CBDT lays out Guidelines for Compulsory Selection of Returns for Complete Scrutiny under Faceless Assessment for FY 2020-21
[Excerpts from The Economic Times, 18 September 2020]
The government has made its intention clear and emphasized its vision for scrutinizing various matters through the recently introduced faceless assessment scheme. In order to have control over the selection of cases under the scheme, the CBDT has issued broad parameters for compulsory selection of returns for complete scrutiny under faceless assessment for FY 2020-21. The parameters are:
- Survey, search and seizure cases;
- Cases where a notice under Section 148 has been issued;
- Cases relating to revocation of registration or approval by authorities under Sections 12A/10(23C);
- Cases where notices under section 142(1) have been issued calling for a return.
The above parameters are captured by way of CBDT Notification F. No. 225/126/2020/ITA-II dated 17 September 2020.
It instructed that the exercise of a selection of cases for compulsory scrutiny on the basis of the guidelines shall be completed by 30 September 2020
Piyush Goyal rolls out the red carpet for American investors, woos USA businesses with low corporate tax reforms
[Excerpts from Financial Express, 8 October 2020]
While addressing the India Chamber of Commerce USA’s Summit on global financial and investment leadership, Piyush Goyal (Commerce and industry minister) called upon American businesses to look at India as their next investment destination. He mentioned that the bilateral trade target of USD 500 billion looks eminently doable in the next five years. The bilateral trade between India and the USA has grown from USD 126 billion in 2017 to USD 145 billion in 2019. He also added that India is moving out of the shackles of the past into a more open and liberal foreign investment destination with added benefits such as low corporate tax rates. The Ministry is working on building a genuine single-window system, which makes it easy for companies and businesses to work in India.
[Excerpts from The Economic Times, 29 September 2020]
The pandemic and lockdown scenario has restricted the movement of many directors/senior executives employed with the foreign subsidiaries of Indian companies. Such people who are stranded in India are worried that they may have domestic tax implications under the Place of Effective Management (POEM) rule. Under the POEM regulations, foreign subsidiaries could be treated as domestic entities for tax purposes if they are controlled and managed from India. Considering that the senior executives may be working from India due to travel restrictions/ safety measures, it may result in a situation where tax officials could construe that the decisions concerning the companies were made from India. While the Organization for Economic Co-operation and Development (OECD) categorically states that this exceptional period should not be considered while determining POEM, the CBDT is yet to issue a notification to address the issue. The tax applicable on the global income of such companies could be as high as 42%.
[Excerpts from The Economic Times, 13 October 2020]
Since people may not be able to travel and utilize their leave travel allowance (LTA) amidst the pandemic, the government announced a relief scheme offering tax-exempt payment of leave travel concession/allowance to the central government employees without the need for them to travel. This is a one-time scheme, and payment will be only in lieu of one LTC during the block of four years 2018-2021. Further, clarifications were issued by way of an office memorandum dated 20 October 2020.
- Buy goods and services worth three times the tax-exempt amount paid before 31 March 2021;
- Spend the money on buying items attracting GST of 12% or more from GST registered vendor and purchase must be in digital mode;
- GST invoice will have to be produced;
- Scheme open to the private sector wherever the employers currently offer LTC. Scheme also open to PSUs, PSBs and state government employees;
- Payment of LTC fare in 3 flatrate slabs depending on class of entitlement of government employees.
While the scheme has been announced for central government employees, private companies could evaluate their Leave Travel guidelines and concessions and amend them as per the stipulations of the LTC Cash Voucher scheme in order to roll out the benefit to their employees too
The Central Board of Direct Taxes (CBDT) vide notification No. 82/2020 on 1 October 2020 has notified amendments in Part-C of the Form No. 3CEB (that deals with Specified Domestic Transactions disclosures).
- Omitting Clause 22: The Finance Act, 2012 had introduced section 92BA to provide for a mechanism to determine the arm’s length nature in cases of ‘Specified Domestic Transactions (SDT),’ that covered, amongst others, the payments made to related parties stated under section 40A(2)(b) of the Act as well. However, sub-clause (1) of section 92BA, which referred to the payments made to related parties covered under section 40A(2) (b), was omitted by the Finance Act, 2017, w.e.f. 1 April 2017. Despite the removal from the legislative intent, practically the annual transfer pricing compliance in Form No. 3CEB still contained the clause (in No. 22) related to disclosure of such transactions. Accordingly, the amendment has sought to omit clause 22 formally.
- Insertion of New Clause 24: The Taxation Laws (Amendment) Ordinance, 2019, passed on 20 September 2019, had introduced a low effective corporate tax rate of 17.16% for new manufacturing companies vide new section 115BAB. Pursuant to this new section, in the event taxpayers entered into transactions with such new domestic companies that constitute a SDT, it would be relevant to assess if ‘the course of business is so arranged that the business transacted produces more than the ordinary profits which might be expected to arise in such business.’ The profits and gains of such business would then be expected to be determined having regard to arm’s length price as defined in section 92F(ii).
Accordingly, the amendment has sought to include new disclosures of such SDT’s with persons referred to in sub-section (6) of section 115BAB, which has resulted in more than ordinary profits expected to arise in such business.
The Central Board of Direct Taxes (CBDT) vide notification No. 83/2020 on 19 October 2020 has notified the tolerance range of 1% for wholesale trading and 3% for all other transactions undertaken during the financial year ending 31 March 2020.
Further, it has defined the transaction considered as ‘wholesale trading’ would be those:
- Where the purchase cost of finished goods is at least 80% of the total cost of such trades;
- The average monthly closing inventory of such goods must be 10% or less of sales on such trading activities.
Considering the hassles and hardships faced by the taxpayers, the government has again extended the due dates for filing return of income, including filing the tax audit report and transfer pricing report. The Central Board of Direct Taxes (CBDT) vide Press Release 24 October 2020 r.w. notification No. 88/2020 on 29 October 2020 has extended the deadline for filing Income Tax returns and various audit reports, including Form No. 3CEB. The due dates for annual transfer pricing compliances for the FY 2019-20 are as follows:
|Forms||Erstwhile Dates||Revised Dates|
|Form No 3CEB||31 October 2020||31 December 2020|
|Master File Form No. 3CEAB||31 October 2020||31 December 2020|
|Master File Form No. 3CEAA||30 November 2020||31 January 2021|
This is a welcome move, which would provide much-needed relief to the taxpayers who are mostly working with limited resources amidst these challenging times.
[Notification No. 80/2020-Central Tax dated 28 October 2020]
In view of the severe disruption in business operations caused by the COVID-19 pandemic, the government has once again extended the due date for filing of GSTR-9 (annual return) and GSTR-9C (reconciliation statement) for the financial year 2018-19 to 31 December 2020 (earlier 31 October 2020).
[excerpts from the online edition of Hindustan Times]
The government has formulated a plan using Artificial Intelligence (AI) and Aadhar registration to identify ‘risky’ businesses that may be involved in the evasion of GST. The government will monitor such businesses closely to identify if any fraudulent activities are carried out. The government will take steps to block GST refunds of such businesses and initiate other legal actions as may be necessary to curb such practices in the future.
2. ITA No. 3529/Del/2015 (AY 2006-07) and ITA No. 3530/Del/2015 (AY 2007-08)