Return of Income – Section 139(1C) of the Income Tax Act – Exemption from furnishing of Return of Income u/s. 139(1) for Assessment Year. 2019 – 20. [265 Taxman (St.) 1]

The Central Government vide notification no. S.O.2672(E) (No.55/2019 [F.No.225/79/2019-ITA II] Dated 26-07-2019 hereby exempts the following class of persons, subject to the conditions specified, from the requirement of furnishing of return of Income u/s 139(1) of the Income Tax Act from assessment year 2019-20 onwards.

1. Class of Persons

(i) a non-resident, not being a company; or

(ii) a foreign company, who have any income chargeable under the said Act during a previous-year from any investment in an investment fund set up in an International Financial Services Centre (IFSC) located in India.

Explanation:- For the purpose of this paragraph.-

(a) “investment fund” means any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(b) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).

2. Conditions

In case of class of persons referred to in para 1,-

(i) any income-tax due on Income of the said class of persons has been deducted at source and remitted to the Central Government by the investment fund at the tax-rate in force as per provisions of section 194LBB of the said Act; and

(ii) there is no other income during the previous year for which the said class of persons, is otherwise liable to file the tax-return.

3. The exemption from the requirement of furnishing a return of income shall not be available to the said class of persons where a notice under sub-section (1) of section 142 or section 148 or section 153A or section 153C of the said Act has been issued for filing a return of Income for the assessment year specified therein.
4. This notification came into force from the date of its publication in the Official Gazette.

Income from Other Sources – Section 56(2) (viib) - CBDT simplifies the process of Assessment in respect of Start-Ups [265 Taxman (st.) 3]

The CBDT vide press release dated 10-08-2019 simplified the process of Assessment in case of start-up entities. The CBDT has decide the following where scrutiny assessment of start-up entities are pending

1. In case of Start-up Companies recognized by DPIIT which have filed Form No.2 and whose cases are under “limited scrutiny” on the single issue of applicability of section 56(2)(viib), the contention of the assessee will be summarily accepted.
2. In case of Start-up Companies recognized by DPIIT which have filed Form No.2 and whose cases have been selected under scrutiny to examine multiple issues including the issue of section 56(2)(viib), this issue will not be pursued during the assessment proceeding and inquiry on other issues will be carried out by the Assessing Officer only after obtaining approval of the supervisory authority.
3. In case of Start-up Companies recognized by the DPIIT, which have not filed Form No.2, but have been selected for scrutiny, the inquiry in such cases also will be carried out by the Assessing Officer only after obtaining approval of the supervisory authorities. In addition to the above, the Central Government has further decided to relax Para-6 of the DPIIT notification No.127(E) dated 19-2-2019 and make it clear that this notification will also be applicable to Start-up Companies where addition under section 56(2)(viib) has been made and the assessee has been recognized by DPIIT and subsequently filed Form No.2. The Circular to this effect in F.No.173/149/2019-ITA-1 of CBDT dated 8th August, 2019 has been placed on www.incometaxindia.gov.in.

Income from Other Sources-Section 56 of the Income Tax Act – Clarification with respect to valuation of shares of Start-up Companies involving application of section 56(2)(viib) [265 TAXMAN-(St.) 3]

The CBDT noticed that substantial additions are made by the AOs in “Start-up Companies” involving issue of valuation of shares u/s 56(2)(viib).

The Government Vide Notification No. G.S.R. 127(E), dated 19-2-2019 issued by the Department for Promotion of Industry and Internal Trade (henceforth referred to as “DPIIT”) and notification No.13/2019 F.No.370142/5/2018-TPL(Pt.) dated 5th March, 2019 Issued by the Central Board of Direct Taxes (henceforth referred to as “CBDT”), the Central Government has notified certain class of persons for which the provisions of section 56(2)(viib) will not apply. Para 6 of the notification issued by the DPIIT dated 19-2-2019 states that the notification is applicable only with regard to recognized “Start-up Companies” where no addition u/s 56(2)(viib) has been made in an assessment order before the date of issue of the notification. This has caused hardship to such companies.

The matter has been examined by the Board. To mitigate such hardships, the Central Government vide circular No.173/354/2019 dated 9-8-2018, has decide to relax the Para-6 of the above-referred notification issued by the DPIIT and make it clear that the notification will be applicable to those Start-up Companies also where addition u/s 56(2)(viib) has been made in an assessment order under the IT Act before 19th February, 2019 provided the assessee had subsequently submitted the declaration in Form–2 that it fulfills the conditions mentioned in Para-4 of the above-referred notification.

Return of Income – Section 139-Clarification in respect of filing –up of ITR Forms for the Assessment Year 2019 – 20 (265 Taxman-(St.)4)

The Income –tax return (ITR) Forms for the Assessment Year (AY) 2019 – 20 were notified vide notification bearing G.S.R. 279(E), dated the 1st day April, 2019. Subsequently, the instructions for filing ITR Forms were issued and the software utility for e-filing of all the ITR Forms were also released. After notification of the ITR Forms various queries have been raised by the stake-holder in respect of filing-up of the ITR Forms.

The CBDT Vide Circular NO.18/2019 (F.No.370142/1/2019-TPL (PT-1)], DATED 8-8-2019 issued be the clarification by way of FAQs. There are about 19 FAQs. Readers may refer to the above citation for the further details.

Section 268 A- Further enhancement of monetary limits for filing of appeals by the department before Income Tax Appellate Tribunal, High Courts and SLPs/Appeals before Supreme Court-Amendment to Circular No. 3 of 2018- Measures for reducing litigation. (265 TAXMAN (St.) 7)

The CBDT, in line with governments objective of reducing litigation, has been deciding monitoring limits for the revenue to file to Income Tax Appeals before tax Tribunals, High Courts and Special Leave petitions (SLPs) / appeals before Supreme Courts from time to time.

In 2018, the CBDT had issued Circular No.3/2018 providing for increased monetary limits, overriding the earlier limits set in this regard. With an aim to further manage litigation, the CBDT has now significantly enhanced the monetary thresholds for filing of Income Tax Appeals vide Circular No.17 of 2019, dated 8-8-2019.

The enhanced monetary limit is as follow :

Apart from enhancing the monetary limits, the Circular has also clarified that where an appeal is filed against consolidated order (Composite order for more than one Assessment Year), the monetary limits shall be tested individually for every tax year. Further where the consolidation is with respect to different tax payers, the limit shall be tested for each taxpayer, separately.

The aforesaid modification shall come in to the effect from date of issue of the circular.

Section 119 of the Income-Tax Act, 1961-Income-Tax Authorities – Instructions to Subordinate Authorities-Processing of returns with refund claims under section 143(1) beyond the prescribed time limits in non-scrutiny cases. [265 TAXMAN (St.) 9 ]

The several returns for various assessment year up to the assessment year 2017 – 18, which were otherwise filed validly u/s 139 or 142 of the Act could not be processed u/s 143 (1) of the Act due to certain technical issues or for other reasons not attributable to the assessee concerned. Consequently, Intimation regarding processing of such returns could not be sent within the period of one year from the end of the financial year in which such returns were filed as prescribed in the second proviso to the section 143 (1) of the Act. This has led to a situation where the taxpayers is unable to get his legitimate refund in accordance with the provision of the Act, although the delay is not attributable to him.

In order to resolve the grievances of such taxpayers, earlier, Board has issued instructions viz. Instruction No.18/2013, dated 18th December, 2013; Instruction/Order dated 25-10-2016; and Instruction No.5/2018, dated 21-8-2018 allowing processing of such validly filed time barred returns with refund claims, where the statutory time-frame for sending intimation under sun-section (1) of section 143 had lapsed. Vide the Instruction No.5/2018 dated 21-8-2018, time frame was given till 31-3-2019 to process all valid unprocessed returns with refund claims up to assessment year 2016-17, subject to other conditions specified therein.

The representation was made to be CBDT to enable the processing of such returns.

The CBDT by virtue of its power u/s 119, in order to mitigate genuine hardship being faced by taxpayers, hereby relaxes the time-frame prescribed in second proviso to sub-section (1) of section 143 and directs that all validity filed returns up to assessment year 2017-18 with refund claims, which could not be processed under sub-section (1) of section 143 of the Act and have become time-barred, subject to the exceptions mentioned in para below, can be processed now with prior administrative approval of Pr. CCIT/CCIT concerned and intimation of such processing under sub-section (1) of section 143 of the Act can be sent to the assessee concerned by 31-12-2019. All subsequent effects under the Act including issue of refund shall also follow as per the prescribed procedures. To ensure adequate safeguards, it has been decided that once administrative approval is accorded by the Pr. CCIT/CCIT, the Pr. CIT/CIT concerned would make a reference to the Pr. DGIT (Systems) to provide necessary enablement to the Assessing Officer on a case to case basis.

The relaxation accorded above shall not be applicable to the following returns :

(a) Returns filed for any assessment year prior to assessment year 2017 – 18, which were under scrutiny and were not processed in view of provisions of sub-section (1D) of section 143 of the Act;

(b) Returns remain unprocessed, where either demand is shown as payable in the return or is likely to arise after processing it;

(c) Returns remain unprocessed for any reason attributable to the assessee.