Professional Documents
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D. Income from house property
12. Extension of period for completion of construction from 3 24
years to 5 years, for claiming higher deduction of upto Rs.2
lakh in respect of interest on capital borrowed for
construction of self-occupied house property
13. Special provision for arrears of rent and unrealized rent 25A
received subsequently
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F. Capital Gains
24. Period of holding of unlisted shares to qualify as a long- 2(42A)
term capital asset to be reduced from “more than 36
months” to “more than 24 months”
25. Total value of assets of a private company or unlisted 47(xiiib)
company not to exceed Rs.5 crore in any of the three
preceding previous years for exemption of transfer of
capital asset or intangible asset on conversion of such
company into LLP
26. Transfer of units by unit holders on consolidation of plans 47(xix)
within a mutual fund scheme not to be regarded as transfer
27. Redemption by an individual of sovereign gold bonds 47(viic) & 48
issued by RBI not to constitute transfer for the purpose of
levy of capital gains tax
28. Cost of acquisition of asset, whose fair market value has 49(5)
been taken into account for the Income Declaration
Scheme, 2016
29. Stamp duty value on the date of agreement may be adopted 50C
as full value of consideration of immovable property, being
land or building or both, if whole or part of the consideration
has been paid by 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
30. Exemption of long-term capital gains on investment in 54EE
notified units of specified fund
31. Exemption of long-term capital gains on sale of residential 54GB
property, where net consideration on sale is invested in
shares of an eligible start-up
32. Long-term capital gains on shares of private companies to be 112(1)(c)
subject to concessional rate of tax@10% in the hands of non-
corporate non-residents and foreign companies
G. Income from Other Sources
33. Shares received by an individual or HUF as a consequence of 56(2)(vii)
demerger or amalgamation of a company or a business
reorganisation of a co-operative bank not to be subject to tax
by virtue of section 56(2)(vii)
H. Set-off and Carry Forward and Set-off of losses
34. Filing of return of loss on or before the due date under 80 & 139(3)
section 139(1) mandatory for carry forward of loss from
specified business under section 73A
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I. Deductions from Gross Total Income
35. Additional deduction for interest on loan borrowed for 80EE
acquisition of self-occupied house property by an individual
36. Monetary limit for deduction under section 80GG increased 80GG
37. Tax incentives for new start-ups 80-IAC
38. Deductions in respect of profits and gains from housing 80-IBA
projects
39. Phasing out of profit-linked incentives 80-IA, 80-IAB,
80-IB, 35AD
40. Deduction in respect of employment of new employees 80JJAA
J. Assessment of various entities
41. Concessional Taxation Regime for royalty income in 115BBF & 115JB
respect of patent developed and registered in India
42. Non-applicability of MAT in respect of certain foreign 115JB
companies
43. Tax incentives to International Financial Services Centres 10(38), 111A,
115JB & 115-O
44. Dividend distributed by SPV to business trust exempt from 115-O, 10(23FC),
levy of DDT 10(23FD),
115UA& 194LBA
45. Rationalisation of the definitions of “buyback” and
“distributed income” for the purpose of levy of additional 115QA
income-tax on income distributed by a company on
buyback of unlisted shares from a shareholder
46. New Taxation Regime for Securitisation Trusts 115TCA, 115TA,
115TC & 10(35A)
47. Tax on accreted income of certain trusts and institutions 115TD
K. Transfer Pricing and Other Provisions to check avoidance
of tax
48. Extension of time limit available to TPO for making an order 92CA(3A)
49. Furnishing of report in respect of international group in line 286, 92D, 271AA,
with BEPS action plan - Country-By-Country Report and 271GB & 273B
Master file
L. Taxation of E-Commerce Transactions
50. Equalisation levy Chapter VIII of
Finance Act,
2016, 10(50),
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40(a)(ib)
M. Income-tax Authorities
51. Time limit for calling in question jurisdiction of Assessing 124(3)
Officer where notice is served under section 153A(1) or
153C(2)
N. Assessment Procedure
52. Rationalisation of provisions relating to filing of return of 139
income
53. Scope of permissible adjustments while processing a return 143(1)(a)
expanded
54. Mandatory processing of return of income before issuance 143(1D)
of assessment order
55. Time limits for completion of assessment, reassessment 153
and recomputation revised
56. Time limit for completion of assessment under section 153A 153B
57. Deemed escapement of income on the basis information 147 & 133C
obtained by the Income-tax authorities
O. Appeals and Revision
58. Removal of reference to “Senior Vice President” 252
59. Provision for filing of appeal by the Assessing Officer 253
against the order of DRP done away with
60. Reduction in time limit for rectification of mistake apparent 254(2)
from the record by the Appellate Tribunal
61. Raising the total income limit of the cases that may be 255(3)
decided by single member bench of Appellate Tribunal
P. Penalties
62. Penalty leviable for under-reporting of income and mis- 270A, 119, 253,
reporting of income 271, 271A,
271AA, 271AAB,
273A & 279
63. Immunity from imposition of penalty and prosecution 270AA & 249
64. Time limit for passing an order for waiver of interest and 220(2A), 273A &
penalty 273AA
65. Levy of penalty at a flat rate of 60% on undisclosed
income, in search cases where assessee does not admit 271AAB(1)(c)
such income in the course of search nor discloses the
same in the return of income for the specified previous year
filed on or before the specified date
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66. Penalty for failure to comply with notice under section 142(1) 272A & 288
or 143(2) of failure to comply with a direction u/s 142(2A)
Q. Miscellaneous Provisions
67. Provision for bank guarantee in lieu of provisional 281B
attachment of property for protecting interests of the
revenue
68. Provision of legal framework for automated processing and 282A, 143(2) &
paperless assessment 2(23C)
R. Deduction, Collection & Recovery of Tax
69. Deduction of tax at source under section 194LBB at ‘rates 194LBB, 2(37) &
in force’ on income distributed by an Investment Fund to its 197
non-resident unit-holders and enabling provision for
obtaining certificate of nil deduction or lower deduction of
tax at source under section 197
70. Increase in threshold limits and reduction of rates for 192A, 194BB,
deduction of tax at source in respect of certain payments 194C, 194D,
[Chapter XVII-B] 194DA, 194EE,
194G, 194H,
194LA
71. Advance tax payment scheme to be the same for 211 & 234C
companies and other assessees
72. Interest on refunds 244A
73. Expansion of scope of TCS 206C
74. Requirement to furnish PAN for avoiding higher tax
deduction not to apply to non-corporate non-residents and 206AA
foreign companies subject to certain conditions
Note - In addition, significant notifications and circulars issued between the period 1.5.2015 and
30.4.2016 have been included under the respective chapters.
Students may note that certain amendments included in this Supplementary Study Paper –
2016, which are effective from A.Y.2018-19 or any subsequent assessment year, are not
relevant for May, 2017 and November, 2017 examinations.
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1
BASIC CONCEPTS
10
11
12
13
14
15
Note – The dividend and income referred to in section 115-O and 115R, respectively,
have to be first grossed up by applying the rates of tax mentioned in column (3) above.
Thereafter, the effective rates of tax under section 115-O and 115R mentioned in column
(4) above have to be applied on gross dividend/income to compute the additional
income-tax payable by domestic companies and mutual funds, respectively, under
section 115-O and 115R.
(B) Government grant or subsidy, for the purpose of the corpus of a trust or institution
established by the Central Government or State Government not to be included in the
definition of income [Section 2(24)]
Effective from: A.Y.2017-18
(i) The Central Government had, vide Notification dated 31.3.2015, in exercise of the
powers conferred under section 145(2), notified ten income computation and
disclosure standards (ICDSs) to be followed by all assessees, following the
mercantile system of accounting, for the purposes of computation of income
chargeable to income-tax under the head “Profit and gains of business or
profession” or “Income from other sources”.
(ii) ICDS VII deals with the treatment of government grants. It recognizes that
government grants are sometimes called by other names such as subsidies, cash
incentives, duty drawbacks etc.
(1) This ICDS requires Government grants relatable to depreciable fixed assets to
be reduced from actual cost/WDV.
(2) Where the Government grant is not directly relatable to the asset acquired,
then, a pro-rata reduction of the amount of grant should be made in the same
proportion as such asset bears to all assets with reference to which the
Government grant is so received.
16
17
` 5,000
(from
` 2,000 (upto A.Y.2017-18)
A.Y.2016-17)
18
(A) No income deemed to accrue or arise in India to a foreign mining company through or
from the activities which are confined to display of uncut and unassorted diamonds in
a Special Notified Zone [Explanation 1 to section 9(1)(i)]
Effective from: A.Y. 2016-17
(i) Scope of total income of a non-resident
The scope of total income of a non-resident is provided under section 5(2). It includes
all income which accrues or arises in India or which is deemed to accrue or arise in
India or is received or is deemed to be received in India.
(ii) Income accruing through business connection: Deemed to accrue or arise in
India
Section 9 provides circumstances under which income is deemed to accrue or arise in
India. As per section 9(1)(i), all income accruing, whether directly or indirectly, through
or from a business connection in India is deemed to accrue or arise in India.
(iii) Possible creation of business connection on account of display of rough
diamonds by foreign mining companies (FMCs) to India : A matter of concern for
FMCs
In order to ease shifting of operations by FMCs to India and to allow the trading of rough
diamonds in India by the leading diamond mining companies of the world, a “Special
Notified Zone” (SNZ) has been created. Since the activity of mere display of rough
diamonds even with no actual sale taking place in India may lead to creation of business
connection in India of the FMC, the probable tax consequence has been a matter of
concern for the mining companies contemplating to undertake these activities in India.
(iv) No income shall be deemed to accrue or arise in India from activities confined to
display of rough diamonds in SNZs: Insertion of new clause (e) in Explanation 1
to section 9(1)(i)
In order to facilitate the FMCs to undertake activity of display of uncut diamond (without
any sorting or sale) in the SNZ, clause (e) has been inserted in Explanation 1 to section
9(1)(i) to provide that in the case of a foreign company engaged in the business of
19
20
Yes Yes
The company
is a resident in
India for the
relevant P.Y.
21
22
23
24
SIGNIFICANT NOTIFICATIONS/CIRCULARS
1. Basis for determining the period of stay in India for an Indian citizen, being a
member of the crew of a foreign bound ship leaving India [Notification No. 70/2015,
dated 17.8.2015]
Section 6(1) of the Income-tax Act, 1961 provides that an individual is said to be resident
in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to 182 days or more; or
(b) having within the four years preceding that year been in India for a period or periods
amounting in all to 365 days or more, is in India for a period or periods amounting in
all to 60 days or more in that year.
25
26
Answer
In this case, the voyage is undertaken by an Indian ship engaged in the carriage of
passengers in international traffic, originating from a port in India (i.e., the Chennai port)
and having its destination at a port outside India (i.e., the Singapore port). Hence, the
voyage is an eligible voyage for the purposes of section 6(1). Therefore, the period
beginning from 6 th June, 2016 and ending on 9 th December, 2016, being the dates
entered into the Continuous Discharge Certificate in respect of joining the ship and
signing off from the ship by Mr. Anand, an Indian citizen who is a member of the crew of
the ship, has to be excluded for computing the period of his stay in India. Accordingly,
187 days [25+31+31+30+31+30+9] have to be excluded from the period of his stay in
India. Consequently, Mr. Anand’s period of stay in India during the P.Y.2016 -17 would
be 178 days [i.e., 365 days – 187 days]. Since his period of stay in India during the
P.Y.2016-17 is less than 182 days, he is a non-resident for A.Y.2017-18.
Note - Since the residential status of Mr. Anand is “non-resident” for A.Y.2017-18
consequent to his number of days of stay in P.Y.2016-17 being less than 182 days, his
period of stay in the earlier previous years become irrelevant.
27
(A) Exemption under section 10(34) not to apply to dividend chargeable to tax in
accordance with section 115BBDA
Effective from: A.Y.2017-18
(i) Section 10(34) exempts dividend received by a shareholder of a domestic company,
since the same is subject to dividend distribution tax (DDT) under section 115-O.
(ii) Under section 115-O, dividends distributed by a domestic company are subject to
tax@ 15% at the time of distribution in the hands of company declaring dividend.
This may result in vertical inequity amongst the tax payers since dividend distributed
to those shareholders (who receive high dividend) are subject to tax only at the rate
of 15% whereas had such income been taxable in their hands directly, the same
would have been subject to tax at the rate of 30%.
(iii) In order to remove this vertical inequity, section 115BBDA has been inserted to
provide that any income by way of aggregate dividend in excess of ` 10 lakh shall
be chargeable to tax in the case of an individual, Hindu undivided family (HUF) or a
firm who is resident in India, at the rate of 10%.
(iv) Further, the taxation of dividend income in excess ` 10 lakh shall be on gross basis
i.e., no deduction in respect of any expenditure or allowance or set -off of loss shall
be allowed to the assessee in computing the income by way of dividends.
(v) Accordingly, a proviso has been inserted in section 10(34) to provide that the
exemption available thereunder in respect of dividend received by a shareholder
from a domestic company would not apply to income by way of dividend chargeable
to tax under section 115BBDA.
Example
A Ltd., a domestic company, declared dividend of ` 170 lakh for the year F.Y.2015-16
and distributed the same on 10.7.2016. Mr. X, holding 10% shares in A Ltd., receives
dividend of ` 17 lakh in July, 2016. Mr. Y, holding 5% shares in A Ltd., receives dividend
of ` 8.50 lakh. Discuss the tax implications in the hands of A Ltd., Mr.X and Mr.Y,
28
29
30
31
(A) Extension of period for completion of construction from 3 years to 5 years, for
claiming higher deduction of upto ` 2 lakh in respect of interest on capital borrowed
for construction of self-occupied house property
Effective from: A.Y.2017-18
(i) Section 24(b) provides that interest payable on capital borrowed for acquisition or
construction of a house property shall be deducted while computing income from
house property.
(ii) In case of self-occupied house property, the annual value is Nil as per section 23(2).
(iii) However, a deduction of an amount of upto ` 2 lakh is allowed under section 24 in
respect of interest on capital borrowed on or after 1 st April, 1999 for acquisition or
construction of a house property for the purpose of self-occupation, where such
acquisition or construction is completed within three years from the end of the
financial year in which capital was borrowed.
(iv) Since housing projects are taking a longer time for completion, a higher deduction
of upto ` 2 lakh on account of interest paid on capital borrowed for acquisition or
construction of a self-occupied house property shall be available if the acquisition or
construction is completed within five years from the end of the financial year in
which capital was borrowed.
Time period for completion of construction (from the end of the financial year
in which capital was borrowed)
5 years
(from A.Y.2017-18)
3 years
(upto A.Y.2016-17)
32
Example
Mr. Anand sold his residential house property in March, 2016.
In June, 2016, he recovered rent of ` 10,000 from Mr. Gaurav, to whom he had let out
his house for two years from April 2010 to March 2012. He could not realise two months
rent of ` 20,000 from him and to that extent his actual rent was reduced while computing
income from house property for A.Y.2012-13.
Further, he had let out his property from April, 2012 to February, 2016 to Mr. Satish. In
April, 2014, he had increased the rent from ` 12,000 to ` 15,000 per month and the
same was a subject matter of dispute. In September, 2016, the matter was finally settled
and Mr. Anand received ` 69,000 as arrears of rent for the period April 2014 to February,
2016.
Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr.
Anand, and if so in which year?
33
34
35
36
Manufacture or
Manufacture or production of an article
production of an or thing
article or thing
Generation or Generation,
generation and transmission or
distribution of distribution of power
power
(C) Deduction under section 32AC to be available in the year of installation i n respect
of actual cost of new plant and machinery acquired in the P.Y.2015-16 and
P.Y.2016-17, if the actual cost of such new plant and machinery acquired in the
relevant previous year exceeds ` 25 crores, even if the new plant and machinery
has not been installed in the relevant previous year but has been installed on or
before 31.3.2017
Effective from: A.Y.2016-17
(i) Section 32AC(1A) provides for deduction@15% of actual cost of new plant and
machinery acquired and installed in a previous year by a company engaged in
manufacturing or production of any article or thing, if the actual cost exceeds ` 25
crore. However, for claim of deduction, the acquisition and installation had to be
done in the same previous year.
(ii) This tax benefit is available in respect of new plant and machinery acquired and
installed in the P.Y.2014-15, P.Y.2015-16 and P.Y.2016-17, provided the actual cost
of plant and machinery acquired and installed in the relevant previous year exceeds
` 25 crore.
(iii) The requirement of acquisition and installation in the year causes genuine hardship
in cases in which assets having been acquired could not be installed in same
previous year.
(iv) Therefore, section 32AC(1A) has been amended to provide that acquisition of the
plant and machinery, the actual cost of which exceeds ` 25 crore, has to be made
in the relevant previous year. However, installation may be made by 31.03.2017 in
order to avail the benefit of deduction of 15%.
37
38
39
40
41
42
(v) Consequences of failure to comply with the conditions after grant of deduction:
Where, in a previous year, any deduction has been claimed and granted to an
assessee and subsequently, there is failure to comply with any of the provisions of
this section, then –
(1) the deduction shall be deemed to have been wrongly allowed;
(2) the Assessing Officer may recompute the total income of the assessee for the
said previous year and make the necessary rectification. This is
notwithstanding anything contained in the Income-tax Act, 1961;
(3) the provisions under section 154 for rectification of mistake apparent from the
record would apply. The period of four years would be reckoned from the end
of the previous year in which the failure to comply with the prov isions of
section 154 takes place.
(F) Scope of section 35AD expanded to include the business of developing,
maintaining and operating a new infrastructure facility
Related amendment in section: 80-IA
43
44
(G) NBFCs eligible for claim of deduction for provision for bad and doubtful debts
[Section 36(1)(viia)]
Effective from: A.Y.2017-18
(i) Under sub-clause (c) of section 36(1)(viia), in computing the profits of public
financial institutions, State financial corporations and State industrial investment
corporations, deduction of an amount not exceeding 5% of total income, computed
before making any deduction under section 36(1)(viia) and Chapter VI-A, is allowed
in respect of any provision for bad and doubtful debt.
(ii) Since Non-Banking Financial Companies (NBFCs) are also engaged in financial
lending to different sectors of society, sub-clause (d) has been inserted in section
36(1)(viia) to provide deduction on account of provision for bad and doubtful debts
of an amount not exceeding 5% of total income (before making any deduction under
section 36(1)(viia) and Chapter VI-A) in the case of NBFCs also.
(iii) Meaning of “Non-Banking Financial Company” [Section 45-I (f) of the Reserve
Bank of India Act, 1934]:
(i) a financial institution which is a company
(ii) a non-banking institution which is a company and which has as its principal
business the receiving of deposits, under any scheme or arrangement or in
any other manner, or lending in any manner
(iii) such other non-banking institution or class of such institutions, as the Bank
may, with the previous approval of the Central Government and by
notification in the Official Gazette, specify.
(H) Sum payable to Indian Railways for use of railway assets allowable as deduction in
the year in which the liability to pay such sum is incurred, only if payment is made
on or before the due date of filing of return [Section 43B]
45
46
47
48
Eligible Assessees
(v) Under the scheme, the assessee will be deemed to have been allowed the
deductions under section 30 to 38. Accordingly, no further deduction under those
sections shall be allowed.
(vi) Further, the written down value of any asset used for the purpose of the profession
of the assessee will be deemed to have been calculated as if the assessee had
claimed and had actually been allowed the deduction in respect of depreciation for
the relevant assessment years.
(vii) The eligible assessee opting for presumptive taxation scheme will not be required to
keep and maintain books of account under section 44AA(1) and get the accounts
audited and furnish a report of such audit as required under section 44AB in respect
of such income unless the assessee claims that:
(a) the profits and gains from the aforesaid profession are lower than the profits
and gains deemed to be his income under section 44ADA(1); and
(b) his income exceeds the maximum amount which is not chargeable to income-tax.
(viii) Consequential amendment has been made in section 44AB requiring every person
carrying on profession to have his accounts audited by an accountant before the
specified date and furnish audit report by that date if such person has claimed lower
profits and gains than the deemed profits under section 44ADA and his income
exceeds the basic exemption limit.
SIGNIFICANT NOTIFICATIONS/CIRCULARS
49
50
51
52
53
54
55
56
57
58
Investment
of LTCG in
units of
specified
fund
Maximum
investment is
` 50 lakhs
59
60
Company engaged in
eligible business
61
1. Notification of Cost Inflation Index for Financial Year 2016-17 [Notification No.
42/2016, dated 2.6.2016]
Clause (v) of Explanation to section 48 defines "Cost Inflation Index", in relation to a previous
year, to mean such Index as the Central Government may, by notification in the Official
Gazette, specify in this behalf, having regard to 75% of average rise in the Consumer Price
Index (Urban) for the immediately preceding previous year to such previous year.
Accordingly, the Central Government has, in exercise of the powers conferred by clause
(v) of Explanation to section 48, specified the Cost Inflation Index for the financial year
2016-17 as 1125.
S. Financial Cost Inflation S. No. Financial Cost
No. Year Index Year Inflation
Index
1. 1981-82 100 19. 1999-2000 389
2. 1982-83 109 20. 2000-01 406
3. 1983-84 116 21. 2001-02 426
4. 1984-85 125 22. 2002-03 447
5. 1985-86 133 23. 2003-04 463
6. 1986-87 140 24. 2004-05 480
7. 1987-88 150 25. 2005-06 497
8. 1988-89 161 26. 2006-07 519
9. 1989-90 172 27. 2007-08 551
10. 1990-91 182 28. 2008-09 582
11. 1991-92 199 29. 2009-10 632
12. 1992-93 223 30. 2010-11 711
13. 1993-94 244 31. 2011-12 785
14. 1994-95 259 32. 2012-13 852
15. 1995-96 281 33. 2013-14 939
16. 1996-97 305 34. 2014-15 1024
17. 1997-98 331 35. 2015-16 1081
18. 1998-99 351 36. 2016-17 1125
62
63
64
65
(A) Filing of return of loss on or before the due date under section 139(1) mandatory
for carry forward of loss from specified business under section 73A [Section 80]
Related amendment in section: 139(3)
Effective from: A.Y.2016-17
(i) Under section 73A, any loss, computed in respect of any specified business referred
to in section 35AD shall not be set off except against profits and gains, if any, of any
other specified business. Such loss can, however, be carried forward indefinitely for
set-off against profits of the same or any another specified business.
(ii) Section 80 requires mandatory filing of return of loss under section 139(3) on or before
the due date specified under section 139(1) for carry forward of the following losses –
(1) Business loss under section 72(1)
(2) Speculation business loss under section 73(2)
(3) Loss under the head “Capital Gains” under section 74(1)
(4) Loss from the activity of owning and maintaining race horses under section
74A(3)
(iii) However, there was no such stipulation for carry forward of loss from specified
business under section 73A.
(iv) Accordingly, section 80 has been amended so as to provide that the loss
determined as per section 73A shall not be allowed to be carried forward and set off
if such loss has not been determined in pursuance of a return filed in accordance
with the provisions of section 139(3).
(v) Correspondingly, section 139(3) requiring filing of return of loss mandatorily within
the time allowed under section 139(1) for claiming carry forward of losses under
sections 72(1), 73(2), 74(1) and 74A(3) has been amended to include reference to
section 73A(2).
66
(A) Additional deduction for interest on loan borrowed for acquisition of self-occupied
house property by an individual [Section 80EE]
Effective from: A.Y.2017-18
(i) Under section 80EE, a deduction of upto ` 1 lakh in respect of interest paid on loan
by an individual for acquisition of a residential house property was allowed for
A.Y.2014-15 and A.Y.2015-16.
(ii) As a step towards achieving the Government’s aim of providing ‘housing for all’,
first-home buyers availing home loans are encouraged, by providing additional
deduction under section 80EE from A.Y.2017-18 in respect of interest on loan taken
by an individual for acquisition of residential house property from any financial
institution. The maximum deduction allowable is ` 50,000.
(iii) The conditions to be satisfied for availing this deduction are as follows –
Value of
house ≤
` 50 lakhs
The assessee
should not own
any residential Loan should be
house on the Conditions sanctioned
during the
date of
P.Y.2016-17
sanction of
loan
Loan
sanctioned
≤ ` 35
lakhs
67
Example
Mr. A purchased a residential house property for self-occupation at a cost of ` 45 lakh on
1.6.2016, in respect of which he took a housing loan of ` 35 lakh from Bank of
India@11% p.a. on the same date. Compute the eligible deduction in respect of interest
on housing loan for A.Y.2017-18 under the provisions of the Income-tax Act, 1961,
assuming that the entire loan was outstanding as on 31.3.2017 and he does not own any
other house property.
Answer
Particulars `
Interest deduction for A.Y.2017-18
(i) Deduction allowable while computing income under the head
“Income from house property”
Deduction under section 24(b) ` 3,20,833
[` 35,00,000 × 11% × 10/12]
Restricted to 2,00,000
68
` 5,000 p.m.
(from A.Y.2017-18)
` 2,000 p.m.
(upto A.Y.2016-17)
Example
Mr. Ganesh, a businessman, whose total income (before allowing deduction under
section 80GG) for A.Y.2017-18 is ` 4,60,000, paid house rent at ` 12,000 p.m. in
respect of residential accommodation occupied by him at Mumbai. Compute the
deduction allowable to him under section 80GG for A.Y.2017-18.
Solution
The deduction under section 80GG will be computed as follows:
(i) Actual rent paid less 10% of total income
(10 4,60,000)
1,44,000 (-) = ` 98,000 (A)
100
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(vi) The provisions of this section, as they stood immediately prior to their amendment by
the Finance Act, 2016, shall apply to an assessee eligible to claim any deduction for
A.Y.2016-17 or earlier assessment year.
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The regular employees participate in recognized provident fund while the casual
employees do not. Further, out of 75, 50 and 100 regular employees employed on
1.4.2016, 1.5.2016 and 1.9.2016, only 40, 30 and 60 qualify as a “workman” under the
Industrial Disputes Act, 1947.
Compute the deduction, if any, available to Mr. A for A.Y.2017-18, if the profits and gains
derived from manufacture of computers that year is ` 75 lakhs and his total turnover is
2.16 crores.
Solution
Mr. A is eligible for deduction under section 80JJAA since he is subject to tax audit under
section 44AB for A.Y.2017-18, as his total turnover from business exceeds ` 1 crore and
he has employed “additional employees” during the P.Y.2016-17.
Additional employee cost = ` 24,000 × 12 × 75 [See Working Note below] =
` 2,16,00,000
Deduction under section 80JJAA = 30% of ` 2,16,00,000 = ` 64,80,000.
Working Note:
Number of additional employees
Particulars No. of workmen
Total number of employees employed during the year 350
Less: Casual employees employed on 1.8.2016 who do not 50
participate in recognized provident fund
Regular employees employed on 1.5.2016, since their total 125
monthly emoluments exceed Rs.25,000
Regular employees employed on 1.9.2016 since they have
been employed for less than 240 days in the P.Y.2016-17. _100 _275
Number of “additional employees” __75
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1. ‘Atal Pension Yojna’ notified under section 80CCD(1) [Notification No. 7/2016 dated
19-02-2016]
Section 80CCD(1) empowers the Central Government to notify a pension scheme,
contribution to which would qualify for deduction in the hands of an individual assessee.
Accordingly, in exercise of the powers conferred by section 80CCD(1), the Central
Government has notified the ‘Atal Pension Yojana (APY)’ as published in the Gazette of
India, Extraordinary, Part I, Section 1, vide number F. No. 16/1/2015-PR dated 16th
October, 2015 as a pension scheme, contribution to which would qualify for deduction
under section 80CCD in the hands of the individual.
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(A) Concessional Taxation Regime for royalty income in respect of patent developed
and registered in India [Section 115BBF]
Related amendment in section: 115JB
Effective from: A.Y.2017-18
(i) The Finance Act, 2016 has introduced a concessional taxation regime for royalty
income from patents for the purpose of promoting indigenous research and
development and making India a global hub for research and development.
(ii) The purpose of the concessional taxation regime is for encouraging entities to retain
and commercialise existing patents and for developing new innovative patented
products.
(iii) Further, this beneficial taxation regime will incentivise entities to locate the high-value jobs
associated with the development, manufacture and exploitation of patents in India.
(iv) The nexus approach has been recommended by the OECD under Action Plan 5 in
Base Erosion and Profit Shifting (BEPS) project. This approach requires attribution
and taxation of income arising from exploitation of Intellectual property (IP) in the
jurisdiction where substantial research and development (R & D) activities are
undertaken instead of the jurisdiction of legal ownership.
(v) Accordingly, new section 115BBF has been inserted to provide that where the total
income of the eligible assessee includes any income by way of royalty in respect of a
patent developed and registered in India, then such royalty shall be taxable at the rate of
10% (plus applicable surcharge and cess). For this purpose, developed means atleast
75% of the expenditure should be incurred in India by the eligible assessee for any
invention in respect of which patent is granted under the Patents Act, 1970.
(vi) No deduction for any expenditure or allowance in respect of such royalty income
shall be allowed under the Act.
(vii) The eligible assessee has to exercise the option for taxation of income by way of
royalty in respect of a patent developed and registered in India in accordance with
the provisions of section 115BBF in the prescribed manner, on or before the due
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92
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(10) The facility for the investors to obtain low or nil deduction of tax certificate would be
available; the investor can make an application to the Assessing Officer, and he
can, on an application made by the assessee in this behalf, issue a certificate
under section 197 in this behalf for no deduction of income-tax or deduction of
income-tax at a lower rate.
(G) Tax on accreted income of certain trusts and institutions [Chapter XII-EB]
Effective from: 1st June, 2016
(i) As per section 2(24), "income" includes any voluntary contribution received by a
charitable trust or institution or a fund.
(ii) Sections 11 and 12 provide exemption to trusts or institutions in respect of income
derived from property held under trust and voluntary contributions, subject to the
conditions stipulated thereunder.
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2 Where the benefit under sections 11 and 12 have been allowed to the trust or institution in respect of
any previous year or years beginning prior to the date from which the registration under section 12AA
became effective, then, the registration shall be deemed to have become effective fr om the first day of
the earliest previous year. Thus, registration under section 12AA shall include any registration
obtained under section 12A as it stood before its amendment by the Finance (No.2) Act, 1996.
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(2) Where the trust has the end of the previous year
modified its objects
and has not applied
for fresh registration
u/s 12AA
(3) Where the trust has the date on which –
modified its objects (a) the period for filing appeal
and has filed under section 253 against
application for fresh the order rejecting the
registration u/s 12AA, application expires an no
but the same was appeal has been filed by
rejected the trust or institution; or
(b) the order in any appeal,
confirming the cancellation
of the application, is
received by the trust or the
institution
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101
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103
(1) Extension of time limit available to TPO for making an order [Section 92CA(3A)]
Effective from: 1st June, 2016
(i) As per section 92CA(3A), the Transfer Pricing Officer (TPO) has to pass his order
60 days prior to the date on which the limitation for making assessment expires.
(ii) In many cases, it becomes necessary to seek information from foreign jurisdictions
for the purpose of determining the arm's length price by the TPO. At times,
proceedings before the TPO may also be stayed by a court order.
(iii) Taking into consideration such cases, a proviso has been inserted in section
92CA(3A) to provide that where assessment proceedings are stayed by any court or
where a reference for exchange of information has been made by the competent
authority under an agreement referred to in section 90 or 90A, the time available to
the Transfer Pricing Officer for making an order after excluding the time for which
assessment proceedings were stayed or the time taken for receipt of information, as
the case may be, is less than 60 days, then such remaining period shall be
extended to 60 days.
(2) Furnishing of report in respect of international group in line with BEPS action plan
- Country-By-Country Report and Master file [New Section 286]
Related amendment in sections: 92D, 271AA, 271GB & 273B
Effective from: A.Y.2017-18
(i) Transfer Pricing provisions under the Income-tax Act, 1961:
Chapter X of the Income-tax Act, 1961 comprising sections 92 to 92F contain
provisions relating to transfer pricing regime.
Section 92D requires maintenance of prescribed information and document relating
to the international transaction and specified domestic transaction.
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(iv) Advantages of the three tier structure [as per BEPS Report]:
(1) Taxpayers will be required to articulate consistent transfer pricing positions;
(2) Tax administrations would get useful information to assess transfer pricing
risks;
(3) Tax administrations would be able to make determinations about where their
resources can most effectively be deployed, and, in the event audits are called
for, provide information to commence and target audit enquiries.
(v) Country-by-country Report : Reporting Requirements of MNEs
The Country-by-Country (CbC) report has to be submitted by parent entity of an
international group to the prescribed authority in its country of residence. This report
is to be based on consolidated financial statement of the group.
(1) MNEs have to report annually and for each tax jurisdiction in which they do
business:
(a) the amount of revenue;
(b) profit before income tax; and
(c) income tax paid and accrued.
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107
108
109
110
111
112
1. Transfer Pricing Rules amended to incorporate “range concept” and “use of multi-
year data” [Notification No. 83/2015, dated 19.10.2015]
Section 92C(2) provides that the arm’s length price (ALP) in relation to an international
transaction or specified domestic transaction has to be determined by applying the most
appropriate method.
As per the first proviso to section 92C(2), where more than one price is determined by
applying the most appropriate method, the ALP shall be taken to be the arithmetical
mean of such prices.
However, if the variation between the ALP so determined and the price at w hich the
international transaction or specified domestic transaction has actually been undertaken
does not exceed such percentage, not exceeding 3%, as may be notified by the Central
Government, the price at which the transaction has actually been undertak en would be
deemed to be the ALP.
In the year 2014, the Finance Minister, in his budget speech, had proposed to introduce
the “range concept” for determination of ALP, for aligning Transfer Pricing Regulations in
India with the best practices.
Accordingly, a third proviso was inserted in section 92C(2) to provide that in case of an
international transaction or specified domestic transaction undertaken on or after
1.4.2014, where more than one price is determined by the most appropriate method, the
ALP shall be computed in the prescribed manner (based on “range concept” to be
specified by way of Rules) and the computation methodology given in the first and
second proviso, based on arithmetic mean, shall be ignored.
The CBDT has, in exercise of the powers conferred by section 92C read with section 295
prescribed the manner of computation of arm’s length price applicable for international
transactions and specified domestic transactions undertaken on or after 1.4.2014.
Incorporation of “Range Concept” in Transfer Pricing Rules
In case of an international transaction or specified domestic transaction undertaken on or
after 1.4.2014, where more than one price is determined by the most appropriate method, the
arm’s length price shall be computed in the prescribed manner specified in Rule 10CA.
Rule 10CA(1) provides that where in respect of an international transaction or a specified
domestic transaction, the application of the most appropriate method referred to in section
92C(1) results in determination of more than one price, then, the arm’s length price in
respect of such international transaction or specified domestic transaction has to be
computed on the basis of the dataset constructed by placing such prices in an
ascending order as provided in Rule 10CA(2).
However, where the most appropriate method is the resale price method or cost plus
method or transactional net margin method and the comparable uncontrolled transaction
has been identified on the basis of data relating to the current year and the enterprise
undertaking the said uncontrolled transaction, [not being the enterprise undertaking the
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3 1% in respect of wholesale trading and 3% in respect of all other cases (for A.Y.2015-16) [Notification
No.86/2015 dated 29.10.2015]. Wholesale trading, for this purpose, means an international transaction or
specified domestic transaction of trading in goods, which fulfils the following conditions , namely:-
(i) purchase cost of finished goods is 80% or more of the total cost pertaining to such trading activities; and
(ii) average monthly closing inventory of such goods is 10% or less of sales pertaining to such trading activities.
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119
120
121
122
123
124
125
126
127
Section Provision
(1) 10(50) In order to avoid double taxation, new clause (50) has been
inserted in section 10 to exempt any income arising from
providing any specified service on or after the date on which the
provisions of Chapter VIII of the Finance Act, 2016 comes into
force, and chargeable to equalisation levy under that Chapter.
(2) 40(a)(ib) In order to ensure compliance with the provisions this Chapter,
clause (ib) has been inserted in section 40(a) to provide that if
any consideration is paid or payable to a non-resident for a
specified service on which equalisation levy is deductible, and
such levy has not been deducted or after deduction, has not
been paid on or before the due date under section 139(1), then,
such expenses incurred by the assessee towards consideration
for specified service shall not be allowed as deduction.
However, where in respect of such consideration, if the
equalisation levy has been deducted in any subsequent year or
has been deducted during the previous year but paid after the
due date specified under section 139(1), such sum shall be
allowed as deduction in computing the income of the previous
year in which such levy has been paid.
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(A) Time limit for calling in question jurisdiction of Assessing Officer where notice is
served under section 153A(1) or 153C(2) [Section 124(3)]
Effective from: 1 st June, 2016
(i) Section 124(3)(a) provides that no person shall be entitled to call in question the
jurisdiction of an Assessing Officer in a case where return is filed under section 139(1),
after the expiry of one month from the date on which he was served with a notice issued
under section 142(1) or section 143(2) or after the completion of the assessment,
whichever is earlier.
(ii) This provision does not, however, specifically refer to notices issued under section 153A
or section 153C which relate to assessment in cases where a search and seizure action
has been taken or cases connected to such cases.
(iii) Consequently, at the appellate stages, the jurisdiction of an Assessing Officer in such
cases have been called into question, inspite of the fact that order passed under section
153A or 153C has to be read with section 143(3).
(iv) For the purpose of conveying the real intent of law in such cases, clause(c) has been
inserted in section 124(3) to specifically provide that in cases where search is initiated
under section 132 or books of accounts, other documents or any assets are
requisitioned under section 132A, no person shall be entitled to call into question the
jurisdiction of an Assessing Officer after the expiry of one month from the date on
which he was served with a notice under section 153A(1) or section 153C(2) or
after the completion of the assessment, whichever is earlier.
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(iv) Thus, adjustments can be made on the basis of data available with the Department in
the form of audit report filed by the assessee, returns of earlier years of the assessee,
Form 26AS, Form 16, and Form 16A.
(v) However, before making any such adjustments, in the interest of natural justice, an
intimation has to be given to the assessee requiring him to respond to such
adjustments. Such intimation may be in writing or through electronic mode. The
response received, if any, has to be duly considered before effecting any adjustment.
However, if no response is received within 30 days of issue of such intimation, the
processing shall be carried out incorporating the adjustments.
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133
4 Principal Chief Commissioner (PCC) / Chief Commissioner (CC) / Principal Commissioner (PC) / Commissioner
of Income-tax (CIT).
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136
137
138
139
140
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(vi) However, where immediately after the exclusion of the aforesaid period, the period of
limitation referred to in section 153B(1)(a) and (b) available to the Assessing Officer
for making an order of assessment or reassessment, as the case may be, is less than
60 days, such remaining period shall be extended to 60 days. Consequently, the
aforesaid period of limitation shall be deemed to be extended accordingly.
(vii) Further, where the period available to the Transfer Pricing Officer is extended to 60
days in accordance with the proviso to section 92CA(3A) and the period of limitation
available to the Assessing Officer for making an order of assessment, reassessment
or recomputation, as the case may be, is less than 60 days, such remaining period
shall be extended to 60 days. Consequently, the aforesaid period of limitation shall
be deemed to be accordingly extended.
(F) Deemed escapement of income on the basis information obtained by the Income-tax
authorities [Section 147]
Related amendment is section: 133C
Effective from: 1st June, 2016
(i) Section 133C empowers the prescribed income-tax authority to issue notice calling for
information and documents for the purpose of verification of information in its
possession.
(ii) For the purpose of expediting verification and analysis of the information and documents
so received, sub-section (2) has been inserted in section 133C to provide that where
any information or document has been received in response to a notice issued under
section 133C(1), the prescribed income-tax authority may process such information or
document so obtained and make the outcome thereof available to the Assessing Officer,
for necessary action, if any.
(iii) Thus, this amendment provides sufficient legislative backing for processing of
information and documents so obtained and making the outcome thereof available to
the Assessing Officer for necessary action, if any.
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Since income is deemed to have escaped assessment in such cases, the Assessing
Officer can reopen the assessment on the basis of the information so received.
SIGNIFICANT NOTIFICATIONS/CIRCULARS
143
144
145
5 Section 158BC lays down the procedure for block assessment dealt with in Chapter XIV -B of the Income-tax Act,
1961, which applies where search is initiated under section 132 or books of account are requisitioned under
section 132A on or before 31.5.2003. Section 158BD provides that where the Assessing Officer is satisfied that
any undisclosed income belongs to any person, other than the person wi th respect to whom search is made under
section 132 or books of account are requisitioned under section 132A, then, the books of account, other
documents seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such
other person and that Assessing Officer shall proceed under section 158BC against such other person and the
provisions of Chapter XIV-B shall apply accordingly.
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147
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1. Revision of monetary limits for filing of appeals by the Department before Income
Tax Appellate Tribunal and High Courts and SLP before Supreme Court – A
significant measure for reducing litigation [Circular No. 21/2015, dated 10‐12‐2015]
The CBDT has, through this circular, revised the monetary limits for filing of appeals by
the Department with the objective of reducing litigation as a part of its initiatives to
reduce grievances of the tax payers.
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152
(A) Penalty leviable for under-reporting of income and mis-reporting of income [New
section 270A]
Related amendment in sections: 119, 253, 271, 271A, 271AA, 271AAB, 273A and 279
Effective from: A.Y.2017-18
(i) Section 271(1)(c) provides for penalty on account of concealment of particulars of
income or furnishing inaccurate particulars of income.
(ii) For the purpose of ensuring objectivity, certainty and clarity in the penalty
provisions, new section 270A has been inserted with effect from A.Y.2017-18
providing for levy of penalty in cases of under reporting and misreporting of income.
Consequently, the penal provisions under section 271 shall not apply in relation to
A.Y.2017-18 and onwards.
(iii) Section 270A(1) empowers the Assessing Officer, Commissioner (Appeals) or the
Principal Commissioner or Commissioner to direct levy of penalty, during the course
of proceedings under the Income-tax Act, 1961, if a person has under reported his
income. Such penalty shall be imposed by an order in writing by such authority.
(iv) Cases of under-reporting of income [Section 270A(2)]:
A person shall be considered to have under reported his income if, A>B in the cases
given hereunder – is greater than
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(ii) Where the amount added or deducted in the first preceding year is not
sufficient to cover the receipt, deposit or investment, the year immediately
preceding the first preceding year and so on.
(vii) Cases not included within the scope of under-reported income under section
270A [Section 270A(6)]:
Case Condition
(1) The amount of income in The Assessing Officer/CIT/PC/
respect of which the assessee Commissioner (Appeals) is satisfied that
offers an explanation the explanation is bona fide and all the
material facts have been disclosed to
substantiate the explanation.
(2) The amount of under-reported If the accounts are correct and complete
income determined on the to the satisfaction of the income-tax
basis of an estimate authority but the method employed is
such that the income cannot properly be
deduced therefrom
(3) The amount of under-reported If the assessee has, on his own,
income determined on the estimated a lower amount of addition or
basis of an estimate disallowance on the same issue and
has included such amount in the
computation of his income and
disclosed all the facts material to the
addition or disallowance
(4) The amount of under-reported Where the assessee had maintained
income represented by any information and documents as
addition made in conformity prescribed under section 92D, declared
with the arm’s length price the international transaction under
determined by the Transfer Chapter X and disclosed all the material
Pricing Officer facts relating to the transaction
(5) The amount of undisclosed Where penalty is leviable under section
income on account of a search 271AAB in respect of such undisclosed
operation income.
(viii) Cases of misreporting of income [Section 270A(9)]:
(1) misrepresentation or suppression of facts;
(2) failure to record investments in books of account;
(3) claim of expenditure not substantiated by any evidence;
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(2) Where the total income The tax payable in respect of the under-
determined u/s 143(1)(a) reported income shall be the amount of tax
or assessed or calculated on the under-reported income as
reassessed or if it were the total income.
recomputed in a
preceding order is a loss
(3) In any other case The amount of tax calculated on the under-
reported income as increased by the total
income determined under section 143(1)(a)
or total income assessed, reassessed or
recomputed in a preceding order as if it
were the total income
Minus
The amount of tax calculated on the total
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(xiv) Examples:
(1) M/s. XYZ is a firm liable to tax@30%. The following are the particulars
furnished by the firm for A.Y.2017-18:
Particulars of total income `
(1) As per the return of income furnished u/s 139(1) 50,00,000
(2) Determined under section 143(1)(a) 60,00,000
(3) Assessed under section 143(3) 75,00,000
(4) Reassessed under section 147 95,00,000
Can penalty be levied under section 270A on M/s. XYZ? If the answer is in the
affirmative, compute the penalty leviable under section 270A.
Solution
M/s. XYZ is deemed to have under-reported its income since:
(1) its income assessed under 143(3) exceeds its income determined in a return
processed under section 143(1)(a); and
(2) the income reassessed under section 147 exceeds the income assessed
under section 143(3).
Therefore, penalty is leviable under section 270A for under-reporting of
income.
Computation of penalty leviable under section 270A
Particulars ` `
Assessment under section 143(3)
Under-reported income:
Total income assessed under section 143(3) 75,00,000
(-) Total income determined u/s 143(1)(a) 60,00,000
15,00,000
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(C) Time limit for passing an order for waiver of interest and penalty [Sections 220(2A),
273A, 273AA]
Effective from: 1 st June, 2016
(i) No time limit has been provided within which orders under section 220 or sections
273A or 273AA have to be passed. Further, there is no requirement under these
provisions that the assessee be given an opportunity of being heard in case such
application is rejected by an authority.
(ii) Accordingly, the Finance Act, 2016 has amended these provisions to provide for a time
limit within which the order for waiver of interest and penalty have to be passed by the
Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner of Income-tax, as the case may be. Further, no order rejecting the
application of the assessee, either in full or in part, under section 220 or 273A, 273AA
shall be passed without giving the assessee an opportunity of being heard.
Section Powers of Principal Time limit
Commissioner/CIT
(1) 220(2A) To reduce or waive the amount of
interest paid or payable section An order accepting
220(2). or rejecting
Note – Section 220(1) requires application of an
payment of amount specified in the assessee in full or
notice of demand under section 156 part has to be
within 30 days of service of notice. passed within a
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(D) Levy of penalty at a flat rate of 60% on undisclosed income, in search cases where
assessee does not admit such income in the course of search nor discloses the
same in the return of income for the specified previous year filed on or before the
specified date [Section 271AAB(1)(c)]
Relevant from: A.Y.2017-18
(i) Section 271AAB(1)(c) provides for levy of penalty ranging between 30% to 90% of
the undisclosed income, in a case where search has been initiated under section
132 on or after 1st July, 2012, and the assessee neither admits, in a statement
under section 132(4), undisclosed income in the course of search nor declares
such income in the return of income furnished for the specified previous year and
pays tax and interest on such undisclosed income.
(ii) For the purpose of reducing discretionary powers in levy of penalty and rationalizing
the rate of penalty, section 271AAB(1)(c) has been amended to provide for levy of
penalty on such undisclosed income at a flat rate of 60% of such undisclosed income.
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(e) Penalty for failure to comply with notice under section 142(1) or 143(2) of
failure to comply with a direction u/s 142(2A) [Section 272A]
Related amendment in section: 288
Effective from: A.Y.2017-18
(i) Under section 272A(1), penalty of ` 10,000 is leviable in each of the following
cases:
(a) for failure or default to answer the questions raised by an income-tax
authority under the Income-tax Act, 1961;
(b) for refusal to sign any statement legally required during the proceedings
under the Income-tax Act, 1961; or
(c) failure to attend to give evidence or produce books or documents as
required under section 131(1).
(ii) New clause (d) has been included in section 272A(1) to levy penalty of `
10,000 for each default or failure to comply with a notice issued under section
142(1) or section 143(2) or failure to comply with a direction issued under
section 142(2A).
(iii) Accordingly, section 272A(3) has been amended to provide that penalty in
case of failure referred to above shall be levied by the income tax authority
issuing such notice or direction.
(iv) Section 288(4) has been consequentially amended to provide that no person,
inter alia, on whom penalty has been imposed under this Act [other than
penalty imposed under section 272A(1)(d)] shall be qualified to represent an
assessee before any income-tax authority or the Appellate Tribunal in
connection with any proceeding under the Income-tax Act, 1961, for such time
as the Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner may by order determine.
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169
170
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172
SIGNIFICANT NOTIFICATIONS/CIRCULARS
6Section 141(3) of the Companies Act, 2013 contains a similar disqualification in case of a company; for which purpose
“business relationship” has been defined in the like manner in Rule 10(4) of the Companies (Audit & Auditors) Rules,
2014. It may be noted that in case of a company, a person who is not eligible for appointment as an auditor of the
said company in accordance with section 141(3) of the Companies Act, 2013 is not included in the definition of
“accountant” [except for appearing as an authorised representative under section 288(1)]
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176
(A) Deduction of tax at source under section 194LBB at ‘rates in force’ on income
distributed by an Investment Fund to its non-resident unit-holders and enabling
provision for obtaining certificate of nil deduction or lower deduction of tax at
source under section 197
Related amendment in section: 2(37) & 197
Effective from: 1st June, 2016
(i) Special taxation regime for Investment Funds:
(1) A special taxation regime, contained in sections 10(23FBA), 10(23FBB),
115UB and 194LBB, was introduced by the Finance Act, 2015 for Category-I
and II Alternative Investment Funds registered with SEBI, in order to ensure
tax pass through status for these investment funds which are collective
investment vehicles.
(2) Under this regime, the income of the investment fund (other than business
income) is exempt in the hands of investment fund. Such income received by
the unit-holder from the investment fund (other than business income which is
taxed at the level of investment fund) is taxable in the hands of unit-holder.
(3) The taxation in the hands of unit-holders is in the same manner and in the
same proportion as it would have been, had the unit-holder received such
income directly and not through the investment fund.
(ii) Deduction of tax under section 194LBB@10% without facility for application of
relief under section 197 – Resultant hardship to non-resident investors
eligible for concessional rate of tax/exemption under the DTAA :
(1) Under section 194LBB, tax is deductible@10% in respect of any income
credited or paid by the investment fund to its unit-holder. Section 197 enables
an assessee to file an application to the Assessing Officer for issue of
certificate of deduction of tax at lower rate or no deduction of tax under certain
sections specified thereunder. If the Assessing Officer is satisfied that total
income of the recipient justifies issue of such certificate, he may give to him
such certificate for non-deduction of tax or deduction of tax at a lower rate.
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181
182
183
184
Circumstance Period9
Where a refund arises as a result From the expiry of 3 months from
of giving effect to an order under the end of the month in which the
section 250/254/260/262/264, order u/s 250/254/260/262 is
wholly or partly, otherwise than by received, or order u/s 263 or 264 is
making a fresh assessment or passed, by the PCC/CC/PC/CIT.
reassessment
Where extension is granted by the From the expiry of 9 months from
Principal Commissioner or the end of the month in which the
Commissioner by invoking proviso order u/s 250/254/260/262 is
to section 153(5) received, or order u/s 263 or 264 is
passed, by the PCC/CC/PC/CIT.
(f) Expansion of scope of TCS under section 206C
Effective from: 1 st June, 2016
(i) Expansion of scope of TCS under section 206C:
Section 206C(1D) requires collection of tax at source, at the time of receipt of
consideration, on cash sale of bullion or jewellery. Tax has to be
collected@1% of sale consideration, if such consideration exceeds ` 2 lakh for
bullion and ` 5 lakh for jewellery.
The scope of tax collection at source under section 206C has been expanded
to provide that every person, being the seller shall, at the time of receipt of
consideration, collect tax at the rate of 1% from the purchaser on sale of
goods or provision of services specified in column (2) exceeding the
corresponding value specified in column (3) :
(1) (2) (3)
Section Sale / Service Transaction Threshold limit
206C(1D) Sale in cash of any goods (other than ` 2 lakhs
bullion and jewellery), or providing of any
services (other than amounts on which tax
is deducted at source by the payer under
Chapter XVII-B), consideration for which is
received in cash.
206C(1F) Sale of motor vehicle ` 10 lakhs
9 Period for which assessee would be entitled to receive additional interest on refund
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10 “Investment Fund” means any fund established or incorporated in India in the form of a trust or a company or a LLP or
a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative
Investment Fund and is regulated under the SEBI (AIF) Regulations, 2012, made under the SEBI Act, 1992.
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4. Time and mode of payment of TDS and TCS to Government account – Amendments
in Rule 30, 31 & 37A [Notification No.30/2016 dated 29.4.2016]
(i) Increase in time limit for payment of TDS under section 194-IA to Government
Account [Rule 30(2A)]:
Rule 30(2A) has been amended to increase the time limit for payment of tax
deduction under section 194-IA to Government account from 7 days to 30 days
from the end of the month in which deduction is made.
(ii) Common due date for filing of statement of TDS under section 200(3) in case
of Government deductors and other deductors [Rule 31A(2)]:
Rule 31A requires every person responsible for deduction of tax under Chapter
XVII-B to deliver, or cause to be delivered, quarterly statements to the Director
General of Income-tax (Systems) or the person authorised by him within the due
date for each quarter specified in Rule 31A(2). Rule 31A(2) prescribed differential
due dates for Government deductors and other deductors. In order to ensure equity
and give more time for other deductors, common due dates are now prescribed
thereunder for Government deductors and other deductors. Accordingly, quarterly
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(iii) Mode of payment in the case of an office of the Government, where tax has
been paid to the credit of the Central Government without production of a
challan [Rules 30 & 37C]:
Rule 30(4) and 37CA(3) have been amended to remove the time limit of 10 days
specified thereunder for submission of Form No.24G in respect of tax
deducted/collected by deductors/collectors (in the case of an office of the
Government, where tax has been paid to the credit of the Central Government
without the production of a challan) and reported to the agency authorised by the
Director General of Income-tax (Systems). In effect, in the case of an office of the
Government, where tax has been paid to the credit of the Central Government,
without production of challan, Rule 30(4) and 37CA(3) now simply require
submission of statement in Form 24G to the agency authorised by the Principal
Director General of Income-tax (Systems) in respect of tax deducted/collected by
the deductors/collectors and reported to him
Time limit for submission of statement in Form 24G in such cases [New sub -
rule (4A) of Rule 30 & Sub-rule (3A) of Rule 37CA]:
Month to which the statement relates Time limit
(i) In a case where the statement relates to On or before 30 th April
the month of March
(ii) In any other case On or before 15 days from
the end of the relevant
month
Manner of submission of statement in Form 24G [New sub-rule (4B) of Rule 30
& sub-rule (3B) of Rule 37CA]:
(i) Electronically under digital signature; or
(ii) Electronically along with the verification of the statement in Form 27A or
verified though an electronic process
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