Budget Highlights

The Hon. Finance Minister in her budget speech has announced several reforms under the Income Tax.

Major Changes

1. Incentives Exemption for LTC Cash Scheme
2. Incentives for affordable rental housing
3. Tax incentives for units located in International Financial Services Centre (IFSC)
4. Issuance of zero coupon bond by infrastructure debt fund
5. Tax neutral conversion of Urban Cooperative Bank into Banking Company
6. Facilitating strategic disinvestment of public sector company
7. Extension of date of sanction of loan for affordable residential house property
8. Extension of date of incorporation for eligible start up for exemption and for investment in eligible start-up
9. Removing difficulties faced by taxpayers Increase in safe harbour limit of 10% for home buyers and real estate developers selling such residential units
10. Relaxation for certain category of senior citizen from filing return of income-tax
11. Rationalization of provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)
12. Addressing mismatch in taxation of income from notified overseas retirement fund
13. Rationalisation of provisions of Minimum Alternate Tax (MAT)
14. Exemption of deduction of tax at source on payment of Dividend to business trust in whose hand dividend is exempt
15. Rationalisation of the provision concerning withholding on payment made to Foreign Institutional Investors (FIIs)
16. Rationalisation of provisions relating to tax audit in certain cases
17. Advance tax instalment for dividend income
18. Raising of prescribed limit for exemption under sub-clause (iiiad) and (iiiae) of clause (23C) of section 10 of the Act
19. Extending due date for filing return of income in some cases, reducing time to file belated return and to revise original return and also to remove difficulty in cases of defective returns
20. Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date
21. Constitution of Dispute Resolution Committee for small and medium taxpayers
22. Constitution of the Board for Advance Ruling
23. Income escaping assessment and search assessments
24. Allowing prescribed authority to issue notice under clause (i) of sub-section (1) of section 142
25. Provision for Faceless Proceedings before the Income-tax Appellate Tribunal (ITAT) in a jurisdiction less manner
26. Discontinuance of Income-tax Settlement Commission
27. Reduction of time limit for completing assessment
28. Rationalisation of the provision of Charitable Trust and Institutions to eliminate possibility of double deduction while calculating application or accumulation
29. Taxation of proceeds of high premium unit linked insurance policy (ULIP)
30. Rationalisation of the provision of slump sale
31. Rationalisation of provision of transfer of capital asset to partner on dissolution or reconstitution
32. Provisional attachment in Fake Invoice cases
33. Rationalisation of the provisions of Equalisation Levy
34. Depreciation on Goodwill
35. Rationalisation of the provision relating to processing of returned income and issuance of notice under sub-seciton (2) of section 143 of the Act
36. Adjudicating authority under the PBPT Act
37. Rationalisation of the provision of presumptive taxation for professionals under section 44ADA
38. Clarification regarding the scope of Vivad se Vishwas Act, 2020
39. Definition of the term “Liable to tax”
40. Income Declaration Scheme (IDS) amendment
41. Tax Deduction at Source (TDS) on purchase of goods
42. TDS/TCS on non-filer at higher rates.

Note: The Central Board of Direct Taxes (CBDT) on Monday further extended the due date for filing declaration under the ‘Vivad Se Vishwas’ (VSV) scheme till February 28, 2021. As per a CBDT’s notification, the date for payment of tax without additional interest under VSV remains unchanged at March 31, 2021.

  Important Judicial Precedents

• Uninikrishan vs ITO(ITAT Mumbai) [ITA Nos. 1200 and 1201/Mum/2018 Assessment years: 2013-14 and 2014-15]
  Section 17(2)(vi): (i) ESOP benefits granted to an assesse when he was resident and in consideration for services rendered in India is taxable even though the assesse is a non-resident in the year of exercise. S. 17(2)(vi) decides the timing of the income to be the year of exercise of the ESOPs but does not dilute or negate the fact that the benefit had arisen at the point of time when the ESOP rights were granted.

• CIT vs. Shriram Ownership Trust (Madras High Court)[ T.C.A.No.242 of 2018]
  Section 2(24)(iia)/ 56(2)(vii)/160(1)(iv): (i) A private discretionary Trust has to be assessed in the status of an “individual” as the beneficiaries are individuals. It cannot be assessed as an “AOP” even though there are multiple trustees & beneficiaries. Even a non-human juristic entity can be assessed as an “individual”. The fact that in the return filed in Form ITR-5, the status is that of a “trust” is irrelevant. Consequently, the contribution received by the assesse is assessable as “income” us 56.

• Sanjay Duggal vs. ACIT (ITAT Delhi)[ ITA.No.1813/Del./2019]
  Section153D: The approving authority (JCIT) has to give approval for “each” assessment year after applying independent mind to the material on record to see whether the cases are un-abated or abated assessments and their effect. However, the JCIT has granted common approval for all AYs. Further, he did not have the seized material nor the appraisal report or other material at the time of granting approval. Therefore, the approval granted is merely technical approval just to complete the formality and without application of mind. The approval has been granted without application of mind and is invalid, bad in Law and is liable to be quashed.

• PCIT Vs. Smt. Krishna Devi(Delhi High Court)[ ITA 125/2020]
  Section 10(38) Bogus Capital Gains from Penny Stock: The fact that there was an astounding 4849.2% jump in the share price within two years, which is not supported by the financials, does not justify the AO’s conclusion that the assesse converted unaccounted money into fictitious exempt LTCG to evade taxes. The finding is unsupported by material on record & is purely an assumption based on conjecture. The theory of human behavior and preponderance of probabilities, based on Sumati Dayal v. CIT 214 ITR 801 (SC), cannot be cited as a basis to turn a blind eye to the evidence.