Expeditious issue of Refunds is a High Priority for the Central Board of Direct Taxes (CBDT)

The Centralised Processing Centre (CPC) of the Income Tax Department (ITD) at Bengluru has already processed over 4.19 crore Income Tax Returns (ITRs) and issued over 1.62 crore refunds during the current financial year up to 10th February, 2017. The amount of refunds issued at Rs.1.42 Lakh Crore is 41.5% higher than the corresponding period last year. 

As a result of emphasis on expeditious issue of refunds, 92% of all Income Tax returns were processed within 60 days demonstrating CBDT’s commitment to faster and more efficient taxpayer service. Of the refunds issued, 92% are below Rs.50,000 due to the high priority given to expeditious issue of refunds to small taxpayers. Only 2% of refunds less than Rs. 50,000 are remaining to be issued. Majority of these cases relate to recently filed ITRs or where the taxpayer’s response to the Department is awaited. 

Taxpayers reposed faith in CBDT’s e-governance initiatives by filing electronically a whopping 4.01 Cr ITRs till 10th February 2017 representing an increase of 20% over the previous year. Also, more than 60 lakh other online forms were filed with an increase of nearly 41% compared to the previous year. 

Taxpayers are advised to verify and update their email address and mobile number on the e-filing website to receive electronic communication. CBDT is committed to ensuring best possible taxpayer services through its e-governance programs and increasing the coverage and scope of electronic filing and processing of various forms and applications.

High Court orders winding-up of United Breweries on its failure to discharge dues of Kingfisher Airlines

United Breweries Holding Limited (UBHL) has failed to discharge its admitted liability towards creditors of Kingfisher Airlines as UBHL had given corporate guarantee against financial obligation of Kingfisher Airlines. For recovering dues from Kingfisher Airlines, the lenders have filed winding up petition against UBHL.

Since, UBHL has failed to discharge its contractual obligation executed under Guarantee agreement in favor of the petitioner, the Karnataka High Court orders winding up of UBHL Company. 

[2017] 78 taxmann.com 80 (Karnataka)

Tax Collection Figures up to January 2017 show consistent trend of healthy growth

The Tax Collection figures up to January 2017 show consistent trend of healthy growth. Following are the details of the Direct and Indirect Tax Collections for the month of January 2017 and upto the month of January 2017 and they show a positive growth.

Indirect Taxes

During January 2017, the Net Indirect Tax grew at the rate of 16.9% compared to corresponding month last year. The growth rate in net collection for Customs, Central Excise and Service Tax was 10.1%, 26.3% and 9.4% respectively during the month of January 2017, compared to the corresponding month last year.

The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to January 2017 show that net revenue collections are at Rs 7.03 lakh crore, which is 23.9% more than the net collections for the corresponding period last year. Till January 2017, about 82.8% of the Revised Estimates (RE) of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs. 3.13 lakh crore during April-January, 2016-17 as compared to Rs.2.23 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 40.5%.

Net Tax collections on account of Service Tax during April-January, 2016-17 stood at Rs. 2.03 lakh crore as compared to Rs.1.66 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 22.0%.

Net Tax collections on account of Customs during April-January 2016-17 stood at Rs. 1.86 lakh crore as compared to Rs. 1.77 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 4.7%.

Direct Taxes

The figures for Direct Tax collections up to January, 2017 show that net collections are at Rs. 5.82 lakh crore which is 10.79% more than the net collections for the corresponding period last year. This collection is 68.7% of the total Budget Estimates of Direct Taxes for F.Y. 2016-17. 

As regards the growth rates for Corporate Income Tax (CIT) and Personal Income Tax (PIT), in terms of gross revenue collections, the growth rate under CIT is 11.7% while that under PIT (including STT) is 21.0%. However, after adjusting for refunds, the net growth in CIT collections is 2.9% while that in PIT collections is 23.1%. Refunds amounting to Rs.1.41 lakh crore have been issued during April 2016-January 2017, which is 41.0% higher than the refunds issued during the corresponding period last year.

Harsh punitive actions to be taken against the deviant Shell Companies including freezing of Bank Accounts, striking off the names of dormant companies, invocation of Benami Transactions (Prohibition) Amendment Act, 2016

A Task Force set-up under the Co-chairmanship of the Revenue Secretary and Corporate Affairs Secretary with members from various regulatory Ministries and Enforcement Agencies to monitor the actions taken against deviant shell companies by various agencies. 

A Meeting was held today in Prime Minister’s Office (PMO) along with the Senior Officers of various Departments to review the functioning of ‘Shell Companies’ (companies which does not conduct any operations and indulge in money laundering) in India, so as to prevent their misuse for money laundering and tax-evasion, especially in the context of unearthing black money post demonetization. There are about 15 lakh registered companies in India; and only 6 lakh companies file their Annual Return. This means that large number of these companies may be indulging in financial irregularities. 

In the initial analysis, it has been found that ‘Shell Companies’ are characterized by nominal paid-up capital, high reserves & surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income, high cash in hand, private companies as majority shareholders, low turnover & operating income, nominal expenses, nominal statutory payments & stock in trade, minimum Fixed Asset.

In a small sample analysis of such companies, it has been found that Rs.1,238 crore cash has been deposited in these entities during November-December period. Serious Fraud Investigation Office (SFIO) has filed criminal prosecution for cheating National Exchequer after investigation of entry operators running a group of 49 Shell Companies and other proprietorship concerns. It has been found that 559 beneficiaries have laundered money to the extent of Rs.3900 Crore with the help of 54 Professionals who have been identified. These information has been shared with SIT, Income Tax Department, Enforcement Directorate, SEBI and The Institute of Chartered Accountants of India (ICAI). Income Tax Department has reopened completed assessment in these cases and Enforcement Directorate has initiated action under Prevention of Money Laundering Act (PMLA), 2002. ICAI has also initiated disciplinary proceedings against its members. Winding up process has been initiated in respect of 49 Shell Companies.

In order to create a credible deterrence a “Whole of Government Approach” will be adopted through coordinated efforts and by leveraging technology. It has also been decided that appropriate red flag indicators would be used for identifying shell companies, and a data base of such companies and their Directors would be built by pulling in information from various agencies. The data base will also capture Aadhar number of individual Directors in the companies.

Harsh punitive actions will be taken against the deviant shell companies which will include freezing of Bank Accounts, striking off the names of dormant companies, invocation of Benami Transactions (Prohibition) Amendment Act, 2016.

A Task Force with members from various regulatory Ministries and Enforcement Agencies has been set-up under the Co-chairmanship of the Revenue Secretary and Corporate Affairs Secretary to monitor the actions taken against deviant shell companies by various agencies. The concerned regulatory Ministry will ensure that disciplinary actions are initiated against the professionals indulging in mal practices and abetting the entry operators of the shell companies.

Central Board of Direct Taxes (CBDT) signs four more unilateral Advance Pricing Agreements (APAs)

The Central Board of Direct Taxes (CBDT),Department of Revenue, Ministry of Finance has entered into four more unilateral Advance Pricing Agreements (APAs) yesterday. 

The four APAs signed pertain to the Manufacturing, Financial and Information Technology sectors of the economy. The international transactions covered in these agreements include Contract Manufacturing, IT Enabled Services and Software Development Services. 

With this, the total number of APAs entered into by the CBDT has reached 130. This includes 8 bilateral APAs and 122 Unilateral APAs. In the current financial year, a total of 66 APAs (5 bilateral APAs and 61 unilateral APAs) have already been entered into. The CBDT expects more APAs to be concluded and signed before the end of the current fiscal. 

The APA Scheme was introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the prices of international transactions in advance. Since its inception, the APA scheme has evinced a lot of interest from taxpayers and that has resulted in more than 700 applications (both unilateral and bilateral) being filed so far in about five years. 

The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA program has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

New Benefits announced for NPS Subscribers in Union Budget 2017-18

In a bid to provide further impetus to the National Pension System (NPS), the following provisions have been introduced in the Finance Bill 2017 laid down in the Parliament today.

Tax-exemption to partial withdrawal from National Pension System (NPS)
The existing provision of section 10(12A)of the Income Tax Act, 1961 provides that payment from National Pension System (NPS) to a subscriber on closurer of his account or opting out shall be exempt up to 40% of total corpus at the time of withdrawal . The amount utilized for purchase of annuity is also tax exempt. At the time of normal exit, 40% of the total corpus is mandatorily required to be purchased for annuity. The subscriber has the option to use higher amount for purchase of annuity.

In order to provide further relief to the subscriber of NPS, it has been proposed to insert a new clause (12B) in the section 10 of Income Tax Act, 1961 to provide exemption on partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under.

This benefit will be effective on partial withdrawal made by the subscriber after 1st April 2017.

Further, Contribution up to 20% of the Gross Income of the Self-employed individual (Individual other than salaried class) will be deductible from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10% earlier.

This is with a view to provide parity between a salaried employee and a self-employed.

This benefit will be available on contribution made by the self employed persons on or after 1st April 2017.

This increased limit for tax benefit will help the self-employed individuals, to save taxes on higher contribution in NPS and thereby properly plan for their old age income security.

Additional tax deduction on investment upto Rs. 50000/- under Section 80CCD (1B) will continue to remain the same for all NPS subscribers whether salaried or self-employed.

Salient Features of Direct Tax Proposals in Union Budget 2017

The Union Budget 2017 was laid before the Parliament today by the Hon’ble Finance Minister of India. The salient features of Direct Tax proposals are summarised below:

I. Affordable Housing:

• Three concessions in the scheme of Income Tax exemption for affordable housing:
• Area of 30 and 60 Sq.mtr. to be counted as carpet area and not built-up area;
• 30 Sq.mtr. only in 4 metropolitan city limits and 60 Sq.mtr. for the rest of the country;
• Completion period extended from 3 years to 5 years.

• Tax on Notional rental income for builders to be calculated only after 1 year from the end of the year in which completion certificate is received.

• Changes in Capital Gain taxation for immovable properties:
• Holding period reduce for computation of long term capital gain from three years to two years
• Base year for counting the cost of property shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property.

• Basket of financial instrument in which capital gain can be invested without payment of tax to be expanded.

• For joint development agreement, the liability to pay capital gain tax will arise in the year in which project is completed.

• For Andhra Pradesh capital, land belonging to owners as on 2.6.2014 to be exempted from capital gain if the same is offered under land-pooling mechanism.

II. Measures for stimulating growth:

• Concessional withholding rate of 5 per cent. for interest received by foreign entities on loans given in India to be continued for another 3 years beyond 30.6.2017.

• Start-ups to get two relaxations under the scheme of Income Tax holiday given last year.
• The condition of continuous holding of 51 per cent. voting rights to be relaxed as long as the original investment of promoter is not diluted.
• Exemption available for three years out of any 7 years from the date of establishment instead of 3 out of 5 years

• The period of carry forward of MAT/AMT credit increased from 10 years to 15 years.

• The corporate income tax to be reduced from 30% to 25% for companies with turnover upto Rs.50 crore in 2015-16. This will benefit 96% of existing 6.67 lakh companies. This will result into tax saving of 16.67% for these companies.

• Deduction for provision for NPA of Banks to be increased from to 8.5% instead of 7.5% of profit.

• In case of NPA of non-scheduled cooperative banks, interest to be recognised as income only when received.

III Promoting Digital Economy:

• In the presumptive income tax for small traders, income to be taken as 6% of turnover which is received by digital or banking means.

• Cash expenditure allowable to be reduced to Rs.10,000 from the existing Rs.20,000.

• Cash transaction of above Rs.3 lakh not to be permitted. The penalty of equal amount to be levied in case of breach.

IV Transparency in Electoral Funding:

• The cash donation to political parties from one person limited to Rs.2,000/-.

• Electoral Bond to be introduced for facilitating donation to political parties from explained sources.

• Political parties to file their return in time limit prescribed in the Income Tax Act.

V. Ease of Doing Business:

• Domestic transfer pricing to be applied only if one of the two companies enjoys specified profit-linked deduction.

• The audit limit for business entities opting for presumptive scheme to be increased from Rs.1 crore to Rs.2 crore.

• Individuals and HUFs not required to keep books of accounts if their turnover is up to Rs.25 lakhs or income is upto Rs.2.5 lakhs.

• Investment in Category 1 and 2 foreign portfolio investors registered with SEBI to be exempted from provisions of indirect transfer.

• TDS of 5% not to be deducted for individual insurance agents if they certify their income to be below taxable limit.

• Professionals in presumptive scheme to pay advance tax only in one instalment in March instead of four.

• The time limit for revising a tax return reduced to 12 months. Also time limit for completion of scrutiny will be brought down to 12 months from Assessment Year 2019-20 onwards.

VI Personal Income Tax:

• Personal income tax for people with income in the slab of 2.5 lakh to 5 lakh to be reduced to 5% instead of 10%. This will reduce their tax liability to half while all other tax payers above this slab will also be benefited in terms of lesser tax of Rs.12,500 per individual (revenue loss ofRs.15,500 crores).

• Surcharge of 10% to be levied on individuals with income between Rs.50 lakhs to Rs.1 crore (revenue gain of Rs.2,700 crore).

VII. Miscellaneous:

• TCS exemption for state transport corporation in respect of purchase of vehicles.

• Income of Chief Minister’s relief fund exempt from tax.

• Penalty on accountant, registered valuer and merchant banker for furnishing incorrect information.

• In order to ensure timely filing of return and expeditious issue of refund, a fee shall be levied for delay in filing of return.