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2016: Achche Din For Taxpayers?

Published on Thu, Dec 31,2015 | 20:24, Updated at Thu, Dec 31 at 20:24Source : CNBC-TV18 

By: Chartered Accountants  Vispi T. Patel, Rajiv Shah & Ketan Maru

In an effort to help taxpayers, the new Government is trying to make the taxation system taxpayer friendly and a ‘non-adversarial tax regime’. It aims to create tax policies and an administrative set-up that considers the taxpayers as partners and not merely as tax collection resources.

In order to cut down on frivolous litigation and tax payer’s grievances, the Central Board of Direct Taxes (CBDT) has issued fresh directions enhancing the monetary threshold retrospectively for the income-tax department to file appeal before Income-tax Appellate Tribunal (ITAT) and High Courts only when the tax effect is Rs. 10 lakhs (earlier Rs. 4 lakhs) and 20 lakhs (earlier Rs. 10 lakhs) respectively.

The government has also decided not to contest High Court ruling that telecom giant Vodafone was not liable to pay tax demand of Rs. 3500 crores in a transfer pricing case. Similarly in case of abandoned feature films, income-tax department has also accepted the decision of Hon’ble Bombay High Court and instructed not to contest cases involving deduction of cost of production of abandoned films for which certificate of Board of Film Censor is not received and clarified that expenditure incurred on such abandoned feature film is not to be treated as capital expenditure. Further, CBDT has also clarified that income arising from investments made by banking concerns in non-SLR securities is attributable to the business of banking and falls under the head “Profits and Gains from Business and profession” and decided not to file appeals on such grounds.

Tax payers, who are facing “high-pitched” assessments or unfair scrutiny by the income-tax department, can use a new redressal procedure. CBDT has directed the income-tax department to create a “local committee” comprising senior officers; and directed them to dispose such grievance and complaint petitions “within two months” from the end of the month in which such a petition is received.

The CBDT has also addressed a letter expressing concern that the rectification application under section 154 of the Income-tax Act, filed by the tax payers before the field officers are not being dealt with promptly. Therefore it has instructed that such application for rectification is to be disposed-off within two months from the end of the month in which such application is received.   

CBDT has launched an e-Sahyog pilot project of income-tax department to facilitate tax payers to reduce their need to physically appear before tax authorities. The aim is to reduce compliance cost, especially for small taxpayers and provide online mechanism to resolve mismatches in income-tax return. It has also notified use of emails as the new mode of communication between  the assessee and department officials, as part of the government’s e-initiative to reduce human interface and complaints of harassment in conducting tax related issues.

Providing relief to employers, CBDT has clarified that contribution by employers for social security and welfare benefits such as provident funds and superannuation funds before due date of filing of return of income would be sufficient tax compliance, even if deposited after the due date as per the relevant Acts.
Rule 37BB of Income-tax Rules has been amended to strike a balance between reducing the burden of compliance and collection of information under section 195 of Income-tax Act. The CBDT has exempted reporting requirements for foreign remittance not exceeding Rs. 5 lakhs during the financial year. Further, payments for imports have also been deleted from the list of requirement of furnishing Forms 15CA and 15CB.

The CBDT has introduced “range concept” and “use of multiple year data” for comparability purposes for determining the arm’s length price (ALP) which are applicable to both international transactions as well as specified domestic transactions. Under the range concept, if the price at which the transaction has been undertaken is within the range i.e. within 35th and 65th percentile, such price shall be deemed to be ALP and no adjustment will be made. When the price at which the transaction has been entered into does not fall within the range, the median of the list will be taken as ALP. The range concept being a statistical tool, enhances the reliability of analysis undertaken for computation of ALP and is in accordance with international best practices. It may assist the tax payers in benchmarking its transactions in a more scientific manner and consequently may reduce litigation.

The CBDT has clarified that MAT is not applicable to foreign companies including foreign portfolio investors (FPI) and foreign institutional investors (FII), if such foreign company or FPI or FII is a resident of a country, with which India has entered Double Taxation Avoidance Agreement (DTAA) and such foreign company or FPIs or FIIs has no permanent place of business in India in accordance with the provisions of the relevant DTAA or in case there is no such DTAA and such foreign company or FPI or FII is not required to seek registration under section 592 of the Companies Act, 1956 or section 380 of the Companies Act, 2013. Therefore, CBDT has advised income-tax department that pending assessment involving applicability of MAT on foreign company or FPI or FII should be completed accordingly.

After notification of Income computation and disclosure standards (ICDS), stakeholders have brought some issues to the notice of the CBDT that certain provisions of ICDS may need further clarification/guidance for proper implementation. CBDT has referred these issues to an expert committee comprising departmental officers and professionals and the committee is currently examining these issues.

However, the initiatives taken by the new government will largely benefit the corporates and industrialists, but as far as the common man or individuals are concerned, no such measures have been taken which can lower the burden of such taxpayers.

It also needs to be understood whether the Goods and Service Tax Bill will ease doing business in India, and benefit the businessman or will the common man bear the increased tax burden. Further, it will also have to be seen how the revenue authorities implement the new policies and measures.

This column is sourced from the year end series of Bombay Chartered Accountants' Society -

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