Budget 2017 - Clause by clause analysis of amendments to direct tax laws (Part 4) - V. K. Subramani - Article published in Business Advisor, dated March 25, 2017 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/

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Budget 2017 - Clause by clause analysis
of amendments to direct tax laws (Part 4)
V. K. Subramani
53. Survey under section 133A on charitable trusts
also: Currently, the scope of survey under section 133A is
limited to the place where the business or profession is
carried on. The Finance Bill, 2017 proposes to explicitly
expand the scope of the legal provision by making
reference to the place where activity for charitable
purpose is carried on. Thus statement could be obtained
from any person being trustee or employee or any other
person who at the time of survey attends in any manner
or helping in carrying on such charitable activity. This
amendment is applicable from 1st April, 2017.
54. Scheme for centralised issuance of notice: Section 133C empowers
the prescribed income-tax authority to issue notice calling for information
and documents for the purpose of verification of information in its
possession. The Finance Bill, 2017 proposes that the CBDT may formulate a
scheme for centralised issuance of notice calling for information and
documents for the purpose of verification of information in its possession,
processing of such documents and making the outcome thereof available to
the Assessing Officer for necessary action, if required. This is applicable
w.e.f.01.04.2017.
55. Mandatory filing of returns by certain entities: Presently, section
139(4C) prescribes mandatory filing of return for certain entities whose
income is fully exempt from tax. The scope of taxpayers who have to file
their returns in spite of their income being tax-free has been enlarged. They
are (i) person referred to in section 10(23AAA), i.e. approved funds meant for
welfare of employees or their dependents; (ii) investor protection fund set up
by commodity exchanges in India (section 10 (23EC); (iii)any income by way
of contributions received from a depository of such Investor Protection Fund
set up in accordance with regulations by a depository referred to in section
10 (23ED); (iv) any specified income of Core Settlement Guarantee Fund, set
up by a recognised clearing corporation referred to in section 10 (23EE); and
certain Boards such as Coffee Board, Tea Board, Rubber Board, Tobacco
Board, Spices Board, Coir Board etc. The objective behind such prescription
is to verify whether these entities that enjoy exemption under section 10
actually carry out the activities for which the exemption is provided under

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the Act. This amendment is applicable from assessment year 2018-19
onwards.
56. Order of appropriation of self-assessment tax paid: The Finance Bill,
2017 proposes to impose „fee‟ for delayed filing of return of income by
inserting section 234F. As a corollary, it proposes to amend the Explanation
to section 140A(1) by setting the priority of appropriation. Now, the self-
assessment tax paid would first be appropriated towards the fee thereafter
towards interest and the balance towards tax. This amendment is also
applicable from 1st April, 2018.
57. Processing of return required even when notice is issued under
section 143(2): The Finance Bill, 2017 seeks to amend section 143(1) by
making reference to „fee‟ proposed to be levied under section 234F. Further,
it proposes to do away with non-processing of return under section 143(1)
where notice under section 143(2) has been issued. This amendment would
apply for returns filed for the assessment year 2017-18 onwards. The
rationale behind the amendment proposed is that the Finance Act, 2016
provided that where the return is selected for scrutiny, it need not be
processed under section 143(1). In order to address the grievance of delay in
issue of refund in genuine cases the Finance Bill, 2017 proposes to omit
section 143(1D) in respect of returns filed for the assessment year 2017-18
onwards.
58. Reduction in time limit for completion of assessments: One of the
far-reaching amendments proposed in the Finance Bill, 2017 relates to
moderation of timelines for completion of assessments and reassessments.
Section 153(1) is proposed to be amended to limit the time for completing
regular assessments from the existing time limit of 21 months to 18 months
from the end of the assessment year. Further, it proposes to limit the time
to 12 months from the end of the relevant assessment year, from
assessment year 2019-20 onwards.
Reduction in timeline for reassessments: The Finance Bill, 2017 also
proposes to reduce the time limit for reassessments to 9 months from the
existing time limit of 12 months from the end of the financial year in which
notice under section 148 was issued. This reduced time limit would apply
for the 148 notices served on or after 01.04.2019.
Increase in time limit for giving effect to appellate orders: Also, the
Finance Bill proposes to extend the time limit for giving effect to the orders
passed under sections 254, 263 or 264 by prescribing the time limit as 12
months from the end of the financial year in which it was received. This
extended time would apply to orders received on or after 01.04.2019.

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59. Threshold limit for invoking section 153A: The Finance Bill, 2017
proposes to fine tooth comb the ambit of search assessments. It prescribes
that the timeline would include the previous year of search or requisition, as
the case may be. Further, it says that provisions of section153A would apply
in respect of search initiated under section 132 or requisition made under
section 132A (on or after 01.04.2017), the income escaping assessment is or
likely to amount to Rs 50 lakh in aggregate.
60 & 61. Rationalisation of provisions relating to 153B/ 153C: The
Finance Bill, 2017 proposes to amend section 153B in line with section153A
by making reference to „assessment years‟ and providing time limit of 12
months where such requisition is made on or after 01.04.2019. Further, in
respect cases requisitioned during financial year, the time limit for
completion of assessment is proposed to be reduced to 18 months from the
end of the financial year in which the last of the authorisations for search
under section132 or for requisition under section 132A was executed. Also,
where the time limit available to the Assessing Officer for assessment under
section153C is less than 12 months, then the available time limit shall be
deemed to be 12 months for the purpose of completing the assessment
under section153C.
62. Credit for income-tax after clearance of dispute: Where credit for
income-tax paid in any country outside India or a specified territory outside
India referred to in section 90, section 90A or section 91 has not be given on
the ground that the payment of such tax was under dispute and if
subsequently such dispute is settled and the assessee has furnished the
evidence of such settlement to the Assessing Officer within 6 months from
the end of the month in which it was settled, the Assessing Officer shall
amend the order of assessment or intimation under section 143(1) by
applying the provisions of section 154. However, the credit of tax which was
under dispute shall be allowed for the year in which such income is offered
to tax or assessed to tax in India.
63. TDS on rent exceeding Rs 50,000: The Finance Bill, 2017 proposes to
insert section 194-IB which is applicable for individual or HUF when they
pay rent exceeding Rs 50,000 for a month or part of a month during the
previous year to a resident. The rate of tax deduction shall be 5% at the time
of credit of rent or payment, whichever is earlier. Such payer deducting tax
at source need not have a TAN to comply with this provision. The term „rent‟
would mean any payment for the use of land or building or both and
includes payment by way of lease, sub-lease, tenancy or any other
agreement or arrangement. Readers may note that this would apply for

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marriage hall booking, hotel booking when the payment exceeds Rs 50,000
whether for a month or part of a month. This is applicable from 01.06.2017.
64. TDS on advance paid for joint development agreement: The Finance
Bill, 2017 has provided some relief to JDUs by deferring the tax liability in
the case of land owner to the year of completion of the project. However, to
provide a trail section 194-IC is proposed to be inserted for tax deduction at
source on any sum paid to a resident @ 10%. However, where the advance is
in kind for the JDU, the TDS requirement will not arise.
65. Lower TDS rate for call centres: The Finance Bill, 2017 proposes to
scale down the TDS rate to 2% in the case of a payee, engaged only in the
business of operation of call centre. This is applicable w.e.f. 01.06.2017.
66. No TDS on compensation under RFCTLARR Act, 2013: The Central
Government has enacted a new law by name Right to Fair Compensation
and Transparency in Land Acquisition, Rehabilitation and Resettlement Act,
2013 (RFCTLARR) which came into force on 01.01.2014. Section 96 of the
RFCTLARR says that income-tax shall not be levied on award or agreement
made subject to limitations mentioned in section 46 of the said Act.
Therefore, compensation received for compulsory acquisition of land under
the RFCTLARR Act is exempt from levy of income-tax. The CBDT has issued
Circular No.36/2016 dated 25.10.2016 clarifying that such compensation
has been exempted from levy of Income-tax even if there is no specific
provision of exemption for such compensation under the Act. To clarify that
the compensation is not only exempt from tax but also no tax deduction at
source is required, the Finance Bill, 2017 proposes to insert a proviso for
non-deduction of tax at source on such payment.
67. Concessional tax rate on ECB and rupee denominated bonds:
Presently, interest payable to a non-resident by a specified company on
borrowings made in foreign currency from sources outside India under a
loan agreement or by issue of any long-term bond including long-term
infrastructure bond is eligible for concessional rate of tax deduction at 5%.
However, the borrowings eligible for such concessional rate of TDS must be
before 01.07.2017. The Finance Bill, 2017 proposes to extend the time limit
for such borrowings made up to 30.06.2020. This will apply retrospectively
from 01.06.2016 and thus in relation to assessment year 2016-17 and
subsequently.
68. Concessional rate of TDS on interest paid to FIIs and QFIs: In the
case of interest payable at any time from 01.06.2013 to 30.06.2017 to FIIs
and QFIs on their investments in government securities and rupee
denominated corporate bonds, tax is deductible at 5% provided the rate of
interest does not exceed the rate notified by the Central Government in this

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behalf. The Finance Bill, 2017 proposes to extend the concessional rate of
5% TDS on interest payable up to 30.06.2020. This will apply from the
assessment year 2018-19 onwards.
69. Self-declaration in respect of insurance commission: The Finance
Act, 2016 decreased the TDS rate in respect of insurance commission to 5%
though the threshold limit for tax deduction was also reduced from Rs
20,000 to Rs 15,000 w.e.f. 01.06.2016. The Finance Bill, 2017 proposes the
payee to furnish declaration in Form No.15G/ 15H where the tax on
estimated total income of the relevant previous year would be „nil‟. This
would provide relief to small earners and is applicable from 01.06.2017.
70. Meaning of person responsible for paying: The Finance Bill, 2017
proposes to add one more category of person within the meaning of the term
„person responsible for paying‟ contained in section 204. In the case of
furnishing of information relating to payment to a non-resident, not being a
company or to a foreign company, of any sum, whether or not chargeable to
tax, the payer himself or if the payer is a company, the company itself
including the principal officer thereof, is included. Thus, every person
making payment to non-resident must comply with section 285, and if the
payer is a company, it would include the principal officer of the company.
71. TCS requirement of jewellery reduced: The Finance Bill, 2017
proposes to reduce the limit for tax collection at source for jewellery from
the existing limit of Rs 5 lakh to Rs 2 lakh. Thus the classification would
now include only bullion and other goods.
As regards sale of motor vehicle for which TCS would apply when sale
consideration exceeds Rs 10 lakh, the Finance Bill, 2017 proposes to certain
exceptions/ exemptions from TCS, such as sale of such motor vehicle to (a)
the Central Government, a State Government and an Embassy, a High
Commission, legation, commission, consulate and the trade representation
of a foreign State; (b) a local authority defined in Explanation to section
10(20); and (c) a public sector company which is engaged in the business of
carrying passengers.
72. Quoting of PAN in TCS: The Finance Bill, 2017 proposes to insert
section 206CC which is similar to section 206AA meant for mention of PAN
while complying with TDS provisions. It proposes that any person paying
any amount on which tax is collectible at source to furnish PAN, failing
which the tax shall be collected at twice the rate mentioned in the relevant
section under Chapter XVII-BB or at the rate of 5% whichever is higher.
Declaration given under section 206C(1A) shall not be valid unless it has
the PAN of the declarant. Where such declaration is not valid, the payee
shall collect the TCS in accordance with the applicable provision. Certificate

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for non-collection of TCS shall not be granted unless PAN is mentioned in
the application. The PAN must be quoted by both the collector and collectee
in all correspondence, bills and vouchers exchanged between them. This
amendment will apply w.e.f. 01.04.2017.
73. Advance tax for professionals admitting income under section
44ADA: The Finance Act, 2016 extended the scope for advance tax by
prescribing payment of advance tax on or before 15th March for persons
engaged in business and who opt for presumptive provisions contained in
section 44AD. The Finance Bill, 2017 proposes to extend such requirement
to professionals who offer income on presumptive basis under section
44ADA of the Act. Thus from the assessment year 2018-19 persons covered
by section 44AD and section 44ADA have to pay advance tax on or before
15th March of the relevant previous year.
74. Interest under section 234C for persons covered by sections 44AD
and 44ADA: Interest under section 234C will apply in respect of persons
admitting income under presumptive provisions contained in section 44AD
and section 44ADA of the Act. Further relief from levy of interest is extended
to incomes which are covered by section 115BBDA, i.e. dividend received
from domestic companies which become taxable in the hands of recipient
where the aggregate payment exceeds Rs 10 lakh.
75: Fee for late filing of return: The Finance Bill, 2017 proposes to insert
section 234F as a compensatory payment for delayed filing of return of
income. It is applicable from the assessment year 2018-19 onwards. Where
the return is filed beyond the due date prescribed in section 139(1) but
before 31st day of December of the assessment year, the taxpayer has to pay
a fee of Rs 5,000. Where the return is filed beyond 31st day of December, the
fee payable would be Rs 10,000. However, if the total income of the assessee
does not exceed Rs 5 lakh, the fee payable under this section shall not
exceed Rs 1,000.
76: Power to withhold refund: The Finance Bill, 2017 proposes to
empower the Assessing Officer to withhold refund by recording reasons in
writing and with the previous approval of the Principal Commissioner or
Commissioner as the case may be, up to the date on which the assessment
is made. From assessment year 2017-18 onwards, where refund of any
amount becomes due to the assessee on processing of return under section
143(1) and the Assessing Officer has issued notice under section 143(2), he
may withhold such refund by following the procedure stated hereinbefore.
(To be continued)
(V. K. Subramani is Chartered Accountant, Erode.)