the current provisions of the Act, section 153 is proposed to be substituted with the following changes in time limit from the existing time limits:
(i) the period, for completion of assessment under section 143 or section 144 be changed from existing two years to twenty-one months from the end of the assessment year in which the income was fi rst assessable;
(ii) the period for completion of assessment under section 147 be changed from existing one year to nine months from the end of the fi nancial year in which the notice under section 148 was served;
(iii) the period for completion of fresh assessment in pursuance of an order under section 254 or section 263 or section 264, setting aside or cancelling an assessment be changed from existing one year to nine months from the end of the fi nancial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, or the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner

It is further proposed to provide that the period for giving effect to an order, under sections 250 or 254 or 260 or 262 or 263 or 264 or an order of the Settlement Commission under sub-section (4) of section 245D, where effect can be given wholly or partly otherwise than by making a fresh assessment or reassessment shall be three months from the end of the month in which order is received or passed, as the case may be, by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. It is also proposed that in a case where it is not possible for the Assessing Offi cer to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such reasons in writing from the Assessing Officer, if satisfied, may allow additional time of six months to give effect to the said order. However, in respect of cases pending as on 1st June 2016, the time limit for passing
such order is proposed to be extended to 31.3.2017.

It is also proposed that where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Income-tax Act, then such assessment, reassessment or recomputation shall be made on or before the expiry of twelve months from the end of the month in which such order is received by the Principal Commissioner or Commissioner. However, for cases pending as on 1.6.2016, the time limit for taking requisite action is proposed to be 31.3.2017 or twelve months from the end of the month in which such order is received, whichever is later.

It is also proposed that where an assessment is made on a partner of the fi rm in consequence of an assessment made on the fi rm under section 147, such assessment be made on or before the expiry of twelve months from the end of the month in which the assessment order in the case of the fi rm is passed. However, for cases pending as on 1.6.2016, the time limit for taking requisite action is proposed to be 31.3.2017 or twelve months from the end of the end of the month in which order in case of firm is passed, whichever is later.

It is also proposed to make consequential changes in time limit for completion of assessment or reassessment by the Assessing Offi cer in accordance with the extension of time limit provided to the Transfer Pricing Offi cer in certain cases by amendment in sub-section (3A) to section 92CA.

The provisions of section 153 as they stood immediately before their amendment by the Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 1st day of June, 2016.

The amendment will take effect from 1st day of June, 2016.

Filing of return of Income

Existing provisions of sub-section (1) of section 139 provide that every person referred to therein shall file a return of income on or before the due date. The sixth proviso to the said section provides that every person, being an individual or Hindu undivided family or an association of person or a body of individual, whether incorporated or not or any artificial juridical person, if his total income or of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to provisions of section 10A or section 10B or section 10BA or Chapter VI-A, exceeds the maximum amount which is not chargeable to income tax shall be liable to furnish return on or before the due date.

Existing provision of sub-section (4) of section 139 provides that a person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

Sub-section (5) of the section 139 provides that if any person, having furnished the return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142 discovers any omission or any wrong statement therein, he may furnish a revised return at any time before one year from the end of the relevant assessment year or completion of assessment, whichever is earlier.

Clause (aa) of Explanation to sub-section (9) of the section 139 provides that a return of income shall be regarded as defective unless the self-assessment tax together with interest, if any, payable in accordance with the provisions of section 140A, has been paid on or before the date of furnishing of return.

In order to rationalise the time allowed for fi ling of returns, completion of proceedings, and realization of revenue without undue compliance burden on the taxpayer, and to promote the culture of compliance, it is proposed to amend the above provisions of the Act. 

It is proposed to amend the sixth proviso to sub-section (1) of the section 139 to include that if a person during the previous year earns income which is exempt under clause (38) of section 10 and income of such person without giving effect to the said clause of section 10 exceeds the maximum amount which is not chargeable to tax, shall also be liable to fi le return of income for the previous year within the due date.

It is also proposed to substitute sub-section (4) of the aforesaid section to provide that any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

It is also proposed to substitute sub-section (5) of the aforesaid section so as to provide that if any person, having furnished a return under sub-section (1) or under sub-section (4), or in a return furnished in response to notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment,
whichever is earlier.

It is also proposed to omit clause (aa) of the Explanation to sub-section (9) of aforesaid section to provide that a return which is otherwise valid would not be treated defective merely because self-assessment tax and interest payable in accordance with the provisions of section 140A has not been paid on or before the date of furnishing of the return.

These amendments will take effect from 1st day of April, 2017 and will, accordingly apply in relation to assessment year 2017-2018 and subsequent years.

No recovery from assessee where tax has been deducted but not deposited by deductor, CBDT reaffirms

SECTION 199 OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - CREDIT FOR TAX DEDUCTED - NON-DEPOSIT OF TAX DEDUCTED AT SOURCE BY THE DEDUCTOR - RECOVERY OF DEMAND AGAINST DEDUCTEE ASSESSEE

OFFICE MEMORANDUM F.NO.275/29/2014-IT(B), DATED 11-3-2016

Vide letter of even number dated 1-6-2015, the Board had issued directions to the field officers that in case of an assessee whose tax has been deducted at source but not deposited to the Government's account by the deductor, the deductee assessee shall not be called upon to pay the demand to the extent tax has been deducted from his income. It was further specified that section 205 of the Income-tax Act, 1961 puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch in such situations cannot be enforced coercively.

2. However, instances have come to the notice of the Board that these directions are not being strictly followed by the field officers.

3. In view of the above, the Board hereby reiterates the instructions contained in its letter dated 1-6-2015 and directs the assessing officers not to enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor. These instructions may be brought to the notice of all assessing officers in your Region for compliance.

This issues with the approval of Member (Revenue &TPS).

Refer:Taxmann.com