INCOME TAX REGULATORY UPDATES CIRCULAR NO. 11/2022, DATED 03-06-2022
CBDT issues clarifications on Form 10AC issued till 03-06-2022; list down conditions for grant of registration
Editorial Note : The Central Board of Direct Taxes (CBDT) has issued clarifications with regards to Form 10AC issued between 01-04-2021 to 03-06-2022. The Board has listed down conditions that shall be considered while granting registration/approval or provisional registration/ provisional approval to trusts and institutions in view of amendments made by the Finance Act, 2022.
NOTIFICATION NO. 1 OF 2022, DATED 09-06-2022
CBDT revises procedures laid down for sharing info. with tax deductors/collectors for Sections 206AB & 206CCA
Editorial Note : The Central Board of Direct Taxes has revised the proce- dures laid down for sharing information with tax deductors/collectors for Sections 206AB & 206CCA considering the changes introduced by the Finance Act, 2022. The Board has earlier laid down the procedure vide Notification No. 01 of 2021 dated 22nd June 2021.
NOTIFICATION F.NO. 187/4/2021-ITA-I, DATED 10-06-2022
CBDT notifies new units under Faceless Assessment incorporating amendments made by the FA 2022 Editorial Note : The Finance Act, 2022 has revamped the provisions related to Faceless Assessment as contained under section 144B. To incorporate these changes, the Central Board of Direct Taxes (CBDT) has issued notifications in suppression of the notifications issued in erstwhile provisions. The CBDT has also notified various units under the amended provisions of faceless assessment.
NOTIFICATION NO. 62/2022, DATED 14-06-2022
‘331’ notified as Cost Inflation Index for Financial Year 2022-23 Editorial Note : The cost of inflation index (CII) has been notified by the Central Board of Direct Taxes (CBDT) every year. CII is used to compute Long term capital gains wherein the cost of acquisition/improvement is indexed with reference to the applicable CII of the relevant year. The CBDT has notified ‘331’ as CII for the Financial Year 2022-23.
NOTIFICATION F. NO. 500/09/2016-APA-I, DATED 10-06-2022
CBDT updates Mutual Agreement Procedure (MAP) Guidance addressing stakeholder’s concerns
Editorial Note : The Central Board of Direct Taxes (CBDT) has updated guidance on MAP procedure addressing various concerns of the stakeholders. The board had earlier notified MAP guidance vide F.No. 500/09/2016-APA-I dated 7th August 2020. Stakeholders had raised queries on certain related aspects of MAP, which were not covered by the guidance. Some partner countries had also requested clarity on certain issues, such as the consequences of the Vivad se Vishwas scheme on MAP.
CIRCULAR NO. 12 OF 2022, DATED 16-06-2022
CBDT issues guidelines on deduction of tax at source under Section 194R
Editorial Note : The Central Board of Direct Taxes (CBDT) has issued guidelines to remove the difficulties in implementing the provisions of section 194R. The board has framed 10 questions and answered them to give clarity on the deduction of tax at source. The guidelines are binding on income-tax authorities and the person providing benefit or perquisite.
NOTIFICATION NO. 63/2022, DATED 15-06-2022
Transfer of capital asset from NTPC Ltd. to NTPC Green Energy Ltd. shall not be treated as transfer u/s 47: CBDT
Editorial Note : Exercising power conferred in section 47(viiaf), the Central Board of Direct Taxes (CBDT) has notified that the transfer of capital asset from NTPC Ltd. to NTPC Green Energy Ltd., under the plan approved by the Central Govt. on 21-03-2022 shall not be treated as transfer.
NOTIFICATION NO. 65/2022/F. NO. 275/30/2019-IT(B), DATED 16-06-2022
No Sec. 194-I TDS on payment of rent to a unit located in IFSC for lease of aircraft: CBDT Editorial Note : The Central Board of Direct Taxes (CBDT) has exempted deduction of tax at source under section 194-I on payment of lease rent or supplemental lease rent made to a unit located in the International Financial Services Center (IFSC)
for the lease of an aircraft. The exemption is available subject to the fulfillment of certain conditions.
NOTIFICATION NO.64/2022/F. NO. 370142/24/2022-TPL, DATED 16-06-2022
CBDT prescribes ‘other conditions’ to be fulfilled by a specified fund referred to in Sec. 10(4D)
Editorial Note : The Central Board of Direct Taxes (CBDT) has notified a new Rule 21AIA prescribing the “other conditions” required to be fulfilled by a specified fund referred to in section 10(4D) of the Income-tax Act. The specified fund is also required to certify that it has fulfilled the conditions and furnish information in respect of units held by residents in the annual statement of exempt income in Form No. 10-IG.
NOTIFICATION NO. 66/2022, DATED 17-06-2022
Applicability of TP Safe Harbour Rules extended till AY 2022-23: CBDT
Editorial Note : The CBDT has extended the applicability of provisions of Rule 10TD(1) & Rule 10(2A) till Assessment Year 2022-23. Rule 10TD prescribes list of eligible international transactions where transfer price declared by the assessee shall be required to be accepted by the Income-tax Authorities.
NOTIFICATION NO. 65/2022/F. NO. 275/30/2019-IT(B), DATED 16-06-2022
No Sec. 194-I TDS on payment of rent to a unit located in IFSC for lease of aircraft: CBDT
Editorial Note : The Central Board of Direct Taxes (CBDT) has exempted deduction of tax at source under section 194-I on payment of lease rent or supplemental lease rent made to a unit located in the International Financial Services Center (IFSC) for the lease of an aircraft. The exemption is available subject to the fulfillment of certain conditions.
CIRCULAR NO. 13/2022 [F. NO. 370142/29/2022-TPL] (PART-1), DATED 22-06-2022
CBDT issues guidelines for TDS under Sec. 194S where VDAs are transferred through an Exchange
Editorial Note : The CBDT has issued guidelines to remove practical difficulties that may arise while deducting tax at source under section 194S where Virtual Digital Asset (VDAs) are transferred on or through an exchange.
NOTIFICATION NO. G.S.R. 463(E) , DATED 21-06-2022
CBDT notifies challan-cum-state- ment Form 26QE for payment of tax deducted on VDAs
Editorial Note : The CBDT has amended Income-tax Rules incorporating TDS changes brought by Finance Act, 2022. The tax deducted under section 194S shall be deposited in challan-cum-statement in Form No. 26QE. Further, the certificate of deduction of tax at source shall be issued in Form No. 16E. The board has also amended rules for tax payment and furnishing of TDS statements in case of tax deducted under section 194R.
CIRCULAR NO. 14 OF 2022, DATED 28-06-2022
CBDT issues guidelines for TDS under Sec. 194S where VDAs are transferred other than through Exchange
Editorial Note : The Central Board of Direct Taxes, vide Circular No. 14 of 2022, dated 28-06-2022, has issued guidelines to remove practical difficulties that may arise while deducting tax at source under Section 194S where Virtual Digital Asset (VDAs) are transferred other than through an Exchange.
NOTIFICATION NO. 73/2022/F. NO.370142/29/2022-TPL(PART-I) , DATED 30-06-2022
CBDT notifies Form 26QF for filing of statement of tax deposited u/s 194S by ‘Exchange’
Editorial Note : The CBDT has
notified Form 26QF for filing of TDS statement by ‘Exchange’ in respect of tax deposited on transfer of virtual digital asset under section 194S. Form 26QF to be furnished on quarterly basis.
NOTIFICATION NO. 74/2022/F. NO. 370142/29/2022-TPL (PART-I), DATED 30-06-2022
Gift vouchers, rewards points and website subscription is excluded from definition of VDA: CBDT
Editorial Note : The Central Board of Direct Taxes (CBDT) has notified that gift cards or vouchers that may be used to obtain discounts, reward/loyalty points, and subscriptions to websites/application shall be excluded from the definition of the virtual digital asset.
NOTIFICATION NO. 75/2022/F. NO. 370142/29/2022-TPL(PART-I), DATED 30-06-2022
NFT whose transfer results in a transfer of ownership of an underlying tangible asset isn’t VDA: CBDT
Editorial Note : The Central Board of Direct Taxes (CBDT) has specified the scope of the non-fungible token (NFT) to be treated as a Virtual Digital Asset (VDA) under section 2(47A). It has been provided that an NFT, whose transfer results in the transfer of owner- ship of the underlying tangible asset and the transfer of ownership of such underlying tangible asset is legally enforceable, shall not be treated as VDA.
SECTION 2(15) OF THE INCOME-TAX ACT, 1961 – CHARITABLE PURPOSE
Profit motive : Where assessee, a non-profit entity, was awarded a contract of construction of a museum by RBI and was also awarded task of establishing five galleries on textiles, astronomy, space etc. by SMC, assessee had disseminated knowledge in process of establishing facilities for RBI and SMC and, thus, activities of assessee amounted to education within meaning of section 2(15) – Creative Museum Designers v. Income-tax Officer, Exemptions – [2022] 139 taxmann.com 451 (Calcutta)
SECTION 40(a)(iib) OF THE INCOME-TAX ACT, 1961 – BUSI- NESS DISALLOWANCE – ROY- ALTY, LICENCE FEE ETC.
Dealing with objections to reopening : Where Assessing Officer along with show cause notice and draft assessment order had sent a detailed order dealing with objections raised by assessee against reasons for reopening of its assessment for disallowing VAT paid by it to State Government and only when assessee failed to reply to same, final reassessment order was passed, instant writ petition filed by assessee against said final order was not maintainable – Tamil Nadu State Marketing Corporation Ltd. v. Additional/Joint/ Deputy/Asstt. Commissioner of Income-tax/Income-tax Officer, National e-Assessment Centre Delhi – [2022] 139 taxmann.com 432 (Madras)
SECTION 90 OF THE INCOME-TAX ACT, 1961 – DOUBLE TAXATION RELIEF – WHERE AGREEMENT EXISTS
Elimination of double taxation – Eligibility of relief : Where for claiming foreign tax credit (FTC), assessee failed to furnish Form 67 on or before due date of furnishing return of income prescribed under section 139(1) but submitted same subsequently during assessment proceedings, assessee was entitled to claim FTC – 42 Hertz Software India (P.) Ltd. v. Assistant Commissioner of Income-tax – [2022] 139 taxmann.com 448 (Bangalore – Trib.)
SECTION 92C OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
Adjustments – General : In case appropriate adjustments cannot be made to uncontrolled transaction due to lack of data, adjustments should be made on tested party; where it was practically not possible for assessee to obtain data on pre-operative expenses of comparable companies, TPO should collate same from comparable companies by
exercising his powers under section 133(6) and provide assessee an opportunity by sharing details so obtained, and accordingly, grant adjustment therefor – Toyota Tsusho India (P.) Ltd. v. ACIT – [2022] 139 taxmann.com 433 (Bangalore – Trib.)
Adjustment – Operating profit : Recovery of deposit could not be considered as part of operating revenue – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Adjustments – Operating profit/cost, computation of : Where assessee incurred ‘extraordinary one-time cost due to change in assumption for actuarial valuation’, since actuary determined amount of provision was to be created at end of year, same became an operating cost without any need for reduction, and, hence, could not be treated as non-operating – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Adjustments – Others : Where assessee admittedly does not include subvention receipt in total income, sequitur is that such an amount cannot be included in operating revenue base for ALP determination – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Comparables, functional similarity – Manufacturer : Company engaged in textile business could not be compared to assessee engaged in manufacturing of textile machines – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Comparables, functional similarity – Manufacturer : Where assessee was engaged in manu- facturing of textile machines, a company engaged in manufacturing textile machines and also manufacturing and selling air pollution and air treatment systems could not be held as comparable to assessee – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Comparables, functional similarity – Manufacturer : Once functional similarity of a company was established with assessee as functionally comparable, TPO was unjustified in excluding same on ground that there were no RPT – Rieter India (P.) Ltd. v.
Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Transaction with AE alone are covered : Assessing Officer/TPO should restrict TP adjustment only to value of international transactions rather than entity level transactions – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Adjustments – Operating profit/cost, computation of : Excess payment of non-cenvatable import duty to be treated as part of operating cost base – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
Adjustments – Operating profit/cost, computation of : Foreign exchange fluctuation should be considered as part of operating cost – Rieter India (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-5, Pune – [2022] 139 taxmann.com 429 (Pune – Trib.)
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