Direct Tax

Extension Of Time Limits Of Certain Compliances To Provide Relief To Tax Payers considering the Pandemic

[Circular No. 12, 25 June 2021] [Notification No. 74, 25 June 2021]

The due date for filing of TDS returns of Q4 has been extended to 15 July 2021. The due date for issuing Form 16, Equalisation Levy statement for FY 2020-21, has been extended to 31 July 2021. Uploading of declaration under Form 15G / 15H for Q1 has been extended to 31 August 2021. The due date for passing the assessment or reassessment order and penalty order has been extended to 30 September 2021. Extension of date of payment of disputed tax without the additional sum of 10% to 31 October 2021.

Guidelines under section 194Q

[Circular No. 13, 30 June 2021]

The Income-tax department released detailed guidelines under section 194Q:

  • Provisions of section 194Q would not apply to the transaction in securities and commodities through recognized stock exchanges.
  • Sum paid/credited before July 2021, to be considered while computing the threshold of INR 5 million.
  • GST, if separately mentioned in the invoice, is to be excluded for withholding of taxes under 194Q. However, in case of advance payment (where the GST component is not identifiable), tax is to be withheld on the full amount.
  • The provisions may not apply in the case of a non-resident buyer where such purchase is not effectively connected to a Permanent Establishment (PE).
  • The provisions would not apply to buyers in the year of incorporation.
  • Where the transaction is subjected to both 194Q and 206C(1H), then preference would be given to the applicability of section 194Q.

Guidelines under section 9B and section 45(4)

[Circular No. 14, 2 July 2021] & [Notification No. 76, 2 July 2021]

The recent union budget had inserted new section 9B and amended section 45(4) to provide a new scheme for the taxation of dissolution/reconstitution of firm/Annual Operating Plan (AOP)/ Business Operating Income (BOI). The Income-tax department has now issued detailed guidelines to address difficulties arising in giving effect to such provisions. It has also issued detailed rules for computing the attribution of capital gains chargeable in the hands of firm/AOP/BOI.

Income tax department notifies computation mechanism for determination of capital gains and written down value (WDV) for a block of intangible asset comprising of goodwill

[Notification No. 77, 7 July 2021]

The Finance Act 2021 introduced a retrospective amendment (effective from FY 20-21) whereby goodwill shall no longer be eligible for depreciation. Pursuant to the amendment, goodwill shall no longer be a part of the block of assets. The CBDT has now notified a new rule (Rule 8AC) that provides the mechanism for computing WDV of the block of assets shall be in accordance with or on the same lines as section 43(6), which provides as under:

  • For computing the value of goodwill to be reduced, goodwill is to be assumed as the only asset in the block. WDV of goodwill to be reduced, to be arrived accordingly by computing depreciation assuming it was the only asset.
  • If the WDV so computed exceeds the carrying value of the block of assets, then the reduction from the block would be restricted to the value of the block.

The Rule also provides that wherever the value of the reduction in the block of an asset exceeds the aggregate of below, such excess shall be deemed as gains arising from transfer of short term capital assets:

  1. WDV of the block as on 1 April 20 [prior to making the above adjustment)] and
  2. the actual cost of the asset in the said block (other than goodwill) acquired during FY 2020-21

The Rule further provides that where goodwill was the only asset in the block and the block shall cease to exist as there are no further additions in the block during FY 2020-21, there will not be any capital gains or loss on account of the block of asset having ceased to exist.

Tax exemption for expenditure on COVID-19 treatment and ex-gratia received on death due to COVID-19

[Press Release dated 25 June 2021]

The government has acknowledged that many taxpayers have received financial help from their employers and well-wishers. As many have lost their lives due to COVID-19, and their family members received financial help from employers, well-wishers and such. In order to provide relief, the government has decided to provide an exemption to ex-gratia payments received by such family members up to an amount of INR 1 million.

Relaxation In Electronic Filing Of Income Tax Forms 15CA/15CB

[Press release dated 20 July 2021]

The ITA requires all form 15CBs or form 15CAs to be filled electronically. In the current event of difficulties faced by the chartered accountants and assesses alike, the taxpayers can submit the aforesaid forms in manual format to the authorized dealers by 15 August 2021. Authorized dealers are advised to accept these for the purpose of foreign remittances. Also, a facility would be provided at the new income tax portal to upload these forms at a later date.

Indirect Tax

Clarification regarding extension of limitation in terms of Hon’ble Supreme Court’s Order

[Circular No. 157/13/2021-GST Dated the 20 July 2021]

The government has issued the following clarifications regarding the extension of the period of limitation under GST law in view of the Hon’ble Supreme Court’s order in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020:

  • Proceedings that need to be initiated or compliances that need to be done by the taxpayers would continue to be governed by the statutory mechanism, and any of the extensions granted by the Supreme Court will not apply to these actions.
  • It is clarified that where the authorities function as a quasi-judicial authority, they can continue to dispose off the proceedings. The same will be governed by those extensions of time granted by the statutes or notifications, if any.
  • Extensions of time limit granted by the Supreme Court will be applicable to proceedings which are before Joint/ Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling, Tribunal and various courts against any quasijudicial order or where proceeding for revision or rectification of any order is required to be undertaken. However, it will not be applicable to any other proceedings under GST Laws.

Government's move to resume blocking of E-way bill generation

With things now slowly moving back to normalcy, the tax administration seems to be urging businesses to regularize their GST compliances up to June 2021.The unblocking of E-way bill generation post filing of returns seems to be an easy process.

Saket Patawari
Executive Director – Indirect Tax, Senior Director