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Justice R.V. Easwar Committee - Recommendations to check or curb litigation/ facilitate speedier disposal - Recommendations to promote ease of doing business and simplify procedures

News and Press Release - Dated:- 20-1-2016 - INTRODUCTORY REMARKS The Central Government issued Notification NoA.50050/112/2015-Ad.I dated 27th October, 2015 constituting a 10-Member Committee under the chairmanship of Justice R.V. Easwar, Former Judge of the Delhi High Court and Former President of the Income Tax Appellate Tribunal with the following broad objectives: (i) to study and identify the provisions/phrases in the Income Tax Act which have given rise to litigation on account of interpr .....

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of recommendations is to be submitted by 31st January, 2016. The Committee met on several occasions and after an involved debate in light of the objectives sought to be achieved listed in the Notification, has prepared the following set of recommendations to be placed in the public domain with a view to seeking the response of the stakeholders. In the course of the discussions and deliberations of the Committee several suggestions, not necessarily similar or consensual, were discussed and the re .....

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me Tax Act, 1961 (hereinafter referred to as the Act ) has been in existence for more than 50 years. Its provisions have come in for interpretation before the High Courts and Supreme Court. Both the revenue department and the tax payers have acted on the basis of such interpretation. Within the time frame given to the Committee to submit its first batch of recommendations, it would have been a stupendous task for the Committee to embark upon an examination of some of the more complex issues even .....

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within the parameters of the mandate) will be dealt with in the next batch of recommendations. Second, the first batch of the recommendations is not necessarily exhaustive in relation to a particular provision of the Act. In other words, even though in relation to a particular section of the Act the Committee may have touched upon certain aspects and made recommendations, it does not preclude the Committee from examining other aspects of the same section and make suitable recommendations in futu .....

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mmary which gives a bird s-eye view of the recommendations. EXECUTIVE SUMMARY Recommendations to check or curb litigation/facilitate speedier disposal (a) Amendments to provide that in cases where shares are shown as capital assets and held for one year or less, the Assessing Officer will not re-characterise the surplus on sale as business income, provided the surplus in a year is rupees five lakhs or less; in case they are held for a period more than one year, and shown as capital assets (and n .....

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nvestment is directly relatable to taxable income. (c) Amendments to Section 50C to bring it in line with Section 43C so far as it relates to agreements for sale of property executed prior to the date of registration of sale deed, fixing the sale price. (d) Amendment to Section 56(2)(viib)(ii) to eliminate taxation of the purchaser of the property on the amount of difference between the sale price and the stamp-duty value. (e) No re-opening or revision of assessments under sections 147 and 263 r .....

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y Tribunal, High Courts or Supreme Court and (ii) if any addition or disallowance is made ad hoc on assumptions or without evidence. (i) Deletion of section 143(1D) - Avoiding undesirable delay in issue of refunds (j) Making of fresh claim during assessment proceedings (k) Stay of disputed demand under certain circumstances (l) Prescribing time limit for disposal of petitions for waiver of penalty and interest under sections 273A, 273AA and 220(2A) Recommendations to promote ease of doing busine .....

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es for lower deduction under section 197 (d) Proposal for certain amendments in rule 37BA to obviate hardships arising in relation to claiming of credit for tax deducted under section 199 (e) Proposal for certain amendments in rule 30 and 31 in relation to time and mode of payment of TDS and filing of statement of TDS under the provisions of section 200 (f) Rationalisation of the provisions for maintenance of books of account and tax audit. (g) A presumptive income scheme for professionals (h) D .....

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ns relating to set off of refunds due to an assessee (m) Release of property attached under section 281B on submission of bank guarantee PART 1 RECOMMENDATIONS REQUIRING STATUTORY AMENDMENTS 1.1 AMENDMENT RECOMMENDED TO SECTION 2(14) TO PROVIDE CLARITY REGARDING TAXABILITY OF SURPLUS ON SALE OF SHARES & SECURITIES - CAPITAL GAINS OR BUSINESS INCOME Section 2(14) of the Act defines the term capital asset to include property of any kind held by an assessee, whether or not connected with his bu .....

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slative guidance has resulted in a lot of uncertainty and avoidable litigation. Over the years, the courts have laid down various tests and factors to distinguish shares held as investments from shares held as stock-intrade. The Central Board of Direct Taxes (CBDT) has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007, dated June 15, 2007, summarized the said principles for guidance of the field formations. Disputes, however, continue on the application of the .....

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arity should be provided in the Act that will bring in certainty if certain objective criteria are met. This is expected to reduce litigation on this issue. In this background the Committee recommends that the Act be amended to specifically provide in a new clause (aa) of section 2(14) that a capital asset shall include shares and securities held by an assessee for a period exceeding 12 months from the date of acquisition (other than those declared as stock-in-trade/trading asset in the return o .....

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eable as capital gains if they are not held as stock-in-trade. (ii) surplus arising on transfer of shares and securities held for a period less than twelve months, upto a sum of rupees five lakhs, will be chargeable as capital gains if they are not held as stock-in-trade. It is further proposed to provide that where the profits or gains arising to an assessee from transfer of shares or securities held by him for a period which is less than twelve months and which have been offered to tax under t .....

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n. The proposed amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years. 1.2 EXISTING DEFINITION OF CAPITAL ASSET (14) capital asset means- (a) property of any kind held by an assessee, whether or not connected with his business or profession; (b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange .....

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(e) sculptures; or (f) any work of art. Explanation 1.-For the purposes of this sub-clause, jewellery includes- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semiprecious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wear .....

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the Act, which contains the definition of a capital asset , may be amended as under: (14) capital asset means- (a) property of any kind held by an assessee, other than shares and securities referred to in clause (aa), whether or not connected with his business or profession; (aa) shares and securities held by an assessee for a period exceeding twelve months from the date of acquisition, other than shares and securities held and disclosed by him as stock-in-trade; No amendment is required to the .....

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of shares or securities held for a period not exceeding twelve months from the date of acquisition and declared in the return of income under the head capital gains from such shares or securities do not exceed the sum of rupees five lakhs as computed under section 48, such profits or gains shall be chargeable under the head capital gains . 2.1 AMENDMENTS RECOMMENDED TO SECTION 14A REGARDING DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME Section 14A was .....

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incurred in relation to the exempt income is correct. The section further provides that the Assessing Officer can also make the disallowance in a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act. A proviso to the section was inserted by the Finance Act, 2002 to provide that though the section operated retrospectively from 1-4-1092 (the commencement of the Act) no action will be taken to a .....

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t from tax. There has been a spate of litigation on the application of the section. The Committee is informed that around 15% of the tax litigation is attributed to the determination of expenditure relating to exempt income. The Committee therefore felt that there is an urgent need to clarify and simplify some of the provisions of the section and the rule. The Committee recommends that suitable instructions may be administratively issued by the CBDT to the Assessing Officers that they should ade .....

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the disallowance under the Rule also results in the disallowance exceeding the exempt income. The Committee recommends that the law should be amended appropriately. A further dispute which arises in the application of the section is what constitutes exempt income. In terms of the existing provisions, an income is treated as exempt if the said income is not includible in the total income of the assessee regardless of the fact that it has suffered economic taxation. In other words, legal taxation .....

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the Committee, having suffered DDT in the hands of the payer-company, should be treated as having been taxed in the hands of the recipient. In view of the above, the Committee recommends that the provisions of Section 14A should be designed to appropriately reflect the principle of economic taxation. Accordingly, income which has been subject to dividend distribution tax (DDT) should be deemed to form part of the total income of the assessee for the purpose of the section. Other similar income, .....

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e of the amount of expenditure claimed under any provisions of the Act (other than the provisions of sections 32 to 35E) in respect of any income forming part of the total income . (B) After sub-section (4) so inserted, the following sub-section shall be inserted with effect from the 1st day of April, 2017, namely:- (5) For the purposes of this section, income referred to in clause (2A), or clause (34) or clause (34A) or clause (35) or clause (35A) of section 10 shall be deemed to form part of t .....

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make investments earning tax-free income. This situation can be taken care of by the CBDT by issuing suitable instructions to the Assessing Officers and no statutory amendment is necessary. 3.1 RATIONALISATION OF THE PROVISIONS FOR MAINTENANCE OF BOOKS OF ACCOUNT AND TAX AUDIT Under the existing provisions of section 44AA of the Income-tax Act, 1961, a person carrying on business or profession is required to maintain books of accounts if, inter alia, the total turnover of the assessee in any of .....

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pees. However, in the case of a professional, he is required to get his books of accounts audited if his total receipts exceed twenty five lakh rupees. Further, a person who claims his income to be lower than the amount determined under the various provisions relating to presumptive income is also required to get his books of accounts audited. As would be noted, the provisions relating to maintenance of books of account and audit are not fully aligned; there is a category of persons who are requ .....

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o rupees one crore for assessees exercising a profession. 3.2 Based on the aforesaid recommendation, section 44AA and section 44AB of the Income-tax Act, 1961 should be merged into the following new section:- Substitution of sections 44AA and 44AB In the Income-tax Act, for sections 44AA and 44AB, the following section shall be substituted with effect from the 1st day of April, 2017, namely:- 44AA (1) Every specified person shall keep and maintain such books of account and other documents as may .....

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ast day of the previous year; (ii) the profit and loss statement or the income and expenditure statement, as the case may be, for the previous year; and (iii) the report of tax audit. (4) The person referred to in sub-section (1) shall be deemed to have complied with the provisions of this section, if - (i) the person keeps and maintains the books of account and documents and gets such accounts and documents audited, as required by or under any other law; (ii) the person obtains by the specified .....

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ccounts and documents; (iii) the form and the manner in, and the place at, which the books of account and other documents shall be kept and maintained; (iv) the period for which the books of account and documents should be retained; (v) the form of the statement and reports and the manner of verification; and (vi) the medium in which the statements and reports is to be delivered; (vii) the income-tax authority, or any other person, authorized to receive the statements and reports; and (viii) any .....

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139; (iv) specified person shall mean a person carrying on business or profession in the previous year and who fulfils the following conditions, namely:- (a) the total sales or turnover in the business exceed or exceeds two crore rupees or the gross receipts in the profession exceed one crore rupees in any one of the three years immediately preceding the previous year; (b) the person is carrying on business or profession which is newly set up in any previous year and the total sales, turnover or .....

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4.1 RECOMMEDNATION TO INCREASE THE ELEGIBILITY UNDER THE PRESUMPTIVE SCHEME FOR SMALL BUSINESSES FROM THE EXISTING RUPEES ONE CRORE TO RUPEES TWO CRORE The existing presumptive income scheme under section 44AD of the Income Tax Act is applicable to an individual, Hindu undivided family or a partnership firm (not to limited liability partnership). This scheme is quite popular amongst small businessmen who declare their income at 8% of the total turnover or gross receipts of the previous year. Th .....

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ptive income scheme find it difficult and cumbersome to maintain accounts. It is therefore recommended that a de minimus provision should be made exempting small businessmen and professionals from the mandatory requirement of maintaining books of accounts and getting them audited. These cases would involve a tax liability of maximum rupees seven thousand as the income expected to be declared by them @ 8% on the turnover of rupees forty lakhs is rupees three lakh twenty thousand and in any case r .....

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ssessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1), shall be required to keep and maintain such books of account and other documents as required under subsection (5) of section 44AA and get them audited and furnish a report of such audit as required under sub-section (2) of section 44AA provided the total turnover or gross receipts from such business exceed rupees forty lakhs. B. The existing definition of el .....

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ns engaged in business. The Committee was of the view that this scheme is quite popular amongst small traders. It was felt that there is a strong case for introducing a similar simplified presumptive income scheme for professionals. Accordingly, the Committee recommends the introduction of a presumptive income scheme whereby the income from profession will be estimated to be thirty three and one-third (33 1/3%) of the total receipts in the previous year. The benefit of this scheme will be restri .....

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to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible profession, the profits and gains of such profession chargeable to tax under the head Profits and gains of business or profession shall be deemed to be - (i) a sum equal to thirty three and one-third per cent of the gross receipts of the assessee in the previous year on account of such profession; or (ii) a sum higher than the aforesaid sum claimed to have been earned by the eligible asses .....

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of any asset of an eligible profession shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years. (4) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible profession are lower than the profits and gains specified in sub-section (1), shall be required to ke .....

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defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and (ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading C. - Deductions in respect of certain incomes in the relevant assessment year; (b) eligible profession means,- (i) the legal, medical, engineering or architectural profession or the profession of accountancy or technical consultan .....

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sult of the transfer of land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (i.e. stamp valuation authority ) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration, and capital gains shall be computed on the basis of such consideration under section 48 of the Income-tax Act. The scope of section 50C was exte .....

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in such agreement. A later similar provision inserted by way of section 43CA does take care of such a situation. 6.2 It is therefore proposed to insert the following provisions in section 50C: (4) Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the value referred to in subsection (1) may be taken as the value assessable by any authority of a State Government for the purpose of .....

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duty value of the property by an amount exceeding 50,000, the stamp duty value of such property as exceeds such consideration, shall be chargeable to tax in the hands of the individual or HUF as income from other sources. This provision works on the assumption that the buyer of the property would have paid consideration more than the stated consideration. This presumption is not in accordance with judicial interpretation and therefore deserves to be deleted. 7.2 Hence, it is proposed that secti .....

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s within this time frame, which is keeping in line with its commitment made under the Citizen s Charter. However, the provision as introduced under Section 143(1D), with effect from 1-7-2012, providing that the processing of a return shall not be necessary, where a notice has been issued to the assessee under Section 143(2), has proved to be a bottle-neck in the commitment of the Department to issue timely tax refunds. It needs to be appreciated that the time limit for finalization of assessment .....

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from 1-7-2016. 9.1 MAKING OF FRESH CLAIM DURING ASSESSMENT PROCEEDINGS It has been observed that in many cases an assessee may wish to make a claim which was not made in the return of income filed under section 139. Where the assessee makes a claim of any expenditure or a deduction during the assessment proceedings which had not been made in the return of income filed the Assessing Officer does not entertain the claim. The judicial interpretation in Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 .....

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ot adversarial in nature. It is therefore, proposed that the provision may be amended to provide an opportunity to the assessee to make a fresh claim during the assessment proceedings. However, such a claim should also be verified and any wrong claim made by the assessee should also be subject to penal provisions. The assessee should make a claim in a prescribed Form and verify that such a claim shall be deemed to have been made in the return of income filed by him. 9.2 It is therefore proposed .....

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return of income for the purposes of this Act . 10.1 DEFERMENT OF ICDS [SECTION 145(2)] By notification No. 892(E) dated 31st March, 2015 issued by virtue of the powers conferred under Section 145(2) of the Income tax Act, 1961, the Central Government notified Income Computation and Disclosure Standards with effect from 1-4-2015 (AY 2016-17). These standards are applicable to the computation of income under the heads Profits and gains of business or profession and Income from other sources . Th .....

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ultiple accounting methods, one for the books of accounts and other for tax purposes, creates confusion, interpretation issues, multiplicity of records and additional compliance burden which may outweigh the gains to be obtained by the application of ICDS. It has also been felt by the Committee that ICDS deals only with the method of accounting and at best it brings timing difference on recognition of expenditure or income as compared to the books of account. The Committee therefore feels that a .....

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Officer is required to take corrective steps following audit objections. The corrective measures take the form of rectification or reassessment (by reopening the case under section 147 or revision by the Principal Commissioner or Commissioner under section 263). In the case of rectification, these are generally in the nature of correction for arithmetical errors and other mistakes which are apparent from the record. The problem arises when the Assessing Officer seeks to take corrective measures .....

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wspaper Society vs CIT (1979) 119 ITR 996 the Supreme Court extensively considered the powers and duties of both the internal audit party of the Income-tax Department (prior to 1960) and those of the C & AG under the Comptroller & Auditor General s (Duties, Powers and Conditions of Service) Act, 1971 and opined that neither statute recognises the power on such authorities to pronounce on the law and that their pronouncements on law cannot amount to information on the basis of which asses .....

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ted 24th June, 1982 to the Ministry of Finance (Department of Revenue) has opined, after referring to the ruling of the Supreme Court, that the .......audit objection as well as the note of the Ministry of Law cannot be the basis for the re-opening of the assessments made under section 59 of the Estate Duty Act. Therefore, the instructions referred to by the Department in para (a) of their note based on the audit objection directing the reopening of the assessments already concluded runs counter .....

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or by the Principal Commissioner for revision of assessment orders. These steps give rise to several rounds of litigation; first the assessee challenges the very act of reopening or revision, as the case may be, and upon losing, the Department files appeal before the higher Courts thereby clogging the judicial system. While this process is on, the Assessing Officer proceeds to complete the assessment on merit leading to another round of litigation. In large number of cases, the assessments on me .....

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require re-opening or revision of completed assessments, the same should not be permitted since it amounts to change of opinion and creates uncertainty for the taxpayer. Such audit objections may be used as material for knowledge dissemination and system improvement. In other words, such audit objections may be given prospective effect by amending the law or issuing circular, as the case may be, to remove ambiguity and eliminate all scope for litigation. The Committee is of the view that this r .....

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ffect from the 1st day of April, 2017, namely:- Explanation 2A. - For the removal of doubts, it is hereby declared that for the purposes of this section, it shall be deemed that no income chargeable to tax has escaped assessment merely on the ground that an objection has been raised, or observation made, by any authority in the course of any audit of any assessment or re-assessment, to the effect that the assessment has not been made in accordance with the provisions of this Act. . 12.1 PROPOSAL .....

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ised over the years. With the liability of TDS being attracted on such tiny annual limits of ₹ 2,500 in respect of payment of interest on securities and on interest on NSS accounts, ₹ 5,000 for payment of interest on private deposits and commission or brokerage and ₹ 10,000 for payment of bank interest, one can just imagine the enormous work that goes into compliance of these provisions. Considering the importance of the long overdue revision of these puny limits, the Committee .....

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t an average rate of tax of 24.8%. In FY 2015-16, the same taxable income of ₹ 5,00,000 attracts income-tax of only ₹ 23,000 (after rebate u/s. 87A), with the average tax rate working out to just 4.6%. Today, the average tax rate of 10% gets attracted only on taxable incomes beyond ₹ 7,00,000. As a result, majority of the taxpayers, more particularly those having mainly interest incomes, are required to claim sizable income-tax refunds. The Income-tax Department is also require .....

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for them be reduced from the existing 10% to 5%. This important change should go a long way to avoid a lot of unproductive work and waste of time and money. Under the existing provisions, Individuals and HUFs have been exempted from the responsibility of tax deduction at source, unless their total sales, gross receipts or turnover from the business or profession carried on by them exceed the monetary limits specified under section 44AB. With a view to facilitate ease of business for small partn .....

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the provisions in regard to interest, commission and lottery winnings etc., it has been proposed to consolidate the relevant provisions in this regard and consequentially delete certain related sections, including certain other sections, which are now obsolete and not in force. The recommendations are summarized in the table given below: REVISED SCHEDULE OF TDS FOR RESIDENT DEDUCTEES Present Section Nature of Payment Present Threshold Limit (Rs.) Proposed Threshold Limit (Rs.) Present Rate of T .....

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ngs from Lottery/Cross Word Puzzle Income from Winnings 10,000 15,000 At Rates in Force 30% To be clubbed together under the head 'Income from Winnings' 194BB Winnings from Horse Race Income from Winnings 5,000 15,000 At Rates in Force 30% 194C Payments to Contractors Contract Payments Single transaction- 30,000 Annual limit- 75,000 1,00,000 (annual limit) Where Deductee Indl./HUF- 1% For others 2% Where Deductee Indl./HUF- 1% For others 2% * No separate Transaction Limit * Exclusions to .....

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Non-resident Sportsmen or Sports Associations NA Nil Nil 20% 20% To be classified separately under the Head-'Pay ments to Non- Residents' 194EE Payments in respect of NSS Deposits Payments in respect of NSS Deposits 2,500 15,000 20% 5% No TDS where payment made to legal heirs 194F Payments on repurchase of Units of MF or UTI To be deleted since now not relevant Nil NA 20% NA 194I Rent Rent Income 1,80,000 2,40,000 * 2% for Plant or Machinery or Equipment * 10% for Land or Building * 2% .....

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ional or Technical Services to include Non- Executive Director's Commission, Royalty and Noncompete Fees 194K Income in respect of Units To be deleted since now not relevant 2,500 NA 10% NA 194L Payment of Compensation on acquisition of Capital Asset To be deleted since now not relevant 1,00,000 NA 10% NA 194LA Payment of Compensation on acquisition of certain Immovable Property Compensation for compulsory acquisition 2,00,000 5,00,000 10% 10% 194LB Income by way of Interest from Infrastruct .....

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0% 10% 194LC Income by way of Interest from Indian Company Specified Interest Payments to Non-residents Nil Nil 5% 5% To be classified separately under the Head- 'Payments to Non- Residents' 194LD Income by way of Interest on certain Bonds and Government Securities Specified Interest Payments to Foreign Investors Nil Nil 5% 5% To be classified separately under the Head- 'Payments to Non- Residents' 12.2 RECOMMENDATIONS (A) Section 193 relating to Interest on securities . should b .....

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he account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of: (i) five per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) ten per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family. Provided that an individual or a Hindu undivided fami .....

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ng interest on securities, as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] (2) The provisions of sub-section (1) shall not apply- (i) where the amount of such income or, as the case may be, the aggregate of the a .....

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with a co-operative society engaged in carrying on the business of banking; (c) deposits with a public company which is formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction under clause (viii) of sub-section (1) of section 36; the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the ba .....

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Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any comp .....

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ted or paid by a co-operative society to any other co-operative society; Explanation.-For the purposes of this clause, co-operative bank shall have the same meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (v) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notified by it in this behalf in the Official Gazette; (vi) to such income credited or paid in respect of deposits (other than time deposits) with .....

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o in subclause (a), engaged in carrying on the business of banking; (viii) to such income credited or paid by the Central Government under any provision of this Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super Profits Tax Act, 1963 (14 of 1963), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), or the Interest-tax Act, 1974 (45 of 1974); (ix) to suc .....

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apital fund or a public sector company or scheduled bank in relation to a zero coupon bond issued on or after the 1st day of June, 2005 by such company or fund or public sector company or scheduled bank; (xii) to any income by way of interest referred to in clause (23FC) of section 10. (xiii) any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a cooperative land .....

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e issued by a company in which the public are substantially interested, if- (a) the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed fifteen thousand rupees; and (b) such interest is paid by the company by an account payee cheque; (xvi) any interest payable to the Life Insurance Corporation of India established under the .....

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of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or (xviii) any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest; (xix) any interest payable on any security issued by a company, where such security is in dematerialised form and is listed on a recognised stock exchange in India in accordance with the Securities Contract .....

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ailure to deduct during the financial year. (C) Winnings from lottery or crossword puzzle or from horse race. (Newly drafted Section effective from 1.6.2016) 194B. (1) The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game or other game of any sort or from gambling or betting of any form or nature whatsoever, as referred to under section 115BB, an amount exceeding fifteen thousand rupees shall, at the time of payment thereo .....

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rnment under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from any horse race, as referred to under section 115BB, an amount exceeding fifteen thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rate of thirty per cent. (D) Section 194BB relating to Winnings from horse race is recommended to be delete .....

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he account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where .....

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the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) The person responsible for paying such sums referred to in subsection (1) shall be liable to deduct income-tax under this section, where such sum or, as the case may be, the aggregate of such sums credited or paid or likely to be credited or paid during the financial year, to t .....

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g the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, i .....

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accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 .....

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diately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) goods carriage shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) contract shall include sub-contract; (iv) work shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d .....

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ly or firm (other than limited liability partnership), who is responsible for paying, to a resident, any income by way of commission (including insurance commission and commission on sale of lottery tickets) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of: (i) five per cent where the paymen .....

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the payee, does not exceed fifteen thousand rupees: Provided further that an individual or a Hindu undivided family or firm (other than limited liability partnership), whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB1 during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct .....

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any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (ii) the expression professional services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA; (ii .....

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ance commission means any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance). (G) Section 194G relating to Commission, etc., on the sale of lottery tickets is recommended to be deleted w.e.f. 1.6.2016 because it has been recommended that these provisions be merged in section 194H (H) Section 194D relating to Insurance commis .....

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be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than fifteen thousand rupees : Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee. (J) Section 194F relating to Payments on account of repurchase of units by Mutual Fund or Unit Trust of India is recommended to be deleted w.e.f. 1.6.2016 as it is no .....

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f- (a) two per cent for the use of any machinery or plant or equipment; and (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings: Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid .....

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ent is credited or paid, shall be liable to deduct income-tax under this section. Explanation.-For the purposes of this section,- (i) rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture .....

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ny person, not being an individual or a Hindu undivided family or a firm (other than limited liability partnership), who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services, or (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at th .....

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ts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed fifty thousand rupees: Provided further that an individual or a Hindu undivided family a firm (other than limited liability partnership) , whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB1 during the .....

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ber of Hindu undivided family. Explanation.-For the purposes of this section,- (a) professional services means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) fees for technical services shall have the same meaning as in Explan .....

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y. (M) Section 194K relating to Income in respect of units is recommended to be deleted w.e.f. 1.6.2016 as it is no longer relevant. (N) Section 194L relating to Payment of compensation on acquisition of capital asset is recommended to be deleted w.e.f. 1.6.2016 as it is no longer relevant. (O) Payment of compensation on acquisition of certain immovable property. Recommended to be amended w.e.f. 1.6.2016 194LA. Any person responsible for paying to a resident any sum, being in the nature of compe .....

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ount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed five hundred thousand rupees. Explanation.-For the purposes of this section,- (i) agricultural land means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (ii) immovable property means any land (other than agricultural land) or any building or part of a building. 13 .....

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e tax. Certain practical difficulties faced by persons who are granted such Certificates have been brought to the notice of the Committee and redressal of the same can go a long way to facilitate ease of business in such cases. 13.2 Considering the same, the Committee recommends suitable amendments in the Rules 28AA and 28AB, to obviate the practical difficulties as explained hereunder: 1. Acceptance of application for issue of Certificate for TDS at lower rate, three months prior to commencemen .....

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Certificate for lower TDS in the prescribed Form 13, only after the beginning of the concerned financial year, by the time the applicant is issued such Certificate, he has already been inflicted with avoidable TDS. (b) Having considered this important aspect, the Committee recommends that this practical difficulty can be resolved by the following measures: (i) Start accepting applications from all eligible assessees in the prescribed Form 13 electronically alongwith necessary documents, details .....

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the issue of a fresh certificate if the assessee has filed the application for issue of a fresh certificate. 2. Need to treat Certificate for TDS at lower rate as valid, in respect of all units of the tax deductor: (a) When a Certificate for TDS at nil/lower rate u/s.197 is presented by a deductee to a deductor, the benefit of the same should be available to the deductee, qua all units of the deductor and not only a specific unit with a specific TAN. (b) Punjab & Haryana High Court has held .....

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r with a separate TAN has granted benefit to the deductee based on the Certificate issued u/s. 197, TDS demand on account of short deduction is raised against the deductor in such cases. (d) A deductee cannot be expected to obtain separate certificates in the name of the same deductor, qua different TAN units, which may run into a large number. In the interests of ease of doing business, it is desirable that the Certificate u/s.197 issued to a deductee, clearly reflecting the name and PAN of the .....

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O AMEND THE PROVISIONS OF RULE 37BA TO OBVIATE THE HARDSHIPS ARISING IN RELATION TO CLAIMING OF CREDIT FOR TAX DEDUCTED U/S. 199 Section 199 read with rule 37BA deal with the provisions in regard to granting credit for tax deducted. However, there are a number of situations, where in actual practice, it becomes extremely difficult or at times, even virtually impossible for the person entitled to claim credit for tax so deducted. To obviate hardships in three such situations, which have come to b .....

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ever, subject to the Proviso under this rule which prescribes that, the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax. In many cases, even where the deductee has filed a declaration, the deductor does not report the tax deduction as requested, as a result of which neither the deductee, nor the person in whose hands the relevant income is assessable is entitled to claim cred .....

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of tax is required to report the details of tax deduction in the statement prescribed for such purpose. The Proviso under this sub-section also authorizes the deductor to file a correction statement for rectification of any mistake in respect of the information so submitted. However, in many cases because of negligence on part of the deductor resulting in a mistake, on account of which the deductee is unable to seek correct credit or where even after the deductee has requested the deductor to co .....

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his regard to a designated authority, in a prescribed form that may be devised by CBDT which can be submitted before the due date of filing of return of income, as applicable in his case under section 139(1). On the basis of such reporting by the deductee, a suitable mechanism for granting credit for tax deducted in all such cases should be worked out by the CBDT. 14.2 In view of the above, the Committee recommends the following amendments to Rule 37BA, which contains relevant provisions for gra .....

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y or the person authorised by such authority. (2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of .....

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has not reported such information in respect of the tax deduction in the name of such other person, the concerned deductee may report such information relating to deduction of tax referred to in sub-rule (1) in the prescribed form and verified in the prescribed manner to the income tax authority or the person authorised by such authority before the due date of filing of return of income, as applicable in his case under section 139(1). Provided that upon such reporting by the deductee, the credi .....

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tion relating to deduction of tax referred to in sub-rule (1) in the prescribed form and verified in the prescribed manner to the income tax authority or the person authorised by such authority before the due date of filing of return of income, as applicable in his case under section 139(1). Provided that upon such reporting by the deductee, the credit for the whole or any part of such tax deducted at source, as the case may be, shall be given to the deductee subject to due verification of his c .....

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r section 139(1). Provided that upon such reporting by the deductee, the credit for such tax deducted at source, as the case may be, shall be given to the deductee subject to due verification of his claim. (3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit fo .....

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ation as reported by the deductee to the income-tax authority or the person authorised by such authority; in accordance with the provisions of sub-rules (2A) to (2C) of this rule, subject to verification in accordance with the risk management strategy formulated by the Board from time to time. 15.1 PROPOSAL FOR CERTAIN AMENDMENTS IN RULE 30 AND 31 IN RELATION TO TIME AND MODE OF PAYMENT OF TDS AND FILING OF STATEMENT OF TDS UNDER THE PROVISIONS OF SECTION 200 Section 200(1) read with Rule 30 pre .....

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ax and file a Challan cum Statement in Form 26QB are required to do so within a tight time frame of seven days from the end of the month in which the deduction is made. Since such persons are not familiar with TDS procedures, with a view to grant them sufficient time for compliance, it is proposed that they may be allowed time of thirty days to comply with the necessary formalities, instead of the prevailing time limit of only seven days from the end of the month in which the tax deduction is ma .....

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d only 15 days time for the purpose. The Committee recommends that even non-Government deductors need to be given a similar time of one month, for purposes of better compliance. Moreover, at the end of the year, the prescribed time of one month needs to be increased to one and a half month for all deductors. 15.2 In view of the above, the Committee recommends the following amendments to Rules 30 and 31A: Time and mode of payment to Government account of tax deducted at source or tax paid under s .....

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ction 192, where tax is paid accompanied by an income-tax challan. (2) All sums deducted in accordance with the provisions of Chapter XVII-B by deductors other than an office of the Government shall be paid to the credit of the Central Government- (a) on or before 15th day of May where the income or amount is credited or paid in the month of March; and (b) in any other case, on or before seven days from the end of the month in which- (i) the deduction is made; or (ii) income-tax is due under sub .....

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ner, permit quarterly payment of the tax deducted under section 192 or section 194A or section 194D or section 194H for the quarters of the financial year specified to in column (2) of the Table below by the date referred to in column (3) of the said Table:- TABLE Sl. No. Quarter of the financial year ended on Date for quarterly Payment (1) (2) (3) 1 30th June 7th July 2 30th September 7th October 3 31st December 7th January 4 31st March 15th May Statement of deduction of tax under sub-section ( .....

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duction of tax under section 192 in Form No. 24Q; (b) Statement of deduction of tax under sections 193 to 196D in- (i) Form No. 27Q in respect of the deductee who is a non-resident not being a company or a foreign company or resident but not ordinarily resident; and (ii) Form No. 26Q in respect of all other deductees. (2) Statements referred to in sub-rule (1) for the quarter of the financial year ending with the date specified in column (2) of the Table below shall be furnished by the due date .....

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llowing manners, namely:- (a) furnishing the statement in paper form; (b) furnishing the statement electronically under digital signature in accordance with the procedures, formats and standards specified under sub-rule (5); (c) furnishing the statement electronically along with the verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards specified under sub-rule (5). (ii) Where,- (a) the deductor is an office of .....

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d to in clause (ii), the statements referred to in sub-rule (1) may, at his option, be delivered or cause to be delivered in the manner specified in item (b) or item (c) of clause (i). (3A) A claim for refund, for sum paid to the credit of the Central Government under Chapter XVII-B, shall be furnished by the deductor in Form 26B electronically under digital signature in accordance with the procedures, formats and standards specified under sub-rule (5). (4) The deductor at the time of preparing .....

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paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax under section 197 by the Assessing Officer of the payee; (vi) furnish particulars of amount paid or credited on which tax was not deducted in view of the compliance of provisions of sub-section (6) of section 194C by the payee; (vii) furnish particulars of amount paid or credited on which tax was not deducted in view of the furnishing of declaration under sub-section (1) or sub-section (1A) .....

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me-tax (System) a challan-cum-statement in Form No. 26QB electronically in accordance with the procedures, formats and standards specified under sub-rule (5) within ninety days from the end of the month in which the deduction is made. (5) The Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the statements or claim for refund in Form 26B and shall be responsible for the day-to-day administration in rela .....

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LITY OF TDS AT A HIGHER RATE UNDER SECTION 206AA Under the current provisions of Section 206AA, tax is required to be deducted by the deductor at a higher rate as prescribed under the said section, where the deductee does not furnish his Permanent Account Number (PAN). This section was introduced with the objective that the furnishing of PAN was important with a view to trail the taxability of the payments in the hands of a non-resident. As regards non-residents, the Committee noted that in view .....

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of PAN is insisted from them. The Committee was of the view that it should suffice if the concerned non-resident furnished to the deductor, in lieu of such Permanent Account Number, his tax identification number in the country or the specified territory of residence and in case there is no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which such person claims to be a resident. 16.2 Accordingly, th .....

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ch number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which such person claims to be a resident. (ii) payment of interest, on long-term bonds, as referred to in section 194LC, to a non-resident, not being a company, or to a foreign company. 17.1 RECOMMENDATIONS REGARDING RECOVERY OF DISPUTED DEMAND Under the existing regime for recovery of demand, Assessing Officers insist upon collecting disputed demands ev .....

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to balancing the need to meet revenue targets and fair treatment to the taxpayer. Accordingly, the Committee recommends that the taxpayer should be allowed automatic stay of demand on payment of seven and one-half percent of the demand. The stay will remain in operation till the first appellate order is passed. Further, the Committee recognizes that in cases of high-pitched assessment, the payment of seven and one-half percent of the demand could be extremely onerous for the taxpayer. In this ba .....

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and arising from the levy of penalty after the order of Commissioner (Appeals) should be stayed till one month after the disposal of the quantum appeal by the Tribunal. Some of the members were of the view that the statutory authority i.e. the Assessing Officer, being a quasi judicial authority cannot be divested of its power to grant stay of demand. Another view was that automatic stay of demand on payment of 7.5% tax may create incentives for tax evasion. 17.2 Based on the aforesaid recommenda .....

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long as such appeal remains undisposed of if the assessee has paid seven and one-half percent of such amount within sixty days from the date of presenting the appeal. (6A) Where an assessee has presented an appeal under section 246A, the assessee may, notwithstanding anything to the contrary contained in sub-section (6), apply to the Commissioner (Appeals) for stay in any proceedings for recovery of the amount and the Commissioner (Appeals) may, in his discretion and subject to such conditions a .....

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bunal in respect of the order of assessment or reassessment in which the proceedings for the levy of the said penalty were initiated, such amount shall not be recovered until one month after the receipt of the appellate order of the Tribunal by the Assessing Officer and the assessee shall not be deemed to be in default during the said period . 18.1 RECOMMENDATION FOR AMENDMENT TO SECTION 234C TO PROVIDE RELIEF WHERE A NEW BUSINESS IS STARTED DURING THE FINANCIAL YEAR Section 234C provides that n .....

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st time after the first or second installment of advance tax is due and where the taxpayer has discharged his liability for payment of advance tax in the installments to follow. 18.2 Accordingly, the committee recommends that the following proviso be inserted in section 234C: Provided further that nothing contained in the sub-section shall apply to any shortfall in the payment of the tax due on the returned income where the assessee is assessed for the first time under the head Profits and gains .....

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ents of TDS u/s. 200(3) and TCS u/s. 206C(3) has been a matter of debate ever since it came to be introduced with effect from 1.7.2012. While in principle, courts have justified the levy as being constitutional, it is widely believed that this levy is harsh keeping in view the fact that the person committing any default for delayed deduction or payment of tax is already inflicted with penal interest of 12% or 18% per annum. Moreover, in cases of grave default of non-furnishing of such Statements .....

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reduction of the fee u/s. 234E from ₹ 200/- per day to ₹ 100/- per day. 19.2 Accordingly, it is recommended that sub-section (1) of Section 234E be amended as follows: 234E. (1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C, he shall be liable to pay, by way of fee, a sum of one hundred rupees for every .....

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fully reflect the opportunity cost of money to the assessee. Further, the low rate of interest creates a perverse incentive for the tax administration to delay the processing of returns under section 143 (1) of the Income-tax Act. The Committee recommends that the tax administration should be held accountable for delay in processing of returns beyond a reasonable period. Accordingly, the Committee recommends that interest on refunds should be payable at the rate of - (a) one percent per month, o .....

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the said twelve month period; This will also prompt the tax administration to put its house in order to expeditiously settle payment mismatches, if any. However, one member was of the view that a penal interest rate of 18% coming at cost of public exchequer is too high and not justified. (B) Another major grievance of taxpayers is in relation to not granting of timely refunds in pursuance to orders passed in any appeal or other proceeding under this Act. Even where refund of tax is granted, in .....

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this regard by the Assessing Officer, it is recommended to provide through the insertion of Section 244A(1B) that the Assessing Officer shall, without the assessee being required to make any claim in that behalf, refund the amount due to the assessee in all such cases, with interest due thereon under the provisions of section 244A and that such refund shall be granted within three months from the end of the month in which such orders are passed. Further, to enforce accountability on the Assessi .....

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out of excess payment of advance tax, tax deducted or collected at source and tax or penalty paid in pursuance of a notice u/s. 156. However, there is no provision to grant interest on refund, where the same arises out of any self assessment tax or interest paid by an assessee under any provision of the Act. It is unfair and inequitable that an assessee should be deprived of interest on such refund of tax or interest, more particularly when the moneys representing such refund have been used by .....

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. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:- (a) where the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, su .....

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sessment under section 140A or out of any tax or interest or penalty paid in pursuance of a notice of demand under section 156 or by way of any set off refund made under section 245 or on account of tax, interest or penalty paid under any other provision of this Act, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or interest or penalty to the .....

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ent per month, or part thereof, if- (i) the return is processed under section 143(1) of the Incometax Act anytime after twelve months from the end of the month in which the return is filed; or (ii) the refund is issued anytime after the end of the said twelve month period. . (1B) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order .....

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y or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final. (3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 115WG or subsection (3) of section 143 or section .....

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assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. (5) In a case referred to in (3) above, where the interest is increased, the Assessing Officer shall inform the assessee by a communication specifying the amount of the interest due to him and shall refund such amount to the asses .....

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ng erroneously adjusted, there is no remedy by which the CPC can take note of the same. In view of the above, Section 245 is proposed to be suitably amended so as to provide that no set off of refund under this section shall be made by any income-tax authority without giving intimation in writing to such person of the action proposed to be taken under this section and without dealing with the objections if any, filed by such person in response to such intimation served on him. Moreover, it is se .....

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his legitimate refund, the same cannot be adjusted against such a demand. The revenue cannot defend such erroneous adjustments merely on the ground that the system does not provide for any such mechanism. Suitable systems shall be required to be put in place to provide remedy keeping in mind that the assessee's money are being adjusted without the authority of law. 21.2 To give due effect to this settled interpretation of Section 245 and avoid any litigation on this aspect, Section 245 is re .....

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unt, against the sum, if any, remaining payable under this Act by the person to whom the refund is due. Provided that no set off of any refund due to the person shall be made against any demand remaining payable under this Act, where in respect of such demand the relevant issue is covered in favour of the person by a judicial decision rendered in his own case by the Commissioner (Appeals) or Income-tax Appellate Tribunal or High Court or the Supreme Court. (2) No set off of refund under this sec .....

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f the Appellate Tribunal for rectification of mistakes apparent from the record. In practice this long time-limit has given rise to difficulties arising on account of nonavailability of the Members who passed the order due to transfer or retirement or otherwise. Moreover any mistake in the order should not be allowed to remain for such a long period. Section 245D(6B) relating to rectification of mistake by the Settlement Commission also prescribed the period of six months for the rectification. .....

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a time-limit of one hundred and twenty days for filing an appeal to the High Court from the order of the Appellate Tribunal on a substantial question of law. The Committee recommends that the time-limit for rectification of the order of the Appellate Tribunal under Section 254(2) of the Income Tax Act, 1961 should be reduced similarly to 120 days from the date of the order sought to be rectified. 22.2 Accordingly, the Committee recommends that the first part of the existing Section 254(2) of th .....

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TO WIDEN THE SCOPE OF DISPOSAL OF APPEALS BY THE SINGLE MEMBER BENCHES OF THE INCOME TAX APPELLATE TRIBUNAL The existing provisions of Section 255(3) provide that a Single Member Bench of the Appellate Tribunal can dispose of Appeals in cases where the assessed income of the assessee does not exceed ₹ 15 lakhs. On account of this limit, which is small in the view of the Committee, cases where the total income assessed is more than the above figure, cannot be heard by SMC Benches. The Comm .....

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ase which has been allotted to the Bench of which he is a member and which pertains to an assessee in whose case the total income assessed by the Assessing Officer does not exceed rupees one crore, and the President may, for the disposal of any particular case, constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a judicial member and one an accountant member. 24.1 RECOMMENDATION FOR AVOIDING REVISION OF ASSSESSMENT ON ACCOUNT OF AUDIT OBJECTIONS Based .....

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ses of this section, it shall be deemed that the order passed by the Assessing Officer is not erroneous in so far as it is prejudicial to the interests of the revenue merely on the ground that an objection has been raised, or observation made, by any authority, on a point of law, in the course of any audit of any assessment or re-assessment, to the effect that the assessment (has not been made in accordance with the provisions of this Act) or re-assessment made was erroneous in so far as it is p .....

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points remain unattended to for long. It is highly desirable that a similar time limit of 1 year from the end of the financial year in which the petition is filed should be prescribed in all such cases. For the purpose it is proposed that Sections 273A, 273AA and 220(2A) may be suitably amended and CBDT may issue suitable directions under Section 119(2)(a) providing for such time limit for disposal of petitions for waiver of interest under Sections 234A, 234B and 234C. 25.2 Accordingly, sub-sect .....

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of penalty either fully or partly under this section shall be passed by the Principal Commissioner or Commissioner, without granting the person who has filed such an application, an opportunity of being heard. Similarly, sub-section (4) is recommended to be inserted to Section 273AA with effect from 1.6.2016 as follows: (4) Where any person has filed an application for waiver of penalty under this section, the order thereon, either accepting or rejecting the plea for waiver of penalty, in full .....

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y be added below sub-section (2A) of Section 220 with effect from 1.4.2017: Provided that the order thereon, either accepting or rejecting the plea for waiver of interest either fully or partly shall be passed by the concerned Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is filed. Provided further that no order rejecting the plea for waiver of interest under this Section, either fully or partly, shall be passed by the .....

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1)(c) of the Income Tax Act to forestall any audit objection or departmental action. In CIT Vs. Reliance Petro Products 322 ITR 158, the Supreme Court stated: If we accept the contention of the revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature In respect of penalties under Section 271 to Section 272BBB (other than provisi .....

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rpretation of the provisions of the statute was not accepted by the Assessing Officer, but have also given rise to wasteful litigation where the penalties have mostly been cancelled by the appellate authorities. In the larger interests of the assessees and the Income Tax Department, the Committee recommends that the scope of Section 273B should be suitably enlarged to provide that penalty for concealment of income or furnishing inaccurate particulars thereof will not be imposed where any additio .....

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lity both upon the tax payer and the revenue. 26.2 Accordingly, the Committee recommends that the existing section 273B be substituted by the following section effective from 1.4.2017: 273B. (1) Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271AAA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAA, section 271F .....

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elying on an interpretation of any provision of this Act or any other law for the time being in force or which is supported by any ruling of any Tribunal or High Court or the Supreme Court. (2) Where during the course of any assessment proceedings under this Act, any addition or disallowance is made by an Assessing Officer based on any assumptions, without evidence or is made merely on estimate or as a result of a view taken by the Assessing Officer, which is different from the bona fide view ta .....

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ECTION 281B TO PROVIDE RELEASE OF ATTACHED PROPERTY ON SUBMISSION OF BANK GUARANTEE Under Section 281B, AO has the power to provisionally attach the assets, with the approval of the CIT/CCIT. Such attachment is supposed to be temporary, with a limit of 6 months, extendable to a maximum of 24 months. However, in view of the fact that in many such cases, the proceedings itself get stayed as a result of applications made by the taxpayer, the time limit has been amended by the Finance Act 2014 till .....

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es, attachment can become the central issue of dispute, in some cases, becoming even more important than the taxability of its income in India. As the attachment of its property can obstruct its business reorganization plans, it can become the primary source of its grievance with the Indian tax authorities. One possible way of protecting the revenue interest of India, while allowing the taxpayers to continue with their business plans could be in substituting the attachment of property with finan .....

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emand, instead of the value of the asset attached, for which the taxpayer may not agree. Lack of clarity on such obligations is likely to be a major hindrance in resolution of such matters, affecting ease of doing business. It is also necessary to ensure that the value of the asset attached is commensurate with the anticipated demand and not in far excess of it. International experience in Mutual Agreement Procedure (MAP) under tax treaties suggests that taxpayers are usually not averse to provi .....

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atutory option to the taxpayer to submit a Bank guarantee for the value of the assets attached u/s 281B or a lower amount covering the tax demand anticipated by the Assessing Officer, and seek relief from attachment of its assets. The Committee also recommends that prohibiting recovery from such Bank Guarantee till the time for filing an appeal against the Assessment order has expired, or in case where such an appeal is filed, till the time that appeal is disposed, would be a necessary assurance .....

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ot be disposed during that period, the option of encashing a bank guarantee that is due to expire shortly, say 15 days, would need to be provided to the Assessing Officer. This would also shift the onus on the taxpayer to extend the validity of the Bank Guarantee before the trigger of recovery sets in. The Committee also recommends that a sub-section may be inserted in Section 281B to provide for the display of the attachment in the portals of the website of the Department of Revenue, Govt. of I .....

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on Officer or authorized valuer, and providing other details of the manner in which the value of the property attached should be determined. 27.2 Accordingly, the Committee recommends that the following subsections be inserted in section 281B: (3) Where, an assessee referred to in sub-section (1) furnishes a Guarantee from a scheduled Bank, as prescribed, for an amount equal to the value of the property attached under sub-section (1), the Assessing Officer shall release such property by order in .....

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quence of an order in the proceeding referred in sub-section (1) or any other proceeding, and the assessee fails to pay that sum within the time specified in the notice of demand or sixty days after such notice is served, whichever is later, the Assessing Officer may invoke the Guarantee referred in sub-section (3) to recover such amount. Provided that where the assessee has filed an appeal against the order under section 246 or clause (d) of sub-section (1) of section 253 of this Act, the sum p .....

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the Guarantee referred in sub-section (3). (6) Where the Assessing Officer is satisfied that the Guarantee referred in sub-section (3) is not required anymore to protect the interests of revenue, he shall release that Guarantee forthwith. (7) Every order of provisional attachment and any extension thereof shall be displayed in the website of the Department of Revenue, Government of India, or in such other website as may be notified by the Government of India. Explanation - For the purpose of thi .....

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s other implications on book profit, turnover as well as income levels. These provisions may substantially change assets, liabilities, turnover, provisions, income recognition, notional gains and notional losses impacting book profit as well as income figures. It is therefore proposed that till such time the taxation department as well as assessee are able to understand the real impact on taxable income and book profit, the present status quo need to be maintained. Implementation without deeper .....

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ger or demerger or restructuring: The TDS to be transferred to resulting company in terms of Scheme approved by High Court. Form 26AS, OLTAS, ITD data to amend on electronic amendment application by centralized software system. d. TDS return filing and rectification software to be directly accessed by assessee, similar to Income Tax Return. No need for TIN centers. e. TDS returns are processed quarterly. Any extra TDS paid by mistake should be permitted to be requested electronically for refund. .....

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spect of any deductee who has not submitted PAN details and consequently where tax was deducted @ 20%. Where deductor is not able to rectify the TDS return, the deductee should be permitted to obtain PAN at any time and take credit for TDS, if he files his income tax return and an electronic application is made for rectification of TDS. h. While data is being punched in the return of TDS, software should be competent to have an electronic pop up of name of the Deductee as soon as any PAN number .....

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er records, the Government may consider writing off the demand. This will eliminate the outstanding arrears in about 1.5 crore cases. In other cases also where sufficient record is not available with the department there should be a mechanism for writing off of the demands. k. In case where the income or amount is credited or paid in the month of March, instead of the current time limit of 30 days until 30th April, it has been proposed that an enhanced time limit of 45 days, until 15th May be al .....

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s interest, unless the full TDS amount along with interest is paid by the deductor before the initiation of prosecution. Penalty proceedings are in any case required to be initiated in such cases. 3. TRANSPARENCY IN TAX ADMINISTRATION - E- GOVERNANCE The Committee agreed in principle that the Government should aim to complete most of the taxation processes electronically so as to eliminate human interface. E-Governance may be considered for implementation in the following fields also: a. Filing .....

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f senior officers. The Committee also recommends that electronic technology is needed to be put in place for: a. Selection of cases for scrutiny b. Issue of notices for scrutiny assessments c. Preparation of questionnaire for scrutiny assessments d. Submission of reply by the assesses e. Seeking of additional information/clarification by the Assessing Officer f. Response on additional information and supporting details g. Issue of show cause notice in respect of proposed additions/disallowance b .....

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the Government of India is accepting self attested documents for several purposes and does not insist on getting the same attested by prescribed authorities. However, non-residents are facing practical difficulties on account of the current requirement of getting the documents attested by consular authorities. In many cases the Indian Embassies may be located far away from their place of residence. To remove this difficulty it is recommended that documents for issuance of PAN may be allowed to .....

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partment is in possession of the assessee s funds due to him as his legitimate refund, the same cannot be adjusted against such a demand. The revenue cannot defend such erroneous adjustments merely on the ground that the system does not provide for any such mechanism. Suitable system shall be required to be put in place to provide remedy keeping in mind that the assessee's money is being adjusted without the authority of law. 7. INSTRUCTIONS TO ENSURE FAIRNESS IN THE APPLICATION OF SECTION 1 .....

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