INCOME TAX REGULATORY UPDATES OCT 2022
PRESS RELEASE, DATED 29-09-2022
Premature closure clause won’t trigger on account of death of holder of ‘Senior Citizens Savings Scheme’: FinMin
Editorial Note : The Ministry of Finance has clarified that the premature closure clause of the Senior Citizens Savings Scheme (SCSS) does not trigger on account of the demise of its account holder. The premature closure of the account is applicable only when the SCSS account holder requests for closure of his SCSS account before the maturity period.
NOTIFICATION NO. 111/2022, DATED 28-09-2022
CBDT notifies Form 69 for making application for recomputation of income due to disallowance of surcharge/cess
Editorial Note : The FA 2022 inserted a new sub-section (18) to section 155 prescribing that the AO shall amend the assessment order of prior previous years on account of retrospective amendment under section 40(a)(ii) which disallows deduction of surcharge and cess. The CBDT has notified Form 69 which shall be filed by the assessee, on or before 31-03-2023, requesting AO for recomputation of total income without allowing the claim for deduction of surcharge or cess.
ORDER F. NO. 370133/13/2022-TPL, DATED 28-09-2022
CBDT specifies manner for constitution of collegium to decide deferment of appeals under Sec. 158AB
Editorial Note : The Finance Act, 2022 inserted a new Section 158AB to provide for deferment of appeal in the case of an assessee wherein the question of law is identical to a question of law that is pending before the jurisdictional High Court or the Supreme Court. To decide on such deferment, the CBDT has specified the manner for the constitution of the collegium. The Collegium shall comprise three members who are officers of the rank of Pr. CIT or CIT.
ORDER F NO. 370142/4I12022-T, DATED 26-09-2022
Due date to file modified return extended to 31-03-23 if order of business organisation issued till 30-09-2022: CBDT
Editorial Note : As per section 170A, entities have to submit form ITR-A within 6 months from the end of the month in which the order of business reorganization was issued. ITR-A was notified on 19-09-22 and come into effect on 01-11-22, thus, to provide adequate time to furnish form, the CBDT has decided that where the order of business reorganisation was issued between 01-04-2022 and 30-09-2022, the time available to furnish ITR-A shall stand extended to 31-03-2023.
NOTIFICATION NO. 110/2022/F.NO. 370142/41/2022-TPL, DATED 19-09-2022
CBDT notifies form ITR-A for filing of modified return by successor entity
Editorial Note : The Central Board of Direct Taxes (CBDT) has notified a new Rule 12AD and Form ITR-A to be filed by successor entities to furnish modified return of income under section 170A consequent to business reorganization.
CIRCULAR NO 18 OF 2022, DATED 13-09-2022
CBDT issues additional guidelines on deduction of tax at source u/s 194R
Editorial Note : The Central Board of Direct Taxes (CBDT) has issued another set of guidelines to remove difficulties on deduction of tax at source under section 194R. The additional guidelines give clarity on earlier guidelines issued by CBDT vide Circular no. 12 of 2022.
SIGNIFICANT ECONOMIC PRESENCE (‘SEP’) RULES IN INDIA FOR NON- RESIDENT ENTITIES, EFFECTIVE FROM ASSESSMENT YEAR 2022-23 ONWARDS
- For a Non-Resident entity which has done business with Indian party(ies) aggregating to more than INR 20 million in Financial Year (FY) 2021-22 or has a user base in India of more than 0.3 million, the newly enforced income-tax regulations of SEP in India are relevant
- Such Non-resident entity, irrespective of whether it has a presence in India or not (such as branch office, liaison office, project office, etc.), might be required to submit tax return in India for FY 2021-22 onwards
- The due date for submission of tax return for FY 2021-22 would be
31 October 2022, if transfer pricing regulations are not applicable, or
30 November 2022, if transfer pricing regulations are applicable
- SEP provisions initially introduced in 2018 but implementation deferred till FY 2021-22, seeks to widen the tax base in India under the Income-tax Act 1961 for Non-Residents doing business with India (especially through digital means). Tax treaty benefits would be available provided the conditions for eligibility are satisfied.
RECENT JUDICIAL RULINGS ON INCOME TAX
SECTION 9 OF THE INCOME-TAX ACT, 1961 – INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA
Royalties/Fee for technical services – Bandwidth service : Where assessee paid bandwidth charges towards bandwidth services provided by its UK based AE, since neither there was transfer of any intellectual property nor any exclusive right was granted to assessee for using any intellectual property, said payment made by assessee was not royalty under section 9(1)(vi) – Madura
Coats (P.) Ltd v. Deputy Commissioner of Income-tax (International Taxation) – [2022] 142 taxmann.com 356 (Bangalore – Trib.)
Royalties/fee for technical services – Make available : Where assessee paid bandwith charges towards bandwidth services provided by its UK based Associated Enterprise, in view of facts that there was no any technical information, knowledge or skill, know-how or process that was made available to assessee in order to independently use it, said payment made by assessee to AE could not be held to be taxable in India – Madura Coats (P.) Ltd v. Deputy Commissioner of Income-tax (International Taxation) – [2022] 142 taxmann.com 356 (Bangalore – Trib.)
Permanent Establishment – Fixed PE, place of business : Where assessee paid bandwidth charges towards bandwidth services provided by its UK based AE, in view of fact that said AE did not have PE in India, said payment made by assessee could not be held to be taxable in India as per section 9 as well as DTAA – Madura Coats (P.) Ltd v. Deputy Commissioner of Income-tax (International Taxation) – [2022] 142 taxmann.com 356 (Bangalore – Trib.)
Royalties/fees for technical services – Computer software : Expenditure incurred towards purchase of off-shelf software products is not in nature of ‘Royalty’ for use of copyright in software and, thus, not liable for withholding tax under section 195 – AMEC Foster Wheeler India (P.) Ltd. v. Deputy Commissioner of Income-tax – [2022] 142 taxmann.com 382 (Chennai – Trib.)
SECTION 68 OF THE INCOME-TAX ACT, 1961 – CASH CREDIT
Unsecured loans : Where assessee-firm claimed to have received unsecured loans during relevant years, however, it could not prove genuineness of unsecured loan taken and underneath sources for making these investments, addition made by Assessing Officer under section 68 was justified – Income-tax Officer v. Sai Everest Building & Developers – [2022] 142 taxmann.com 383 (Mumbai – Trib.)
SECTION 92C OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
Adjustments – Aggregation of transactions : Aggregation is not a rule of blind application and it is to be applied in certain situations and there has to be a scientific or rational basis for adoption; unless characteristic of ‘closely-linked’ is satisfied, aggregation is not possible – Deputy Commissioner of Income-tax v. Gujarat Microwax (P.) Ltd. – [2022] 142 taxmann.com 357 (Ahmedabad – Trib.)
Adjustments – Management fee : Management fee paid to AEs by assessee-company for availing various support services pursuant to management service agreement entered with AEs, merited acceptance, since rendition of such services stood proved by assessee-company by filing relevant evidence – AMEC Foster Wheeler India (P.) Ltd. v. Deputy Commissioner of Income-tax – [2022] 142 taxmann.com 382 (Chennai – Trib.)
Methods for determination of – TNM method : Where TPO had accepted TNMM as most appropriate method in respect of 99.95 per cent transactions of export of threads, however, in respect of 0.05 per cent of transactions pertaining to export of threads, he had applied CUP method by cherry picking few transactions and made TPO adjustment, since he had not assigned any reasons as to why and how a small portion of transactions was not at ALP, TPO had erred in adopting CUP method for few transactions when he had accepted overwhelming majority of transactions under TNMM – Madura Coats (P.) Ltd. v. Deputy Commissioner of Income-tax – [2022] 142 taxmann.com 354 (Chennai – Trib.)
SECTION 139(5) OF THE INCOME TAX ACT, 1961 – RETURN OF INCOME – REVISED RETURN
SC dismisses Wipro’s review petition against its July 2022 judgement on law relating to Revised Return – Wipro Ltd. v. Principal Commissioner of Income-tax, III – [2022] 142 taxmann.com 562 (SC)
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