India Tax Update - T G Suresh - TGS

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Opening Remarks: CA. Piyush S Chhajed, Chairman, Direct Taxes Committee, ICAI
Welcome Address: CA. Cotha S. Srinivas, Vice-Chairman, Direct Taxes Committee, ICAI
Speaker: CA. T G Suresh, an expert in Direct Taxes
Session Moderator: CA. Subashini Ganapathy
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May the blessings of Lord Krishna fill your life with joy, love, peace and prosperity. Happy Gokulashtami/ Krishna Jayanthi to you and your loved ones T G Suresh Tgs

I had the honor of addressing the esteemed audience at the "AI in Finance and Accounting Forum 2024" hosted by the Institute of Chartered Accountants of India. The energy in the room was electrifying, and it was truly a pleasure to share insights on the transformative role of AI in our industry.

A special moment for me was receiving a message from Ramki Sir, Senior Partner at PKF, who made the experience even more memorable. His words, "Amazing presentation. Permit me to say wow," deeply resonated with me and further fueled my passion for this ever-evolving field.
As always Thanks Venki and Aanju

I had the privilege of addressing a session on ‘Buyback of Securities & Wealth Maximization Strategies for CAs’ at the Salem branch of SIRC of ICAI. It was refreshing to see a blend of experienced professionals and young, eager faces in the audience.
A big thumps up to the branch for their initiative in organizing such a distinctive topic.

On this day in 1985, my journey in the world of Income Tax began, and what an exhilarating ride it has been. From day one, I've been fortunate to learn and grow alongside an amazing support system that has propelled me forward every step of the way.

Special thanks to Venki and Aanju,; to my father and FIL for their unwavering support; to my wife and son for their boundless sacrifice; and to my brothers, Sisters, and their spouses for standing by me through it all.

But the gratitude doesn't end there – to all my clients,
friends, and students, your questions and challenges have strengthened my expertise and fuelled my passion for this subject. Each interaction has been a stepping stone, enriching my understanding and shaping me into the professional I am today.

As I continue this journey, I am filled with gratitude for the support, wisdom, and camaraderie that have made these 39 years truly remarkable. Here's to many more years of growth, learning, and making a meaningful impact in the world of Income Tax!

MUCH AWAITED 206 AA NOTIFICATION

Amended Rule 8 D
the amount of expenditure directly relating to income which does not form part of total income; and
an amount equal to 1 % of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income:
Total disallowance shall not exceed the total expenditure claimed by the assessee.";

F.No.142/8/2016-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) ***
Dated 20th of May, 2016
Clarifications on the Income Declaration Scheme, 2016
The Income Declaration Scheme, 2016 (hereinafter referred to as ‘the Scheme’) incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totaling in all the 45% of such undisclosed income declared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as ‘the Rules’) have been notified. In regard to the scheme queries have been received from the public about the scope of the scheme and the procedure to be followed. The Board has considered the same and decided to clarify the points raised by issue of a circular in the form of questions and answers as follows.-
Question No.1: Where an undisclosed income in the form of investment in asset is declared under the Scheme and tax, surcharge and penalty is paid on the fair market value of the asset as on 01.06.2016, then will the declarant be liable for capital gains on sale of such asset in the future? If yes, then how will the capital gains in such case be computed?
Answer: Yes, the declarant will be liable for capital gains under the Income-tax Act on sale of such asset in future. As per the current provisions of the Income-tax Act, the capital gains is computed by deducting cost of acquisition from the sale price. However, since the asset will be taxed at its fair market value the cost of acquisition for the purpose of Capital Gains shall be the fair market value as on 01.06.2016 and the period of holding shall start from the said date (i.e. the date of determination of fair market value for the purposes of the Scheme). Question No.2: Where a notice under section 142(1)/ 143(2)/ 148/ 153A/ 153C of the Income-tax Act has been issued to a person for an assessment year will he be ineligible from making a declaration under the Scheme?
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Answer: The person will only be ineligible from declaration for those assessment years for which a notice under section 142(1)/143(2)/148/153A/153C is issued and the proceeding is pending before the Assessing Officer. He is free to declare undisclosed income for other years for which no notice under above referred sections has been issued. Question No.3: As per the Scheme, declaration cannot be made where an undisclosed asset has been acquired during any previous year relevant to an assessment year for which a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued. If the notice has been issued but not served on the declarant then how will he come to know whether the notice has been issued?
Answer: The declarant will not be eligible for declaration under the Scheme where the undisclosed income relates to the assessment year where a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued and served on the declarant on or before 31st day of May, 2016. The declarant is required to file a declaration regarding receipt of any such notice in Form-1.
Question No.4: In a case where the undisclosed income is represented in the form of investment in asset and such asset is partly from income that has been assessed to tax earlier, then what shall be the method of computation of undisclosed income represented by such undisclosed asset for the purposes of the Scheme?
Answer: As per sub-rule (2) of rule 3 of the Income Declaration Scheme Rules, 2016, where investment in any asset is partly from an income which has been assessed to tax, the undisclosed income represented in form of such asset will be the fair market value of the asset determined in accordance with sub-rule (1) of rule 3 as reduced by an amount which bears to the value of the asset as on the 1.6.2016, the same proportion as the assessed income bears to the total cost of the asset. This is illustrated by an example as under: Investment in acquisition of asset in previous year 2013-14 is of Rs.500 out of which Rs.200 relates to income assessed to tax in A.Y. 2012-13 and Rs.300 is from undisclosed income pertaining to previous year 2013-14. The fair market value of the asset as on 01.06.2016 is Rs.1500. The undisclosed income represented by this asset under the scheme shall be:
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1500 minus (1500 X 200 ) = Rs.900 500 Question No.5: Can a declaration be made of undisclosed income which has been assessed to tax and the case is pending before an Appellate Authority?
Answer: As per section 189 of the Finance Act, 2016, the declarant is not entitled to re-open any assessment or reassessment made under the Income-tax Act. Therefore, he is not entitled to avail the tax compliance in respect of such income. However, he can declare other undisclosed income for the said assessment year which has not been assessed under the Income-tax Act.
Question No.6: Can a person against whom a search/ survey operation has been initiated file declaration under the Scheme?
Answer: (a) The person is not eligible to make a declaration under the Scheme if a search has been initiated and the time for issuance of notice under section 153A has not expired, even if such notice for the relevant assessment year has not been issued. In this case, however, the person is eligible to file a declaration in respect of an undisclosed income in relation to an assessment year which is prior to assessment years relevant for the purpose of notice under section 153A. (b) In case of survey operation the person is barred from making a declaration under the Scheme in respect of an undisclosed income in which the survey was conducted. The person is, however, eligible to make a declaration in respect of an undisclosed income of any other previous year.
Question No. 7: Where a search/ survey operation was conducted and the assessment has been completed but certain income was neither disclosed nor assessed, then whether such unassessed income can be declared under the Scheme?
Answer: Yes, such undisclosed income can be declared under the Scheme.
Question No.8: What are the consequences if no declaration under the Scheme is made in respect of undisclosed income prior to the commencement of the Scheme?
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Answer: As per section 197(c) of the Finance Act, 2016, where any income has accrued or arisen or received or any asset has been acquired out of such income prior to the commencement of the Scheme and no declaration is made under the Scheme, then such income shall be deemed to have been accrued, arisen or received or the value of the asset acquired out of such income shall be deemed to have been acquired in the year in which a notice under section 142/143(2)/148/153A/153C is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly. Question No.9: If a declaration of undisclosed income is made under the Scheme and the same was found ineligible due to the reasons listed in section 196 of the Finance Act, 2016, then will the person be liable for consequences under section 197(c) of the Finance Act, 2016?
Answer: In respect of such undisclosed income which has been duly declared in good faith but not found eligible, then such income shall not be hit by section 197(c) of the Finance Act, 2016. However, such undisclosed income may be assessed under the normal provisions of the Incometax Act, 1961.
Question No.10: If a person declares only a part of his undisclosed income under the Scheme, then will he get immunity under the Scheme in respect of the part income declared?
Answer: It is expected that one should declare all his undisclosed income. However, in such a case the person will get immunity as per the provisions of the Scheme in respect of the undisclosed income declared under the Scheme and no immunity will be available in respect of the undisclosed income which is not declared.
Question No.11: Can a person declare under the Scheme his undisclosed income which has been acquired from money earned through corruption?
Answer: No. As per section 196(b) of the Finance Act, 2016, the Scheme shall not apply, inter-alia, in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988. Therefore, declaration of such undisclosed income cannot be made under the Scheme. However, if such a declaration is made and in an event it is found that the income represented money earned through corruption it would amount to misrepresentation of facts and the declaration
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shall be void under section 193 of the Finance Act, 2016. If a declaration is held as void, the provisions of the Income-tax Act shall apply in respect of such income as they apply in relation to any other undisclosed income.
Question No.12: Whether at the time of declaration under the Scheme, will the Principal Commissioner/Commissioner do any enquiry in respect of the declaration made?
Answer: After the declaration is made the Principal Commissioner/ Commissioner will enquire whether any proceeding under section 142(1)/143(2)/148/153A/153C is pending for the assessment year for which declaration has been made. Apart from this no other enquiry will be conducted by him at the time of declaration.
Question No.13: Will the declarations made under the Scheme be kept confidential?
Answer: The Scheme incorporates the provisions of section 138 of the Incometax Act relating to disclosure of information in respect of assessees. Therefore, the information in respect of declaration made is confidential as in the case of return of income filed by assessees.
Question No.14: Is it necessary to file a valuation report of an undisclosed income represented in the form of investment in asset along with the declaration under the Scheme?
Answer: It is not mandatory to file the valuation report of the undisclosed income represented in the form of investment in asset along with the declaration. However, the declarant should have the valuation report. While e-filing the declaration on the departmental website a facility for uploading the documents will be available.
(Ekta Jain) Deputy Secretary

PRINTING / PRINTING AND PUBLICATION MANUFACTURE - ELIGIBLE FOR ADDL DEPRECIATION
Circular No. 15/2016

F. No. 279/Misc/140/2015/ITJ
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

New Delhi, 19th May, 2016

Subject: Additional Depreciation u/s 32(1)(iia) of the Income Tax Act, 1961 -reg.

An assessee, engaged in the business of manufacture or production of an article or thing, is eligible to claim additional depreciation under clause (iia) of sub-section (1) of section 32 of the Income-tax Act, 1961 (hereinafter referred to as the Act) in addition to the depreciation allowance under sub-section (1) of section 32 of the Act.

2. Whether or not an assessee engaged in printing or printing and publishing is eligible for grant of additional depreciation under clause (iia) of sub-section (1) of section 32 of the Act, has been a contentious issue. In other words, whether printing or printing and publishing amounts to manufacture or production of article or thing has been contested in legal forums.

3. The Hon’ble Kerala High Court in the case of Mathrubhoomi Printing & Publishing Co. vide its judgment’ dated 16.2.2015 in ITA No 23 of 2015 relied upon the Hon’ble Delhi High Court judgement dated 31.5.2013 in 1TA No 49 of 1996 in the case of Delhi Press Patra Prakashan Ltd.2 and held that printing and publishing activity is a manufacturing activity and therefore, assessee is eligible for grant of additional depreciation u/s 32(1)(iia).

4. The Board has accepted the position that printing or printing and publishing amounts to manufacture or production of article or thing. The judgments of Hon’ble Delhi and Kerala High Courts on this issue have been accepted. Thus the issue relating to grant of deprecation u/s 32(1) (iia) has not been further contested, though the Delhi High Court judgment has been contested on other issues.

5. It is, therefore, a settled position that the business of printing or printing and publishing amounts to manufacture or production of an article or thing and is accordingly eligible for additional depreciation u/s 32(l)(iia) of the Act. Henceforth, appeals may not be filed on this ground by officers of the Department and those already filed, in Courts/Tribunals may be withdrawn / not pressed upon.

6. The above may be brought to the notice of all concerned.
(Sadhana Panwar)
DCIT (OSD)(ITJ),
CBDT; New Delhi.

Holding period of debentures will be considered for ST/LT.

At present conversion of deb in to stock is not regarded as transfer u/s 47 (X)
COA in such cases will be determined u/s 49(2A) i..e Cost of deb. will be taken as the cost.
However, there is no corresponding amendment in Sec 2(42A), to take the holding period of deb, for ST/LT
CBDT vide Notification No. 18/2016New Delhi, the 17th March, 2016 has introduced a new Rule 8 AA which specifically provides for taking in to account the holding period of Debentures for ST/LT.

The old prima facie adjustments are back again. Form 16,16 A, 26 AS, Audit reports are going to be used to make additions after giving 30 days time u/s 143(1)(a). Heading for a headache ?