Updates on Circulars and Notifications - V. K. Subramani
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Updates on Circulars and Notifications - V. K. Subramani - Article published in Business Advisor, dated June 25, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM
Updates on Circulars and Notifications - V. K. Subramani
Volume XV Part 6 June 25, 2016 21 Business Advisor
Updates on Circulars and Notifications
V. K. Subramani
1. Verification of tax returns of past years pending
due to non-filing of ITR-V form: The CBDT in Circular
No.13/2016 dated 09.05.2016 took note of the cases were
the taxpayers having e-filed their returns have not filed
ITR-V within 120 days of transmitting the data
electronically. With the introduction of Electronic
Verification Code (EVC) as one of the possible modes for
filing the tax return for the last financial year, the
verification of tax return has become much more
convenient. The CBDT in exercise of its powers under section 119(2)(a) to
regularise the returns of the assessment years 2009-10 to 2014-15 which
were uploaded electronically by the taxpayers within the time allowed under
section 139 and which remain incomplete due to non-submission of ITR-V
form for verification, are permitted to verify such returns also through EVC.
It has prescribed the last date for verification process as 31.08.2016. As an
alternative to EVC, the taxpayers are allowed to send a duly signed copy of
ITR-V to CPC, Bengaluru by Speed Post. Consequently, the CBDT has
relaxed the time frame for issuing the intimation as provided in the second
proviso to section 143(1) and prescribes the time limit for processing those
returns by 30.11.2016. The intimation of such returns shall be sent to the
taxpayers as per the laid down procedure and in respect of refund cases, for
determining the interest, the provisions of section 244A (2) would apply. The
benefit of this circular will not apply to cases where during the intervening
period, the Department has already taken recourse to any other measure as
specified in the Act for filing the tax return by the taxpayer concerned after
declaring the return as non-est.
2. Amendments to DTAA between India and Mauritius: In the Press
Release dated 10.05.2016 the key features of the convention for the
avoidance of double taxation and the prevention of fiscal evasion between
India and Mauritius signed by both countries were given. The key features
are given below:
(i) Source-based taxation of capital gains on shares: India gets taxation
rights on capital gains arising from alienation of shares acquired on or after
01.04.2017 in a company resident in India while it provides protection to
investments in shares acquired before 01.04.2017. The capital gains during
the transition period from 01.04.2017 to 31.03.2019 would be taxed at 50%
of the domestic tax rate of India, subject to fulfillment of the conditions in
Volume XV Part 6 June 25, 2016 22 Business Advisor
the Limitation of Benefits Article. Taxation in India at full domestic tax rate
will take place from the financial year 2019-20 onwards;
(ii) Limitation of Benefit (LOB): The benefit of 50% of deduction in tax rate
during the transition period 01.04.2017 to 31.03.2019 shall be subject to
LOB Article whereby a resident of Mauritius (including a shell/ conduit
company) will not be entitled to benefits of 50% reduction in tax rate, if it
fails the main purpose test and bona fide business test. A resident is
deemed to be a shell/ conduit company, if its total expenditure on
operations in Mauritius is less than Rs 27 lakh (Mauritian Rs 15 lakh) in
the immediately preceding 12 months;
(iii) Source-based taxation of interest income of banks: Interest arising
in India to Mauritian resident banks will be subject to withholding tax in
India at 7.5% in respect of debt claims or loans made after 31.03.2017.
However, interest income of Mauritian resident banks in respect of debt-
claims existing on or before 31.03.2017 shall be exempt from tax in India;
(iv) The Protocol also provides for updation of Exchange of Information
Article as per International Standard, provision for assistance in collection
of taxes, source-based taxation of other income, amongst others.
3. Clarification on amendment made in section 206C: In Circular
No.22/2016 dated 08.06.2016 the CBDT has clarified that collection of tax
at source @ 1% would apply on sale in cash of bullion exceeding Rs 2 lakh
and jewellery exceeding Rs 5 lakh. Further, it made reference to the Finance
Act, 2016, which expanded the scope of section 206C(1D) and provides that
the seller shall collect 1% from the purchaser on sale in cash of any goods
(other than bullion and jewellery) or towards provision of services (other
than those for which TDS provisions will apply), when it exceeds Rs 2 lakh.
Readers may note that transaction of sale otherwise than by cash is
not hit by the amendment in section 206C.
With regard to high value transactions such as sale of motor vehicle
regardless of the mode of payment, the seller must collect tax at
source @ 1% from the buyer. The threshold limit is with reference to the
sale consideration of Rs 10 lakh. This is as per section 206C(1F). It is
applicable from 01.06.2016.
The provisions of tax collection at source contained in section 206C(1D) and
section 206C(1F) will apply to the following persons:
(i) A Central Government or a State Government;
(ii) Any local authority, or corporation or authority established under
any Central, State or Provincial Act;
Volume XV Part 6 June 25, 2016 23 Business Advisor
(iii) Any company, firm or co-operative society;
(iv) An individual or HUF who is liable to audit as per the provisions of
section 44AB during the financial year immediately preceding the
financial year in which the goods are sold or the services are
FAQ on applicability of section 206(1F): The CBDT has given FAQ on
various issues, the gist of which is given below:
(i) The tax collection at source will apply in respect of motor vehicles
when the sale value exceeds Rs 10 lakh. It will apply only to the
transactions of retail sales and will not apply to sale of motor vehicles
by manufacturers to dealers/ distributors.
(ii) It will apply to all motor vehicles and not necessarily to luxury cars.
(iii) Sale of motor vehicle to Government Departments, institutions
notified under United Nations (Privileges and Immunities) Act, 1947
and Embassies, Consulates, High Commission, Legation, Commission
and trade representation of a foreign state are not liable to levy of TCS
both in respect of sale of goods/ services [covered by section 206(1D)]
or for sale of motor vehicles to them [covered by section 206(1F)].
(iv) It will apply to sale of each motor vehicle and not to aggregate value of
motor vehicles sold during the year.
(v) It is applicable in the case of individual/ HUF being a seller only in
cases where the accounts are liable for audit as per the provisions of
section 44AB for the financial year immediately preceding the
financial year in which the motor vehicle is sold.
(vi) The tax collection at source on sale of motor vehicle is not dependent
on mode of payment; and once the consideration for sale exceeds Rs
10 lakh, the requirement for collection at source would arise.
(vii) Where the sale consideration is less than Rs 10 lakh but it is paid in
cash in excess of Rs 2 lakh the tax collection at source provision will
apply under section 206(1D) though section 206(1F) will not apply.
Thus, cash payment for any goods and services above Rs 2 lakh
will be liable for tax collection at source and when it exceeds Rs
10 lakh in the case of sale of motor vehicle, the tax collection
at source has to be made regardless of the mode of payment.
(V. K. Subramani is Chartered Accountant, Erode.)