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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax - 23/2022

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..... ion in respect of maintenance including medical treatment of a dependent who is a person with disability 80-IAC Special provision in respect of specified business 80LA Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre 92CA Reference to Transfer Pricing Officer 94 Avoidance of tax by certain transactions in securities 115BAB Tax on income of new manufacturing domestic companies 115BBD Tax on certain dividends received from foreign companies 115BBH Tax on Income from virtual digital asset 115BBI Specified income of certain institutions 115JC Special provisions for payment of tax by certain persons other than a company 115JF Interpretation in this Chapter (Chapter XII-BA) 115TD Tax on accreted income 115TE Interest payable for non-payment of tax by trust or institution 115TF When trust or institution is deemed to be assessee in default 119 Instructions to subordinate authorities 132 Search and seizure 132B Application of seized or requisitioned assets 133A Power of survey 139 Return of income 140B Tax on updated return 143 Assessment 144 Best judgment assessment 144B Faceless Assessment 144C Reference to dispute resolution p .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... pay tax to the credit of Central Government under Chapter XII-D or XVII-B 276CC Failure to furnish returns of income 278A Punishment for second and subsequent offences 278AA Punishment not to be imposed in certain cases 285B Submission of statements by producers of cinematograph films or persons engaged in specified activity 1. Introduction 1.1 The Finance Act, 2022 (hereafter referred to as 'FA 2022') as passed by the Parliament, received the assent of the President on 30th March, 2022 and has been enacted as Act No.6 of 2022. 1.2 This circular explains the substance of the provisions of the FA 2022 relating to direct taxes. 2. Changes made by FA 2022 2.1 The FA 2022 has,- (i) specified the existing rates of income-tax for the assessment year 2022-23 and the rates of income-tax on the basis of which tax has to be deducted at source and advance tax has to be paid during financial year 2022-23; and (ii) amended sections of the Income-tax Act, 1961 ('the Act'). 3. Rate structure 3.1 Rates of income-tax in respect of incomes liable to tax for the assessment year 2022-23. 3.1.1 Part I of First Schedule to the FA 22 specifies the rates of income-tax in respect of income .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... vidend or income under the provisions of section 111 A and 112A of the Act) exceeding one crore rupees but not exceeding two crore rupees, at the rate of fifteen per cent. of such income-tax; (iii) having a total income (excluding the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent. of such income-tax; (iv) having a total income (excluding the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding five crore rupees, at the rate of thirty-seven per cent. of such income-tax; (v) having a total income (including the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding two crore rupees, but is not covered under clause (iii) or (iv) above, at the rate of fifteen per cent of such income-tax. However, surcharge shall be at the rates provided in (i) to (iv) above for all categories of income without excluding dividend or capital gains in case if the income is taxable under section 115A, 115AB, 115AC, 115ACA and 115E of the Act. Further, in case an .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... rupees. The Health and Education Cess on income-tax shall be levied at the rate of four per cent. on the amount of tax computed inclusive of surcharge. No marginal relief shall be available in respect of Health and Education Cess. 3.1.3 Co-operative Societies. Paragraph B of Part I of the First Schedule to the FA 2022 specifies the rates of incometax in the case of every co-operative society as under: - Income chargeable to tax Rate Up to Rs. 10,000 10% Rs. 10,001 - Rs. 20,000 20% Exceeding Rs. 20,000 30% The amount of income-tax so computed or as computed under the provisions of section 111 A or section 112 or section 112A of the Act shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. On satisfaction of certain conditions, a co-operative society resident in India has the option to pay tax at 22 per cent. as per the provisions of section 115BAD. Surcharge would be at 10% on such tax. However, marginal relief shall be available so that the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount pay .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... e rates of income-tax in the case of a company. (i) In case of a domestic company, the rate of income-tax is - a) twenty-five per cent. of the total income, if the total turnover or gross receipts of the company in the previous year 2019-20 does not exceed four hundred crore rupees; b) twenty-five per cent. of the total income at the option of the company, if it opts for taxation under section 115BA of the Act; c) twenty-two per cent. of the total income, at the option of the company, if it opts for taxation under section 115BAA of the Act; d) fifteen per cent. of the total income, at the option of the company, if it opts for taxation under section 115BAB of the Act; e) thirty per cent. of the total income, in all other cases. The tax so computed or as computed under the provisions of section 111 A or section 112 or section 112A of the Act shall be enhanced by a surcharge of seven per cent. where such domestic company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of twelve per cent. shall be levied if the total income of the company exceeds ten crore rupees. However, where the domestic company exercises the option under sectio .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... corporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act, being a nonresident, calculated,- (i) at the rate of ten per cent. of such tax, where the income or aggregate of income (including the income by way of dividend or income under the provisions of sections 111 A, 112 and 112A of the Act) paid or likely to be paid and subject to the deduction exceeds fifty lakh rupees but does not exceed one crore rupees; (ii) at the rate of fifteen per cent. of such tax. where the income or aggregate of income (including the income by way of dividend or income under the provisions of sections 111 A, 112 and 11 2A of the Act) paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed two crore rupees; (iii) at the rate of twenty-five per cent. of such tax, where the income or aggregate of income (excluding the income by way of dividend or income under the provisions of sections 111 A, 112 and 112A of the Act) paid or likely to be paid and subject to the deduction exceeds two crore rupees but does not exceed five crore rupees; (iv) at the rate of thirty-seven per cent. of such tax, wher .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... e of 10 per cent, then the surcharge at the rate of two per cent on such tax deducted shall be Rs. 24,0001-. Health and Education cess on such amount of tax deducted and surcharge (i .e. Rs. 12,00,000/- + Rs. 24,000/-; Rs. 12,24,000/-) shall be Rs. 48,960/-. 3.3 Rates for deduction of income-tax at source from "Salaries", computation of "advance tax" and charging of income-tax in special cases during the financial year 2022-23. 3.3.1 Part III of the First Schedule to the FA 2022 specifies the rates for deduction of income-tax at source from "Salaries" or under section 194P of the Act during the FY 2022- 23 and also for computation of "advance tax" payable during the said year in the case of all categories of asses sees have been specified in the said Part of the First Schedule to the FA 2022. These rates are also applicable for charging income-tax during the financial year 2022-23 on current incomes in cases where accelerated assessments have to be made, e.g., provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during that financial year, assessment of persons who are like .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... income under section 111A, 112 and 11 2A) exceeding one crore rupees but not exceeding two crore rupees; (c) at the rate of twenty-five per cent. of such income-tax, in case of a person having a total income (excluding any income by way of dividend or income under section 111A, 112 and 112A) exceeding two crore rupees but not exceeding five crore rupees; (d) at the rate of thirty-seven per cent. of such income-tax, in case of a person having a total income (excluding any income by way of dividend or income under section 111 A, 112 and 112A) exceeding five crore rupees; (e) at the rate of fifteen per cent. of such income-tax, in case of a person having a total income (including any income by way of dividend or income under section 111A, 112 and 112A) exceeding two crorce rupees but which is not included in (c) or (d) above; In case of an association of persons consisting of only companies as its members, the rate of surcharge on the amount of Income-tax shall not exceed fifteen per cent. However, marginal relief shall be available so that the total amount payable as income-tax and surcharge on total income exceeding- (i) fifty lakh rupees but not exceeding one crore rupees shall not .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... s income-tax and surcharge on total income exceeding ten crore rupees shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees. Heatth and Education Cess on income-tax shall be levied at the rate of four per cent. of the amount of income-tax computed inclusive of surcharge. No marginal relief shall be available in respect of Health and Education Cess. 3.3.4 Firms. Paragraph C of Part III of the First Schedule to the FA 2022 specifies the rate of incometax as thirty per cent. in the case of every firm. The amount of income-tax so computed or as computed under the provisions of section 111 A or section 11 2 or section 112A of the Act shall continue to be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a firm having a total income exceeding one crore rupees. However, marginal relief shall be available so that the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income tha .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... cent. shall continue to be levied if the total income of the company exceeds ten crore rupees. However, where the domestic company exercises the option under section 115BAA or section 115BAB, the tax computed shall be enhanced by a surcharge of ten per cent. (ii) In the case of a company other than a domestic company, the tax rate is forty per cent. The tax so computed, shall continue to be enhanced by a surcharge of two per cent. where such company has total income exceeding one crore rupees but not exceeding ten crore rupees. Surcharge at the rate of five per cent. shall continue to be levied if the total income of such company exceeds ten crore rupees. However, marginal relief shall be allowed in the case of every company to ensure that: (i) the total amount payable as income-tax and surcharge on total income exceeding one crore rupees but not exceeding ten crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees, (ii) the total amount payable as income-tax and surcharge on total income exceeding ten crore rupees shall not exceed the total amount payable as income-t .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... uot;slump sale" 5.1 Slump sale is defined in clause (42C) of section 2 of the Act, as the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to individual assets and liabilities in such sales. Vide Finance Act. 2021, the definition of "slump sale" was amended to expand its scope to cover all forms of transfer under slump sale. However, inadvertently, in the last sentence, there is reference to the word "sales" instead of "transfer", 5.2 Therefore, consequential amendment was carried out vide FA 2022 by amending the provision of clause (42C) of section 2 of the Act, to substitute the word "sales" with the word "transfer" . 5.3 Applicability: This amendment is effective retrospectively from the 1st April, 2021 and accordingly applies to the assessment year 2021-22 and subsequent assessment years. 6. Scheme for taxation of virtual digital assets 6.1 Virtual digital assets have gained tremendous popularity in recent times and the volumes of trading in such digital assets has increased substantially. Further, a market is emerging where payment for the transfer of a virtual d .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... in kind or in exchange of another virtual digital asset, where there is no part in cash; or (b) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer, the person responsible for paying such consideration shall, before releasing the consideration, ensure that tax required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset. 6.3.1 In case of specified person, the provisions of sections 203A and 206AB are not applicable. Further, no tax is to be deducted in case the payer is the specified person and the value or the aggregate of such value of consideration to a resident is equal to or less than Rs. 50,000 during the financial year. In any other case, the said limit is Rs. 10,000 during the financial year. 6.3.2 [t has been provided that in case of a transaction where tax is deductible under section 194-O along with section 194S, then the tax shall be deducted under section 194S and not section 194-0. 6.3.3 Furthermore, where any sum paid for transfer of virtual digital asset is credited to any account, whether called "Suspense Accou .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... 94S, agreed to pay tax in relation to a transaction of transfer of a virtual digital asset owned by it (as an altemative to tax required to be deducted by the buyer of such asset under section 194S), the Exchange shall deliver or cause to be delivered, a quarterly statement of such transactions in Form No. 26QF. 6.3.9 Applicability: This amendment is effective from 1st July, 2022. 6.4 Further, in order to provide for taxing the gifting of virtual digital assets, Explanation to clause (x) of sub-section (2) of section 56 of the Act has been amended to inter alia, provide that for the purpose of the said clause, the expression "property" shall have the meaning assigned to it in Explanation to clause (vii ) and shall include virtual digital asset. 6.4.1 Applicability: This amendment takes effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. 6.5 To define the term"virtual digital asset", a new clause (47A) has been inserted to section 2 of the Act. A virtual digital asset has been defined as any information or code or number or token (not being Indian currency or foreign currency), generat .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... lations, 2012 of which all the units other than unit held by a sponsor or manager are held by non-residents. Finance Act, 2020 inserted clause (1 A) to section 6 of the Act to provide that an individual who is a citizen of India having income other than income from foreign sources, exceeding Rupees 15 lakh and who is not liable to tax in any other country shall be deemed to be a resident in India. It was brought to the notice that some of the unit holders, after the issue of units may become residents or deemed residents in India. It will result in the denial of the entire exemption of the specified fund. Fund has no control over such a situation. In view of the above, FA 2022 has inserted a proviso to item (III) to provide that the conditions specified in item (III) of sub-clause (i) of clause (c) of the Explanation to clause (4D) of section 10 shall not apply where any unit holder or holders, being nonresident during the previous year when such unit or units were issued, becomes resident under clause (1) or clause (1A) of section 6 in any previous year subsequent to that year, if the aggregate value and number of the units held by such resident unit holder or holders do not excee .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... n any International Financial Services Centre, referred to in sub-section (1A) of section 80LA, to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India. Further, it has also been provided that "portfolio manager" shall have the same meaning as assigned to it in clause (z) of sub-regulation (1) of regulation (2) of International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019; (iv) The Explanation to clause (viib) of section 56 of the Act has been amended to provide that specified fund shall also include Category I or a Category II Alternative Investment Fund which is regulated under the International Financial Services Centres Authority Act, 2019, (v) Clause (d) of sub-section (2) of section 80LA of the Act has been amended to provide that in addition to the income arising from the transfer of an asset being an aircraft, the income arising from the transfer of an asset, being a ship, which was leased by a unit of the International Financial Services Centre to any person shall also be eligible for deduction under .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... assistance programme or project. Such technical assistance programme or projects were required to be in accordance with an agreement entered into by the Central Government and the agency and the agreement relating to the engagement of the consultant is required to be approved by the prescribed authority. 8.6 Clause (8B) of the said section provided for exemption to an individual who is an employee of the consultant as referred to in clause (8A) of section 10. Such individuals were those who were assigned duties in India in connection with any technical assistance programme and project. These technical assistance programmes and projects were required to be in accordance with an agreement entered into by the Central Government and the agency. 8.7 The exemption was provided to the remuneration received by such individual, directly or indirectly, for such duties from any consultant referred to in clause (8A) of section 10. Exemption was also provided to any income accruing or arising outside India (which is not deemed to accrue or arise in India), in respect of which the individual was required to pay income or social security tax to the country of his origin. 8.8 The individual was re .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... vailable under the two regimes: (i) Regime for any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 (hereinafter referred to as trust or institution under first regime); and (ii) Regime for the trusts registered under section 12AA112AB (hereinafter referred to as trust or institution under the second regime). 9.2 FA 2022 has rationalised the provisions of both the exemption regimes by- (I) ensuring their effective monitoring and implementation; (II) bringing consistency in the provisions of the two exemption regimes; and (III) providing clarity on taxation in certain circumstances. In addition to the above, some amendments consequent to the amendments of past few years have also been undertaken. AIl the amendments are discussed below: 9.3 Ensuring effective monitoring and Implementation of two exemption regimes 9.3.1 Books of account to be maintained by the trusts or institutions under both the regimes a) Where the total income of any trust or institution under the second regime, as computed .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... noticed again in any subsequent year. It has also been provided that section 271AAE shall operate without prejudice to any other provision of Chapter XXI. Thus, if any penalty is leviable under any of the other provisions of Chapter XXI, in addition to the penalty under section 271AAE, that penalty would also be applicable. b) Section 271AAE provides that, if during any proceeding under the Act, it is found that a person, being any trust or institution under the first or the second regime, has violated the provisions of twenty-first proviso to clause (23C) of section 10 (inserted by the FA 2022 and discussed in subsequent paragraphs) or clause (c) of sub-section (1) of section 13, as the case may be, the Assessing Officer may direct that such person shall pay by way of penalty, i) a sum equal to the aggregate amount of income applied, directly or indirectly, by such person, for the benefit of any person referred to in sub-section (3) of section 13 where the violation is noticed for the first time during any previous year; and ii) a sum equal to two hundred per cent of the aggregate amount of income of such person applied, directly or indirectly, by such person, for the benefit of .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... been rescinded. There was no such provision in cases of trusts or institutions under second regime. iii) No time limit prescribed for the PCIT/CIT to decide on references for the withdrawal of approval: For the trusts or institutions under the first regime, the provisions for making reference by the Assessing Officer to the Principal Commissioner or Commissioner are contained in the first proviso to sub-section (3) of section 143 and the time limitation for the completion of assessment is extended as per the provisions of clause (iii) of Explanation 1 to section 153. However, there was no time limit for such Principal Commissioner or Commissioner to decide on such reference. b) In order to address the above issues, FA 2022 has amended the provisions of section 12AB and fifteenth proviso to clause (23C) of section 10 of the Act as follows: (I) Sub-section (4) of section 12AB of the Act has been substituted with a new sub-section (4) to provide that where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) of section 12AB or clause (b) of sub-section (1) of section 12AA, as the case may .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ty or caste; (e) Any activity being carried out by the trust or the institution under the second regime, (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or (f) the trust or the institution under the second regime has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1) of section 12AB, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality. (III) Sub-section (5) of section 12AB of the Act has been substituted with a new sub-section (5) to provide that the order under clause (ii) or (iii) of sub-section (4) of said section shall be passed before expiry of the period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of sub-section (4); (IV) Similarly, the fifteenth proviso to clause (23C) of section 10 of th .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... day on which the period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) expires. (VI) The term "specified violation" has been defined by inserting an Explanation (Explanation 2) to the fifteenth proviso to clause (23C) of section 10 of the Act to mean the following: - (a) where any income of trust or institution under the first regime has been applied other than for the objects for which it is established; or (b) the trust or institution under the first regime has income from profits and gains of business is not incidental to the attainment of its objectives or separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives; or (c) any activity being carried out by the trust or institution under the first regime- (A) is not genuine; or (B) is not being carried out in accordance With all or any of the conditions subject to which it was notified or approved; or (d) the trust or institution unde .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... proviso to clause (23C) of section 10, and ending with the date on which the copy of the order under clause (ii) or (iii) of fifteenth proviso to clause (23C) of section 10 or clause (ii) or (iii) of sub-section (4) of section 12AB, as the case may be, is received by the Assessing Officer shall be excluded in computing the period of limitation. Applicability: These amendments are effective from 1st April, 2022. 9.4 Bringing consistency in the provisions of two exemption regimes As mentioned earlier, there was a requirement for alignment of certain provisions of the two regimes as they both intend to grant similar benefit. 9.4.1 Accumulation provisions i) Under the provisions of the Act, a trust or institution is required to apply 85% of its income during any previous year. However, if it is not able to apply 85% of its income during the previous year, it is allowed to accumulate such income for a period not exceeding 5 years as per the following provisions, namely: (I) sub-section (2) of section 11 of the Act for the trusts or institution under the second regime; and (II) third proviso to clause (23C) of section 10 of the Act for trusts or institution under the first regime. ii) H .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... cumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11; and (c) the statement referred to in clause (a) of Explanation 3 is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; Accordingly, vide Notification No. 96/2022 (GSR 632(E)) dated 17.08.2022, Rule 17 and Form No. 10 of Income tax Rules, 1962 have been substituted to provide for the statement to be furnished to the Assessing Officer /Prescribed Authority under clause (a) of the Explanation 3 to the third proviso to clause (23C) of section 10 of the Act, 1961 C) inserted a proviso to the proposed Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that in computing the period of five years referred to in sub-clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. D) inserted an Explanation (Explanation 4) to third proviso to claus .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... or second regime, as referred to in clause (d) of proposed Explanation 4 to the third proviso to clause (23C) of section 10. Applicability: These amendments will be effective from 1st April, 2023 and accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. 9.4.2 Bringing consistency in the provisions relating to payment to specified person i) Under section 13 of the Act, trusts or institutions under the second regime are required not to pass on any unreasonable benefit to the trustee or any other specified person. FA 2022 has inserted twenty first proviso in clause (23C) of section 10 of the Act to provide that where the income or part of income or property of any trust or institution under the first regime, has been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of section 13, such income or part of income or property shall be deemed to be the income of such trust or institution under the first regime of the previous year in which it is so applied. The provisions of sub-section (2), (4) and (6) of section 13 of the Act shall also apply to trust or institution under the first regime. Applicability: Th .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... he time allowed under that section, then provisions of sections 11 and 12 are not applicable. However, there was no similar provision in the first regime. ii) Hence, FA 2022 has inserted twentieth proviso to clause (23C) of section 10 of the Act to provide that for the purpose of exemption under this clause, any trust or institution under the first regime is required to furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under that section. Applicability: This amendment will be effective from the 1st April, 2023, and accordingly, applies in relation to the assessment year 2023-24 and subsequent assessment years. 9.4.5 Approval under clause (23C) of section 10 to be in-operative in case of notification under clause (46) of section 10 i) Finance Act, 2020 had inserted first proviso to sub-section (7) of section 11 of the Act to provide that the registration under Section 12A or 12AA or 12AB) shall become inoperative from the later of: (i) date on which such trust or institution is approved under clause (23C) of section 10 or clause (46) of section 10 of the Actor, (ii) the date on .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... receipts could be subject to tax and no deduction for any application would have been allowed. iii) In order to bring clarity in the computation of the income chargeable to tax in such cases, FA 2022 has: (a) inserted sub-section (10) in section 13 of the Act to provide that where the provisions of sub-section (8) are applicable to any trust or institution under the second regime or such trust or institution violates the conditions prescribed under clause (b) or clause (ba) of subsection (1) of section 12A. its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of the trust or institution, subject to fulfilment of the following conditions, namely :- (i) such expenditure is not from the corpus standing to the credit of such trust or institution as on the last day of the financial year immediately preceding the previous year relevant to the assessment year for which the income is being computed; (ii) such expenditure is not from any loan or borrowing; (iii) claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income in the s .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... rd proviso in clause (23C) of section 10 of the Act to provide that for the purposes of computing income chargeable to tax under twenty second proviso, no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any other provision of the Act. Applicability: These amendments will be effective from 1st April, 2023 and accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. 9.5.2 Taxation of certain income of the trusts or institutions under both the regimes at special rate Following incomes of the trusts or institutions are chargeable to tax, under different provisions of the Act: (a) The trusts or institutions under the first or second regime are required not to pass on any unreasonable benefit to the trustee or any other specified person. For the trusts or institutions under the second regime, clause (c) of sub-section (1) of section 13 of the Act provides that the entire exemption shall be denied to the trust irrespective of the amount of benefit passed on. For trusts or institutions under the first regime similar provisions has been provided by way of insertion of twentieth proviso to .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... of taxation of such income. Further, there was need for special provision to ensure that the income applied in violation is taxed at special rate without deduction. Accordingly, in order to rationalise the provisions, the FA 2022 has: (a) amended clause (c) of sub-section (1) of section 13 of the Act to provide that only that part of income which has been applied in violation to the provisions of the said clause shall be liable to be included in total income. (b) inserted twenty first proviso in clause (23C) of section 10 to specifically provide that where the income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of the said clause, or any part of the such income or property, has been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of section 13, such income or part of income or property shall be deemed to be income of such fund or institution or trust or university or other educational institution or hospital or other medical institution of the previous year in which .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... otal income under clause (c) of subsection (1) of section 13; or (v) any income applied outside India and which is not excluded from total income under clause (c) of sub-section (1) of section 11. Applicability: These amendments will be effective from 1st April, 2023 and accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. 9.5.3 Voluntary Contributions for the renovation and rep air of temples, mosques, gurudwaras, churches etc notified under clause (b) of sub-section (2) of section 80G i) Donations for the renovation and repair of temples, mosques, gurudwaras, churches etc notified under clause (b) of sub-section (2) of section 80G of the Act are received for specific purposes. However, prior to the amendments made vide FA 2022, it was not clear if such donations are treated as corpus donations or are required to be applied or can be accumulated for a maximum period of 5 years. ii) In order to provide clarity, FA 2022 has inserted Explanation 3A in sub-section (1) of section 11 of the Act to provide that where the property held under a trust or institution includes any temple, mosque, gurdwara, church or other place notified under clause (b .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... y trust or institution referred to in sub-clause (v) has treated any sum received by it as forming part of the corpus and subsequently any of the conditions specified in clause (a), (b), (c) or clause (d) thereof are violated, such sum shall be deemed to be the income of such trust or institution of the previous year during which the violation takes place. Applicability: These amendments are effective retrospectively from 1st April, 2021 and accordingly apply in relation to the assessment year 2021-22 and subsequent assessment years. 9.5.4 Clarifying that application will be allowed only when its actually paid (i) Trust or institutions under both the regimes are required to apply 85% of their income for the purposes specified. As is evident from the word "application", it means actually paid. This is the position which has been held by different courts also. Accordingly FA 2022 has clarified by way of insertion of Explanations "[Explanation 3 to clause (23C) of section 10 and Explanation to section 11] to provide that any sum payable by any trust under the first or second regime shall be considered as application of income in the previous year in which such sum is ac .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... f such trust or institution. (iii) In view of the above amendments made vide FA 2022, clause (x) of sub-section (2) of section 56 of the Act could be interpreted in a manner that where any unreasonable benefit is passed on by any trust or institution under the first or second regime to any person referred to in sub-section (3) of section 13, the provisions of clause (x) of subsection (2) of section 56 may not be applicable. However, that is not the intention of the law. (iv) In view of the above, FA 2022 has inserted a proviso to clause (x) of sub-section (2) of section 56 to provide that the exemption provided in item (VI) and item (VII) of the first proviso to clause (x) of section 56 in respect of any money or property received from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10 or from any trust or institution registered under section 12A or section 12M or section 12AB shall not apply where any sum of money or any property has been received by any person referred to in sub-section (3) of section 13. Applicability: This amendment will be effective .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from the 1st April, 2021, whereby the deduction claimed by the donor under this section was disallowed in case the donee fails to furnish the statement of donations. ii) Hence, FA 2022 has amended sub-section (1A) of section 35 of the Act to provide that the deduction claimed by the donor with respect to the donation given to any research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of sub-section (1) of section 35 of the Act shall be disallowed unless such research association, university, college or other institution or company files the statement of donations. Applicability: This amendment is effective retrospectively from 1st April, 2021 and shall be applicable to AY 2021-22 and subsequent assessment years. 10. Clarification in respect of disallowance under section 14A in absence of any exempt income during an assessment year 10.1 Section 14A of the Act provides that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income that does not fo .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... to exempt income, notwithstanding anything to the contrary contained in any other provisions of this Act. Applicability: This amendment is effective from the 1st day of April, 2022. 11. Exemption of amount received for medical treatment and on account of death due to Covid-19 11.1 Clause (x) of sub-section (2) of section 56 of the Act, inter alia, provides that where any person receives, in any previous year, from any person or persons any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum shall be the income of the person receiving such sum. However, certain exceptions have been provided in the clause for transactions specified therein. 11.2 Clause (2) of section 17 of the Act. inter alia. provides the definition of ·perquisite··. However, certain exceptions have been provided which shall not be considered as perquisites. 11.3 The Finance Ministry had released a press statement dated 25.06.2021 wherein it was announced that income tax shall not be charged on the amount received by a taxpayer from employer or from any person for treatment of COVID-19 during FY 2019-20 and .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person; (ii) any sum of money received by a member of the family of a deceased person, from the employer of the deceased person (without limit), or from any other person or persons to the extent that such sum or aggregate of such sums does not exceed ten lakh rupees, where the cause of death of such person is illness relating to COVID-19 and the payment is, received within twelve months from the date of death of such person, and subject to such other conditions, as may be notified by the Central Government, shall not be the income of such person. 11.6 Further, for the purpose of both of the said clauses, it has been provided that "family" in relation to an individual shall have the same meaning as assigned to it in Explanation 1 to clause (5) of section 10. The conditions in regard to the newly inserted clause (XII) of the first proviso of clause (x) of sub-section (2) of section 56 of the Act have been notified vide CBDT's Notification No. 91/2022 (SO 3703E) dated 05.08.2022 and the conditions in regard to the newly inserted clause (XI II) of the first proviso of .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ny other person or persons, on account of death due to COVID-19 for the purposes of clause (XIII) of the first proviso to clause (x) of sub-section (2) of section 56 of the Act shall be verified and furnished in Form A. Further, the details of the amount received in any financial year shall be furnished in Form A to the Assessing Officer within nine months from the end of such financial year or 31.12.2022, whichever is later. 11.10 Applicability: This amendment is effective retrospectively from the 1st April, 2020 and accordingly, applies in relation to the assessment year 2020-21 and subsequent assessment years. 12 Clarifications on allowability of expenditure under section 37 12.1 Section 37 of the Act provides for allowability of revenue and non-personal expenditure (other than those failing under sections 30 to 36) laid out or expended wholly and exclusively for the purposes of business or profession. Explanation 1 of sub-section (1) of section 37 of the Act provides that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... vested in it, s. 37(1) comes into play. The Petitioner's contention that the circular goes beyond the section is not acceptable. In case the assessing authorities are not properly understanding the circular then the remedy lies for each individual assesses to file an appeal but the circular which is totally in line with s. 3 7(1) cannot be said to be illegal. If the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the AO that the expense is not in violation of the Medical Council Regulations." 12.5 After this there have been various judgments of Income-tax Appellate Tribunals. Some of these judgments have held that these expenses to be not allowable under sub-section (1) of section 37 the Act, while others holding it lo be allowable. The latest judgment on this issue is from ITAT Mumbai in the case of Macleods Pharmaceuticals delivered on 14th October 2021 in ITA Nos. 5168 & 5169/Mum/2018. In this judgment ITAT held that the action of the assessing officer in disallowing the expenditure deserves to succee .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... the case of Liva Healthcare Ltd, (2016) 161 ITD 63 (Mum) where the Hon'bte Mumbai ITAT has held that the CBDT circular dated 01.08.2012 is merely a clarification in nature and creates a bar on such illegal payments being against public policy, the said bar always existed in the statute by virtue of the existence of Explanation of Section 37 of the Income-tax Act which was inserted by Finance Act, 1998 w.e.f. 01-04-1962. it was also noted that in Hon'ble AP High Court's full bench decision in the case of CIT vs B R Constructions (1993) 202 ITR 222 (AP- FC) their Lordships have observed that a "precedent ceases to be a binding precedent... (iii) when it is inconsistent with the earlier decisions of the same rank; and (iv) when it is rendered per incuriam". Clearly, therefore, the decisions which disregard earlier binding decisions on the same issue, "cease to be a binding judicial precedent". v. ITAT also noted that Hon'ble Delhi High Court in the case of Max Hospital vs Medicar Council of India (WP No. 1334 of 2013; judgment dated 10th January 2014), in which it was held that the provisions of Medical Council of India only bind the medical profes .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... erefore has to succeed. I hereby issue a writ of certiorari quashing the adverse observations passed by the MCI against the Petitioner hospital highlighted in Para 1 above." ITAT thus held that in their humble understanding, the judgment of Delhi High Court does not negate, dilute, or even deal with, ratio decidendi of, or even casual observations In, Hon'ble HP High Court's judgment in the case of Confederation of Indian Pharmaceutical Industry (discussed earlier). These judgments are in altogether in different field. vi. ITAT thus noted that while Hon'ble HP High Court dealt with the interpretation of Explanation to sub-section (1) of section 37, Hon'ble Delhi High Court dealt with the powers of the MCI to pass an order against a Hospital in Delhi on the question of adequacy regarding infrastructure facilities by Hospitals in Delhi, and that too without affording an opportunity of hearing to the said hospital. Hon'ble Delhi High Court judgment in Max Hospitals case has no bearing on the question as to whether giving benefits to the medical professionals is in violation of law or not. ITAT further noted that it is also well settled in law, including by Hon .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... time to time, read with section 20A of the Indian Medical Council Act 1956, can be allowed as a deduction under section 37(1) of the Income Tax Act, 1961 read with Explanation thereto, in the hands of the pharmaceutical companies. 12.6 Thus, the legal position is clear that the claim of any expense incurred in providing various benefits in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section sub-section (1) of section 37 of the Act being an expense prohibited by the law. Delhi High Court decision which was relied upon by ITAT in some decisions was in completely different context as discussed by ITAT Mumbai in their judgment in the case of Macleods Pharmaceuticals. These ITAT decisions allowing such expenditure were clearly not in line with the intention of the legislation. 12.7 Further, some taxpayers were seen to be claiming deduction on expenses incurred for a purpose which is an offence under foreign law or for compounding of an offence for violation of foreign law, claiming that provisions of Explanation 1 to subsection (1) of section 37 of the Act applies only to offences which .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... f any business or profession or assessed at a proportion of. or otherwise on the basis of, any such profits or gains shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". 13.2 However, It was seen that certain taxpayers were claiming deduction on account of 'cess' or 'surcharge' under section 40 of the Act claiming that 'cess' has not been specifically mentioned in the aforesaid provisions of section 40(a)(ii) of the Act and, therefore, cess is an allowable expenditure. This view was upheld by Courts in a few judgments. Further, Courts were also relying upon the CBDT Circular No. 91/58/66-ITJ(19) dated 18-05-1967. 13.3 The assessees were relying upon the decision of the Hon'ble Bombay High Court in the case of "Sesa Goa Limited vs JClT" (2020) 117 taxmann.com and further on the decision of the Hon'ble Rajasthan High Court in the case of "Chambal Fertilizers & Chemicals Ltd vs JCIT": D.B Income-tax Appeal No. 52/2018 decided on 31-07-2018 . In these decisions, the Hon'ble High Courts relied upon the aforesaid CBDT Circular Dt. 18-05-1967 and held tha .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ax". 21. The Hon'ble Supreme Court, therefore, has decided the issue in favour of the revenue and held that surcharge and additional surcharge are part of the income tax. At this stage, it is pertinent to mention here that 'education cess' was brought in for the first time by the Finance Act, 2004, wherein it was mentioned ss under:- " An additional surcharge, to be called the Education Cess to finance the Government's commitment to universalise qualify basic education, is proposed to be levied at the rate of two per cent on the amount of tax deducted or advance tax paid, inclusive of surcharge." 22. The provisions of the Finance Ad 2011 relevant to the Assessment Year under consideration i.e. 2012-13 are also relevant. For the sake of ready reference, the same is reproduced hereunder:- 2(11) The amount of income-tax as specified in sub-sections (1) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the "Education Cess on income-tax", calculated at the rate of two per cent, of such income-tax .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ay please be brought to the notice of all the ITOs so that further litigation on this account may be avoided." 13.6 In the above referred Circular issued by CBDT, 'Cess' is to be allowed under sub- clause (ii) of clause (a) of section 40 of the Act. However, it is to be noted that 'Cess' is imposed not only by the Central Government through the Finance Act for a financial year, but also by various State Governments. It is pertinent to mention that in the above referred Circular of CBDT, there is no reference to the 'Cess' imposed by the Central Government through the Finance Act for a particular year. This CBDT circular needs to be seen from the perspective that "Education Cess" imposed by Finance Act 2004 and subsequent Acts and then designated as "Education and Health Cess" are actually tax in the form of additional surcharge, as slated clearly in each of the relevant Finance Act imposing such "Cess". It is only called "Cess" since they were imposed for a particular purpose of fulfilling the commitment of the Government to provide and finance quality health services and universalized quality basic education and .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... t of co-ordinate jurisdiction which covered the case before it. in which case It must be decided which case to follow; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force." 13.9 From the above discussion it may be seen that the interpretations of two High courts and various ITATs are against the intention of legislature and not in line with the judgment of Hon'ble Supreme Court. Hence, in order to make the intention of the legislation clear and to make it free from any misinterpretation. Explanation 3 has been inserted retrospectively in sub-clause (ii) of clause (a) of section 40 of the Act to clarify that for the purposes of this sub-clause, the term "tax" includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Amendment has been made retrospectively to make clear the position irrespective of the circular of the CBDT. 13.10 Enabling provisions have been made in the Act with the insertion of sub-section (18) of section 155 which provides that where any .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... a deduction of any sum, being interest payable on loan or borrowing from specified financial institution/NBFC/scheduled bank or a co-operative bank under clause (d), clause (da), and clause (e) of this section respectively, shall be allowed if such interest has been actually paid and any interest referred to in these clauses which has been converted into a loan or borrowing or advance shall not be deemed to have been actually paid. 14.2 However, certain taxpayers were claiming deduction under section 43B on account of conversion of interest payable on an existing loan into a debenture on the ground that such conversion was a constructive discharge of interest liability and, therefore, amounted to actual payment which has been upheld by several Courts. 14.3 Such interpretation is against the intent of legislation. The section was introduced to curb the mischief of claiming deduction by the assessee, without paying interest to financial institutions/NBFC/scheduled bank or a co-operative bank. Section 43B makes a departure from other sections in the Act, as indicated by its non-obstante clause. Under the provisions of this section conversion of the outstanding interest liability into .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... relation to the assessment year 2021-22 and subsequent assessment years. 16. Cash credits under section 68 16.1 Section 68 of the Act provides that where any sum is found to be credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 16.2 The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added to the total income of the person. Certain judicial pronouncements have created doubts about the onus of proof and the requirements of this section, particularly, in cases where (he sum which is credited is loan or borrowing. 16.3 It is noticed that there is a pernicious practice of conversion of unaccounted money by crediting it to the books of assessees through a masquerade of loan or borrowing. 16.4 Vide Finance Act, 2012, It was provided .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... n which the provisions of sub-section (1) shall not apply. 17.2 II order to facilitate the strategic disinvestment of public sector companies, section 79 of the Act has been amended to provide that (he provisions of sub-section (1) of section 79 shall not apply to an erstwhile public sector company subject to the condition that the ultimate holding company of such erstwhile public sector company, immediately after the completion of strategic disinvestment, continues to hold, directly or through its subsidiary or subsidiaries, at least fifty one per cent of the voting power of the erstwhile public sector company in aggregate. 17.2.1 It has also been provided that if the above condition is not complied with in any previous year after the completion of strategic disinvestment, the provisions of sub-section (1) shall apply for such previous year and subsequent previous years. 17.2.2 The terms "erstwhile public sector company" and "strategic disinvestment" shall have the meaning assigned to in clause (ii) and (iii) of the Explanation to clause (d) of sub- section (1) of Section 72A respectively. 17.3 Applicability: This amendment is effective from 1st April, 2022 and .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... d income" has been defined for the above purpose as- (i) any income of the previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132 or a requisition made under section 132A or a survey conducted under section 133A. other than that conducted under sub-section (2A) of section 133A, which has- (a) not been recorded on or before the date of search or requisition or survey, in the books of account or other documents maintained in the normal course relating to such previous year; or (b) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search or requisition or survey, or (ii) any income of the previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the previous year which is found to be false and would not have been found to be so, had the search or the survey not been conducte .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... nt of the death of the individual or the member of the HUF in whose name subscription to the scheme has been made. 20.3 Sub-section (3) of the aforesaid section provides that if the dependant with disability predeceases the individual or the member of the HUF, the amount deposited in such scheme shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year. 20.4 In the Writ Petition No. 1107 of 2017 Ravi Agrawal vs Union of India and Another , Hon'ble Supreme Court observed that there could be cases where handicapped dependants may need payment of annuity or lump sum amount even during lifetime of their parents/guardians. It was further observed that the Centre may take into consideration all the aspects, including those where a disabled dependant might need payment on annuity or lump sum amount even during the lifetime of the parents or guardians. 20.5 Therefore, in order to remove this genuine hardship, the section has been amended to provide that deduction under the said section can also be allowed during the lifetime, i.e., upon attaining t .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ers and tax officials. The faceless procedures are being introduced in a phased manner in the Act. 22.2 As part of this process of making the tax administration transparent and efficient, provisions for notifying faceless schemes under sections 92CA, 144C, 253 and 264A were introduced in the Act through Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from 01.11.2020 and under section 255, was inserted through Finance Act, 2021 with effect from 01.04.2021: S.No. Section Scheme Date of Limitation 1. 92CA Faceless determination of arm's length price 31st day of March, 2022 2. 144C Faceless Dispute Resolution Panel 31st day of March, 2022 3. 253 Faceless appeal to Appellate Tribunal 31st day of March, 2022 4. 255 Faceless procedure of Appellate Tribunal 31st day of March, 2023 22.3 Section 92CA and section 144C are principally related to the transfer pricing functions and international taxation which are presently out of the regime of faceless assessment. New schemes for these two functions are a part of the assessment function and should follow the faceless assessment procedure, wherein certain modifications are proposed which will ha .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... nsion of the last date for commencement of manufacturing or production, under section 115BAB, from 31.03.2023 to 31.03.2024 24.1 Section 115BAB of the Act provides for an option of concessional rate of taxation at 15 per cent, for new domestic manufacturing companies provided that they do not avail of any specified Incentives or deductions and fulfil certain other conditions. 24.2 Sub-section (2) of section 115BAB of the Act contains the conditions required to be fulfilled by such companies. Prior to amendments made vide FA 2022, clause (a) of said sub-section (2) provided that the new domestic manufacturing company is required to be set up and registered on or after 01.10.2019, and is required to commence manufacturing or production of an article or thing on or before 31st March, 2023. 24.3 The intent of the introduction of section 115BAB was to attract investment, create jobs and trigger overall economic growth. However, the cumulative impact of the persistence of the COVID-19 pandemic resulted in some delay in setting up/registration of new domestic companies and the commencement of manufacturing or production by such companies, if they have been set up and registered. 24.4 In o .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... nt year 2023-24 and subsequent assessment years. 27. Amendment in the provisions of section 119 of the Act 27.1 Section 119 of the Act empowers the Board to issue orders, instructions and directions to other income-tax authorities for proper administration of the Act. Clause (a) of sub-section (2) of the said section gives powers to the Board to provide relaxation of provisions of certain sections of the Act such as 115P, 115S, 115WD, 139, 211, 234A, 234B, 234C, 234E etc. by way of general or special orders, in respect of any class of incomes or class of cases, for the purpose of proper administration of the work of assessment or collection of revenue or initiation of proceedings for the imposition of penalties and such other issues, in public interest. 27.2 Section 234F of the Act which falls under Chapter XVII-F provides that in case a person fails to furnish return of income under section 139 within the prescribed time, he shall be liable to pay a fee of five thousand rupees. Currently this section is not expressly mentioned in clause (a) of sub-section (2) of section 119 of the Act. 27.3 While this section acts as a deterrent against those who do not comply with obligations imp .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... company/auditable case and 1 month to an assessee who enters into an international transaction or specified domestic transaction respectively, in a financial year to file belated or revised return. This additional timeline for filing a revised/belated return may not be adequate when we factor in utilization of huge information and data available coupled with the "nudge approach" that motivates the taxpayer towards the desired objective of voluntary tax compliance, starting with filing of correct tax returns. 28.4 Hence, a new provision is introduced in section 139 for filing an updated return of income by any person, whether he has filed a return previously for the relevant assessment year, or not. This provision for updated return over a period longer than that is provided in the existing provisions of the Act would on the one hand bring use of huge data with the IT Department to a logical conclusion resulting in additional revenue realization and on the other hand, it will facilitate ease of compliance to the taxpayer in a litigation free environment. 28.5 Through this provision, taxpayers are given some more time under the Act to file particulars of their income for a .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... oned under section 132 or section 132A in the case of any other person belongs to such person, or (d) a notice has been issued to the effect that any books of account or documents, seized or requisitioned under section 132 or section 132A in the case of any other person, pertain or pertains to, or any other information contained therein, relate to, such person, for the assessment year relevant to the previous year in which such search is initiated or survey is conducted or requisition is made and two assessment years preceding such assessment year. (iv) also, no updated return shall be furnished by any person for the relevant assessment year, where, (a) an updated return has been furnished by him under sub-section (8A) of section 139 of the Act for that relevant assessment year, or (b) any proceeding for assessment or reassessment or recomputation or revision of income under the Act is pending or has been completed for the relevant assessment year in his case, or (c) the Assessing Officer has information in respect of such person for the relevant assessment year in his possession under the Prevention of Money Laundering Act, 2002 or the Black Money (Undisclosed Foreign Income and A .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... or any delay in furnishing the return or any default or delay in payment of advance tax, along with the payment of additional tax. The tax payable shall be computed after taking into account the following:- (i) the amount of tax, if any, already paid as advance tax; (ii) any tax deducted or collected at source; (iii) any relief of tax claimed under section 89; (iv) any relief of tax or deduction of tax claimed under section 90 or section 91 on account of tax paid in a country outside India; (v) any relief of tax claimed under section 90A on account of tax paid in any specified territory outside India referred to in that section; and (vi) any tax credit claimed to be set off in accordance with the provisions of section 115JAA or section 115JD. Such updated return shall also be accompanied by proof of payment of such tax, additional tax, interest and fee. II. In the case of an assessee, where, return of income under sub-section (1) or subsection (4) or sub-section (5) of section 139 (referred to as earlier return) has been furnished by an assessee, he shall before furnishing the return under sub-section (8A) of section 139, be liable to pay the tax due together with interest and fee .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... It is clarified that all other subsequent non-compliances under the Act, if any, shall be dealt with as per the relevant provisions of the Act. It is also clarified that for the purposes of computation of "additional income-tax", tax shall include surcharge and cess, by whatever name called, on such tax. IV. It is further provided that notwithstanding anything contained in the Explanation 1 to section 234B, in the cases where an earlier return has been furnished, interest payable under section 234B shall be computed an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid falls short of the assessed tax, where, "assessed tax" means the tax on the total income as declared in the return to be furnished under sub-section (8A) of section 139, after taking into account the following: (i) the amount of relief or tax, referred to in sub-section (1) of section 140A, the credit for which has been taken in the earlier return; (ii) tax deducted or collected at source, in accordance with the provisions of Chapter XVII-B, on any income which is subject to such deduction or collection and which is taken into account in computing .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... the purposes of this section. 29.2 Through Taxation and Other Laws (Amendment and Relaxation of Certain Provisions) Act, 2020, the Explanation was amended to provide that any income-tax authority who is subordinate to the Principal Director General of Income-tax (Investigation) or the Director General of Income-tax (Investigation) or the Principal Chief Commissioner of Income-tax (TDS) or the Chief Commissioner of Income-tax (TDS), as the case may be, shall only be considered as income-tax authorities for the purposes of section 133A. 29.3 Explanation to section 133A of the Act is amended to provide that income tax authority shall be sub-ordinate to Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner, as the case may be, specified by the Board. 29.4 Applicability: This amendment is effective from 1st April, 2022. 30. Amendment in Faceless Assessment under section 144B 30.1 The Central Government has undertaken a number of measures to make the processes under the Act electronic, by eliminating person to person interface between the taxpayer and the Department to the extent technologically feasible, and provide for optimal utilisation .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... f property, withdrawal of registration, approval, exemption or any other technical matter by referring to the Technical Unit (TU) and the request shall be assigned by the NaFAC to a TU through an automated allocation system. (e) The assessee or any other person, as the case may be, shall file his response in compliance to the said notice served by NaFAC, at the request of AU, to the NaFAC which shall forward the reply to the AU. If the assessee fails to comply with the said notice seeking information served by NaFAC, or the earlier notice under sub-section (2) of section 143 or under sub-section (1) of section 142, the NaFAC shall intimate the same to the AU. The AU shall serve upon the assessee, through NaFAC, a show cause notice under section 144 giving him the opportunity to explain as to why the assessment in his case should not be completed to the best of its judgement. Further any report received by the NaFAC, from the VU or TU shall also be forwarded to the AU. (f) The assessee shall file his response to the show-cause notice under section 144 of the Act, within the time specified in such notice, to the NaFAC which shall forward the same to the AU. If the assessee fails to r .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... assessee under section 144C, the NaFAC shall convey to the AU to complete the assessment in accordance with such draft order, which shall thereafter pass the final assessment order and initiate penalty proceedings, if any, and send it to the NaFAC. The NaFAC shall serve a copy of such final assessment order, notice for initiating penalty proceedings, if any and the demand notice, specifying the sum payable by, or refund of any amount due to the assessee on the basis of such assessment, to the assessee. (l) An eligible assessee, as referred to in section 144C, shall, upon receiving the draft order served on him as above, shall file his acceptance of the variations proposed in such draft order or file objections, if any, to such variations, with the Dispute Resolution Panel, under section 144C and the NaFAC, within the period specified in sub-section (2) of section 144C. (m) In case the variations proposed in the draft order are accepted by the assessee or not objected to within the time given in sub-section (2) of section 144C, the NaFAC shall intimate the AU of the same, which shall complete the assessment, on the basis of the draft order, within the time allowed under sub-section .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... e purposes of making faceless assessment and the term "assessment unit", wherever used in section 144B, shall refer to an Assessing Officer having powers to the extent so assigned by the Board; (iii) verification units (referred to as VU), as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of verification, which includes enquiry, cross verification, examination of books of account, examination of witnesses and recording of statements, and such other functions as may be required for the purposes of verification and the term "verification unit", wherever used in section 144B, shall refer to an Assessing Officer having powers so assigned by the Board; Further, the function of VU under this section may also be performed by a verification unit located in any other faceless centre set up under the provisions of this Act or under any scheme notified under the provisions of the Act and the request for verification may also be assigned through the National Faceless Assessment Centre to such VU; (iv) technical units (referred to as TU), as it may deem necessary to facilitate the conduct of faceless assessment, to perform the .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... celess assessment, an electronic record shall be authenticated by the NaFAC by way of an electronic communication, by the AU or VU or TU or RU, as the case may be, by affixing digital signature and by the assessee or any other person, by affixing his digital signature or under electronic verification code, or by logging into his registered account in the designated portal. Every notice or order or any other electronic communication shall be delivered to the addressee, being the assessee, by way of placing an authenticated copy thereof in the registered account of the assessee or by sending an authenticated copy thereof to the registered email address of the assessee or his authorised representative or by uploading an authenticated copy on the assessee's Mobile App, and followed by a real time alert. (u) The section further seeks to provide that the assessee shall file his response to any notice or order or any other electronic communication, through his registered account, and once an acknowledgement is sent by the NaFAC containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated. The time and place of dispatch a .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ase may be, in charge of the NaFAC shall, with the prior approval of the Board, lay down the standards, procedures and processes in the specified manner for effective functioning of the NaFAC and the units set up, in an automated and mechanised environment. (y) The section also seeks to provide that if at any stage of the proceedings before it, the AU having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of accounts, multiplicity of transactions in the accounts or specialized nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary to do so, it may, upon recording its reasons in writing, refer the case to the NaFAC stating that the provisions of sub-section (2A) of section 142 may be invoked in the case. The Principal Chief Commissioner or the Principal Director General, as the case may be, in charge of the NaFAC shall, in accordance with the procedure laid down by the Board in this regard, if he considers appropriate that the provisions of sub-section (2A) of section 142 may be invoked in the case, forward the reference received from the AU to the Principal Chief .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... lia, sections 147, section 148, section 149 and also introduced a new section 148A in the Act. In cases where search is initiated under section 132 of the Act or books of account, other documents or any assets are requisitioned under section 132A of the Act, on or after 1st April, 2021, assessment or reassessment is now made under sections 143 or 144 or 147 of the Act after the amendment of the Act by Finance Act, 2021. 31.2 As a part of the government's policy related to simplification of procedures under the Act, amendments have now been brought in through FA 2022 to- (i) insert a new proviso in section 148 of the Act to the effect that approval to issue notice under that section shall not be required to be taken by the Assessing Officer if he has passed an order under section 148A(d) with the prior approval of the specified authority in that case stating that the income is escaping assessment. (ii) to omit the requirement of approval of specified authority in clause (b) of section 148A. Applicability: These amendments are effective from 1st April, 2022. 31.3 To correct the inadvertent drafting errors and align the provisions with the intent of the section, amendments have be .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... on 153, by inserting a new clause to provide for exclusion of the period of limitation for the purpose of assessment, reassessment or recomputation, (not exceeding one hundred eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the date on which the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee, in whose case such search is initiated or such requisition is made or to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to or to whom any books of account or documents seized or requisitioned, pertains or pertain to, or any information contained therein, relates to; (v) amend section 153B, by inserting a new clause to provide for exclusion of the period (not exceeding one hundred eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the dat .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ery such assessment year for assessment, reassessment or recomputation, as the case may be. (iv) to provide that the provisions of the section 148A shall not apply in cases where the Assessing Officer has received any information under the scheme notified under section 135A, pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee. Applicability: These amendments are effective from 1st April, 2022. 32. Amendment of section 153 to extend time barring date in assessment 32.1 Sub-section (1) of the section 153 of the Act provides the time-line for completion of assessment proceedings under sections 143 and 144 of the Act. As per the provisions of the said section the time-limit for completion for assessment for A.Y. 2020-21 is 12 months from the end of the relevant A.Y., that is 31st March, 2022. The assessment is now being conducted in a faceless manner as per the provisions of section 144B of the Act. The proceedings are carried out on the ITBA and the shift to faceless assessment has mandated new functionalities in the ITBA. The development as well as implementation of these functionalities has been delayed which has resulted in .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ver u/s 153C to the Assessing Officer having jurisdiction over such other person during the financial year 2020-21, the assessment in such cases shall be made on or before 30th September, 2022 as opposed to 31st March, 2022. 33.4 Applicability: This amendment is proposed to be effective retrospectively from 1st April 2021. 34. Litigation management when in an appeal by revenue an identical question of law is pending before jurisdictional High Court or Supreme Court. 34.1 Section 158AA of the Act provides that where the Commissioner or Principal Commissioner is of the opinion that any question of law arising in the case of an assessee (relevant case) is identical with a question of law arising in his case for another assessment year (other case) which is pending in appeal before the Supreme Court against an order of High Court which was in favour of assessee, he may direct the Assessing Officer to make an application to the Appellate Tribunal stating that an appeal on the question of law in the relevant case may be flied when the decision on the question of law becomes final in the other case, subject to the acceptance of the same by the assessee. 34.2 If such a principle could be a .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... rovisions contained in sub-section (2) of section 253 or in sub-section (2) of section 260A. 34.5 Accordingly, vide Notification no. 83/2022 (GSR 537E) dated 12.07.2022, rule 16 has been inserted in the Income-tax Rules to prescribe Form no. 8A for making an application under this provision. 34.6 Furthermore, where the order of the Commissioner (Appeals) or the order of the Appellate Tribunal, as the case may be, in the relevant case is not in conformity with the final decision on the question of law in the other case as and when such order is received, the Commissioner or Principal Commissioner may direct the Assessing Officer to appeal within Sixty days to the Appellate Tribunal or within one hundred and twenty days to the jurisdictional High Court or the Supreme Court, as the case may be, against such order. 34.7 For the purposes of the proposed section, "collegium" shall comprise of two or more Chief Commissioners or Principal Commissioners or Commissioners of Income-tax, as specified by the Board in this regard. Consequently, an order dated 28.09.2022 was issued by CBDT specifying that such collegium shall be constituted by Pr.CCIT (IT&TP) for IT&TP jurisdict .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... carried on and are often completed on the predecessor entities only. Courts have held such proceedings and consequent assessments illegal as the predecessor assessee ceases to exist in the midst of a perfectly valid and legal proceeding. 35.3 Hence, till the decision of the court is received, the proceedings of the Act have to be continued in the case of the predecessor only and such proceedings once completed, cannot become illegal as a result of subsequent order of any court. Therefore, with a view to clarify that such proceedings under the Act are valid, a new sub-section (2A) is inserted in section 170, to provide that the assessment or other proceedings pending or completed on the predecessor in the event of a succession, shall be deemed to have been made on the successor. 35.4 Further, it is seen that post such reorganisation, the affairs of the successor entity go through a complete change with effect from the date from which such reorganisation takes place. However, due to the indefinite timeline involved in issuing such orders, there is a gap between the effectivity of such order and the date on which such order is issued by the competent authority. This also affects the .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... le for the payment of such tax with certain conditions. However, the title of the section inadvertently refers to the liability of directors of private company in liquidation. 36.2 The liability of directors of a private company under this section is not conditional upon the company being in liquidation and the section makes no reference to liquidation. Therefore, to make the title of the section uniform with its provisions, the title of the section is amended to 'Liability of directors of private company". 36.3 Further, Explanation to the section clarifies that the expression "tax due" in the section includes penalty, interest or any other sum payable under the Act. In order to avoid unnecessary litigation and to provide further clarity, the word "fees" is inserted in the scope of the expression "tax due" under Explanation to the section. 36.4 Applicability: These amendments are effective from 1st April, 2022. 37. Consequence for failure to deduct/collect or payment of tax 37.1 Computation of interest under section 201 of the Act deals with the consequences of persons who fail to deduct tax or after deducting, fail to deposit the same to the .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... come under sub-section (1) of section 139 of the Act has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years. Government has provided online utility to taxpayers to check whether the person is specified person or not. 38.3 Further, the provisions of section 206AB of the Act were not applicable in relation to transactions on which tax is to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act. 38.4 In order to ensure that all the persons in whose case significant amount of tax has been deducted do furnish their return of income, the two years requirement has been reduced to one year by amending sections 206AB and 206CCA of the Act. It has been provided that "specified person" means a person who has not filed its return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is to be deducted or collected, as the case may be, and the amount of tax collected and deducted at source is Rs. 50,000 or more in the said previous year. 38.5 However, in order to reduce the additional burden .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... uty value is also to be considered. Thus, there was inconsistency in the provisions of section 194-IA and sections 43CA and 50C of the Act. 39.3 In order to remove inconsistency, section 194-IA of the Act has been amended to provide that in case of transfer of an immovable property (other than agricultural land), tax is to be deducted at source at the rate of one per cent. of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher. In case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees, then no tax is to be deducted under section 194-IA. 39.4 Stamp duty value shall have the meaning assigned to it in clause (I) of the Explanation to clause (vii) of sub-section (2) of section 56 of the Act. 39.5 Form 26QB (challan-cum-statement) of deduction of tax under section 194-IA has been updated vide Notification no. 67/2022 (GSR 463E) dated 21.06.2022. 39.6 Applicability: This amendment is effective from 1st April, 2022. 40. TDS on benefit or perquisite of a business or profession 40.1 As per clause (iv) of section 28 of the Act, the value of any benefi .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... e financial year in which such benefit or perquisite, as the case may be, is provided. 40.2.4 The Board has been empowered to issue guidelines, with the prior approval of the Central Government, to remove any difficulty arising in giving effect to the provisions of section 194R of the Act and every such guideline issued by the Board shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person providing any such benefit or perquisite. 40.3 Vide circular no 12 of 2022 of CBDT dated 16.06.2022 and circular no.18 of 2022 dated 13.09.2022, the Central Government has issued guidelines for removal of difficulties for operation of section 194R of the Act. Circular no 12 of 2022 dated 16.6.2022 was laid before the Rajya Sabha on 26th July, 2022 and the Lok Sabha on 1st August, 2022. 40.4 Form 26Q and rule 31A of Income-Tax Rules 1962 have been amended vide G.S.R. 463(E) Notification no. 67/2022 dated 21.06.2022 to also capture details of TDS under section 194R of the Act on benefits and perquisites given in kind. 40.5 Applicability: This amendment is effective from 1st July, 2022. 41. Amendment in section 245MA of the Act related to Dis .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... ach the Assessing Officer with such request. He has to necessarily enter the appellate process by filing an appeal before the Commissioner (Appeals). At the same time, the agreement or arrangement, under which the tax has been deducted and paid, is not brought on the record of the Assessing Officer or examined by him. 42.3 In view of the above. a new section 239A has been inserted in the Act to, inter alia, provide that such a person, who has made the deduction of tax under an agreement or arrangement in writing and borne the tax liability, when no tax deduction was required, may file an application for refund of such tax deducted before the Assessing Officer, in such form and such manner as may be prescribed. Accordingly, vide Notification no. 98/2022 (GSR 634E) dated 17.08.2022, Rule 40G has been inserted in the Income-tax Rules prescribing Form 29D in which such application shall be made. 42.4 Such person can, if he is not satisfied with the order of the Assessing Officer, go into appeal against such order before the Commissioner (Appeals), under section 246A of the Act. Accordingly, the provisions of section 248 of the Act will not apply in cases where the date of tax payment t .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... (3), (5) and (6) have also been carried out. 43.5 Applicability: This amendment is effective from 1st April , 2022. 44.Rationalization of the provisions of sections 271 AAB, 271AAC and 271AAD 44.1 Sections 271AAB, 271AAC and 271AAD of the Act under Chapter XXI of the Act contain provisions which give powers to the Assessing Officer to levy penalty in cases involving undisclosed income in cases where search has been initiated u/s 132 or otherwise, or for false entry etc. in books of account. 44.2 Under Chapter XXI of the Act which deals with penalties, Commissioner (Appeals) has concomitant powers with Assessing Officer to levy penalty in eligible cases under section 270A, section 271, section 271A, section 271AA, section 271G, section 271J which deal with deliberate concealment, non-disclosure and omission by an assessee to evade tax. 44.3 Similarly, sections 271AAB, 271AAC, 271AAD penalise actions pertaining to undisclosed income, unexplained credits or expenditures, or deliberate falsification or omission in books of accounts. Therefore, in order to make deterrence more effective against non-compliance among tax payers, sections 271AAB, 271AAC and 271AAD are amended by enabling .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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..... o, or in relation to, the transfer of any immovable property effected on or after 01 .07.2002. Consequently, prosecution provisions u/s 276AB are not relevant, as launching prosecution against offences committed more than twenty years ago, that is prior to 2002 would be beyond reasonable time. 47.2 Since such cases involve transfer of immovable property, it is not improbable that prosecution cases launched previously while the relevant provisions were still in effect might be ongoing. Therefore, in order to take those cases to logical conclusion without any interpretational issue arising on applicability of the section or otherwise, section 276AB is amended to align it with the provisions of the Act that have been made inapplicable, by providing a sunset clause. Consequently, no fresh prosecution proceeding shall be initiated under this section on or after 1st April, 2022. 47.3 Section 276B provides for prosecution for a term ranging from three months to seven years with fine for failure to pay tax to the credit of Central Government under Chapter XII- D or XVII-B. Under this section, a person shall be punishable for failure to a) deduct the tax as required under the provisions of .....

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Finance Act, 2022 - Explanatory Notes to the Provisions of the Finance Act, 2022 - Income Tax

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