New Section 115BAA – a quick clarification by way of circular seems result of desire for publicity hype for clarifications seekers and clarification by CBDT where in fact clarification is not required.

[CA DEV KUMAR KOTHARI]

New provision of S.115 BAA

New provisions of S.115 BAA are clear on the issues which have been clarified by the Board. As per provisions it is clear that there is no time limit, by way of first year of assessment for exercising the new option and option once exercised cannot be revised or reversed by assesse.

Provision is also clear about incentives or benefits presently available which will not be available after exercise of the option to pay tax as per S.115 BAA.

Therefore, it will depend on  assesse company to consider its state of affairs about specified benefits available which can be availed in near future and amount of such benefits and tax benefit if the option is not exercised.

Therefore, one need to prepare estimated computation of income and tax as per presently followed provisions and as per new provision if an option is exercised.

Suppose one perform exercise for AY 2020-21 he has time to exercise option at any time before due date to file ROI for AY 2020-21- that is 30^th September 2021. At that Time Company will also have to consider estimates of income for at least few more years, if sizable benefits are still available and can be availed in near future.

By that time a new Finance Act, 2021 will also be announced, that can reduce even normal tax rates applicable to companies.

 Therefore, in case of companies having substantial specified benefits available  will have to do complete exercise to find out year up to which present provisions should continue and when it will be most  beneficial, if at all,  to opt, for new provision.

For this purpose any clarification was not required.

As discussed above, for taking a decision wholesome exercise is to be made for past, present and future about earnings of company and taxable income after considering two possible regimes under which computation is to be made and compared for taking a decision.

As per new section depreciation shall be allowed under some new method and rates which are yet to be notified then it will need clarifications etc.

 Therefore, at present one cannot take a decision to opt or not to opt new provision.

In view of above it seems that seeking un-necessary explanations and board issuing clarification by way of circular appears to be result of desire for publicity hype for clarifications seekers and CBDT. Such exercises only causes brain drain and confusions.

It is worth to mention that in facts some other critical issues need to be examined and clarified, which have not been raised and clarified. For example, provisions and circular mention about brought forward additional depreciation u/s 32.1.ii.a. Whereas, generally such depreciation is not carried forwarded  separately and becomes part of current depreciation.

As expressed by author in his articles, deduction u/s 32.1.iia being one time deduction allowed based on actual cost and not on WDV, is an incentive to promote investments and therefore, need not be deducted from WDV. Therefore, such incentive need to be claimed separately and not through Sch. DEPM in ITR.

The provision and clarification makes it clear that restriction is only about additional depreciation, therefore, normal depreciation c/f will be eligible for set off even if new section is adopted. 

However, a question will arise, as to block of assets under existing manner and rates and under a new manner which is likely to be notified as stated in new section vide clause (iii) of sub-section (2) which reads as follows:

(iii) by claiming the depreciation, if any, under section 32, other than clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.

It is clear that deductions and losses other than those mentioned and covered by S. 115BAA (2) (i) and (ii)   shall continue to be carried forwarded and set off. Therefore, other losses carried forwarded shall not be deemed to have been allowed and lapsed.

The CBDT should not act as an opinion board, circulars should be issued only where there is a need for clarification. When provisions are clear, issue of circulars can un-necessarily make issues complicated because one need to see circular and find out if any new advantage can be inferred from such clarifications.