TMI BlogAdditional Guidelines for removal of difficulties under sub-section (2) of section 194R of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed twenty thousand rupees. 4. The responsibility of tax deduction also does not apply to a person, being an Individual/Hindu Undivided Family (HUF) deductor, whose total sales / gross receipts / gross turnover from business does not exceed one crore rupees, or from profession does not exceed fifty lakh rupees, during the financial year immediately preceding the financial year in which such benefit or perquisite is provided by him. 5. Sub-section (2) of section 194R of the Act authorises the Board to issue guidelines, for removal of difficulties, with the approval of the Central Government. These guidelines are required to be laid before each House of Parliament and are binding on the income-tax authorities and the person providing the benefit or perquisite. 6. Accordingly, in exercise of the power conferred by sub-section (2) of section 194R of the Act, CBDT had issued guidelines in the form of the Circular no 12 of 2022 dated 16th June 2022 . Subsequently, some more clarifications are requested by stakeholders on various issues. Accordingly, this Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (vii) Deposit taking Non-Banking Financial Company as defined in clause (e) of the Explanation 4 to section 43B of the Act; (viii) Systemically Important Non-deposit Taking Non-Banking Financial Company as defined in clause (g) of the Explanation 4 to section 43B of the Act; (ix) Public company engaged in providing long term finance for construction or purchase of houses in India for residential purpose and which is registered in accordance with the guidelines/direction issued by the National Housing Bank formed under National Housing Bank Act 1987; (x) Asset Reconstruction Companies registered under section 3 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SRFAESI) Act 2002. As stated earlier, this clarification is only for the purposes of section 194R of the Act. The treatment of such settlement/waiver in the hands of the person who had got benefitted by such waiver would not be impacted by this clarification. Taxability of such settlement/waiver in the hands of the beneficiary will be governed by the relevant provisions of the Act. Question 2: Refer question No 7 of the Circular No 12 of 2022 - If under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of goods or services or both; b) neither intends to hold nor holds any title to the goods or services or both, so procured or provided as pure agent of the recipient of supply; c) does not use for his own interest such goods or services so procured; and d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. The GST valuation rules provide that expenditure incurred as a pure agent, will be excluded from the value of supply, and thus also from aggregate turnover. However, such exclusion of expenditure incurred as a pure agent is possible only and only if all the conditions required to be considered as a pure agent and further conditions stipulated in the rules are satisfied by the supplier in each case. The supplier would have to satisfy the following conditions (in addition to the condition required to be satisfied to be considered as a pure agent and discussed above) for exclusion from the value as under:- i. the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party on authorization by such recipient; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the consideration in the bill for professional fee that is charged to the Company and the tax is deducted under section 194J of the Act on the entire consideration including on out of pocket expense. In such a case, the out of pocket expense is already included as part of professional fee. Hence, there is no further benefit/perquisite which requires tax deduction under section 194R of the Act. Question 4: Refer question No 8 of the Circular No 12 of 2022 - If there is a dealer conference to educate the dealers about the products of the company - (i) is there a requirement that all dealers must be invited in the conference, (ii) what if dealers arrive one day before and leave one day after and (iii) how to identify benefit against individual dealers in a group activity? Answer: Representations have been received from various stakeholders seeking clarity on these questions arising out of answer to question No 8. It is clarified that (i) it is not necessary that all dealers are required to be invited in a dealer/business conference for the expenses to be not considered as benefit/perquisite for the purposes of tax deduction under section 194R of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company A has deducted tax on gifting of car in accordance with section 194 R of the Act (or released the car after dealer B showed him payment of tax on such benefit) and dealer B has included this benefit as income in his income tax return, it would be deemed that the actual cost of the car for the purposes of section 32 of the Act shall be the amount of benefit included by dealer B as income in his income-tax return. Hence, dealer B can get depreciation on fulfillment of other conditions for claiming depreciation. Question 6: Whether Embassy/High Commissions are required to deduct tax under section 194R of the Act? Answer: For the removal of difficulty it is clarified that the provision of section 194R is not applicable on benefit/perquisite provided by, an organization in scope of The United Nations (Privileges and Immunity Act) 1947, an international organization whose income is exempt under specific Act of Parliament (such as the Asian Development Bank Act 1966), an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign state. Question 7: Whether issuance of bonus share/right share is a benefit or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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