Income-tax (Twelfth Amendment) Rules, 2018 – Amendment in Rule 114, Forms 49A & 49AA
Notification No. Gsr 1128(E) [No. 82/2018 (F. No. 370142/40/
2016-Tpl (Part-I)], Dated 19/11/2018
Budget 2018 amended Sec 139A of the I-T Act making it mandatory for non-individuals who did not have PAN but conducted transactions of Rs 2.5 lakh or more in a single FY to apply for PAN. Non-individual entities who have do not have PAN but conduct a transaction of Rs 2.5 lakh or more in a single financial year will now mandatorily have to get a PAN before May 31 of the following financial year. This is as per the above notification. An amendment has been made in Rule 114 of the income tax rules. The amendment will come into effect from December 5, 2018.
Section 90 of the Income-tax Act, 1961 – Double Taxation Agreement – Amendment in Double Taxation Avoidance Agreement between India & China
Pib Press Release, Dated 26/11/2018
The Government of the Republic of India and the Government of the People’s Republic of China have amended the Double Taxation Avoidance Agreement (DTAA) for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income, by signing a Protocol on 26/11/2018.
Besides other changes, the Protocol updates the existing provisions for exchange of information to the latest international standards. Further, the Protocol incorporates changes required to implement treaty related minimum standards under the Action reports of Base Erosion & Profit shifting (BEPS) Project, in which India had participated on an equal footing. Besides minimum standards, the Protocol brings in changes as per BEPS Action reports as agreed upon by the two sides.
Section 194A of the Income-tax Act, 1961, Read with Rule 31A of the Income-tax Rules, 1962 – Deduction of Tax at Source – Interest other than Interest on Securities - Tds in Case of Senior Citizens
Notification No. 06/2018 [F. No. pr.dgit(S)/Cpc(Tds)/Notification/2018-19], Dated 6/12/2018
It has been brought to the notice of CBDT that in case of Senior Citizens, some TDS deductors/Banks are making TDS deductions even when the amount of income does not exceed fifty thousand rupees. The same is not in accordance with the law as the Income-tax Act provides that no tax deduction at source under section 194A shall be made in the case of Senior Citizens where the amount of such income or, the aggregate of the amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees. (Please refer to the third proviso to sub-section 3 of section 194A). Under sub-rule (5) of Rule 31A of the Income-tax Rules, 1962, the Director General of Income-tax (Systems) is authorized to specify the procedures, formats and standards for the purposes of furnishing and verification of the statements or claim for refund in Form 26B and shall be responsible for the day-to-day administration in relation to furnishing and verification of the statements or claim for refund in Form 26B in the manner so specified. In exercise of the powers delegated by the Central Board of Direct Taxes (Board) under sub-rule (5) of Rule 31A of the Income-tax Rules, 1962, the Principal Director General of Income-tax (Systems) hereby clarifies that no tax deduction at source under section 194A shall be made in the case of Senior Citizens where the amount of such income or, the aggregate of the amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees.
Vinod Soni vs. ITO (ITAT Delhi)[Date of Pronouncement: 10th December, 2018] A.Y.2014-15
The exemption of Rs. 50 lakh in section 194-IA(2) is applicable w.r.t. the amount related to each transferee and not with reference to the amount as per sale deed. Each transferee is a separate income tax entity and the law has to be applied with reference to each transferee as an individual transferee/person.
It is also noted that Section 194-IA was introduced by Finance Act, 2013 effective from 1/6/2013. It is also noted from the Memorandum explaining the provisions brought out alongwith the Finance Bill wherein it was stated that “in order to reduce the compliance burden on the small tax payers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakhs rupees.”
ACIT vs. Subhodh Menon (ITAT Mumbai)
Section 56(2)(vii) is a counter evasion mechanism to prevent money laundering of unaccounted income & does not apply to bona fide business transaction done out of business exigency. The difference between alleged fair market value of share and the subscribed value of shares cannot be assessed as income U/s. 56(2)(vii)(c)
As explained hereinabove, shares were issued by the company to comply with a covenant in the loan agreement with State Bank of India which required the promoters to increase the total net worth of the company to Rs. 150 crores by 31 March, 2010. Therefore, the shares were issued by the company for a bonafide reason and as a matter of business exigency. Circular No.1/2011 dated 6 April, 2011 issued by the CBDT explaining the provision of section 56(2)(vii) specifically states that the section was inserted as a counter evasion mechanism to prevent money laundering of unaccounted income. In paragraph 13.4 thereof where it is stated that “the intention was not to tax transactions carried out in the normal course of business or trade, the profit of which are taxable under the specific head of income”
CBDT clarification regarding Filing of Low Tax Appeals by the Department:
The CBDT has issued a letter dated 11th December, 2018 by which it has issued an important clarification regarding the filing of low tax effect appeals by the Department as stipulated in Circular No.3 of 2018 dated 11th July, 2018 and letter issued vide No.279/Misc.142/2007 -ITJ(Pt) dated 20/8/2018.