Direct Tax Vista Your weekly Direct Tax recap Edn. 17 – 2nd August 2022 By Vivek Jalan, Partner, Tax Connect Advisory Services LLP

 

1. ITR processing Time reduced from 120 days to 30 days

Income Tax compliances are also slowly getting more and more stringent. The due date of this ITR was not extended from 31st July, even after multiple pressures on the Government. It also had the desired impact as 5.8 Crore ITRs actually got filed before 31st July 2022. This also substantiated the stand of the CBDT that the Income Tax Portal was actually working fine as it also created a record of sorts by supporting more than 70 Lakh ITRs filing on 31st July itself.

 

Now the time limit of processing of ITRs has been reduced from the current 120 days to 30 days. Hence taxpayers have to be on their toes. However, this change is effective for all returns filed post 31st July – which will be primarily returns which are impacted by tax audit and hence this would primarily impact the non-tax audit impacted returns from the next year.

 

2. Section 197 Certificate issuance – 2 Justices of Supreme Court Divided in Opinion

While the Doctrine of Res-judicata is not applicable to income tax proceedings because assessment for each year is final only for that year and does not cover later years, yet the principle of consistency is to be followed. While considering the application u/s 197 the perspective and scope of issuance of the certificate for deduction of tax at lower rate or no deduction at tax needs to be considered and also the prescribed procedure needs to be followed.

 

While one justice held the above view, another did not hold the view in the case of NATIONAL PETROLEUM CONSTRUCTION COMPANY Vs DEPUTY COMMISSIONER OF INCOME TAX [2022-VIL-16-SC-DT]. Hence the matter is referred to The Chief justice of India. This is an important issue and many low/Nil TDS cases would depend upon the final judgement.

 

3. Premium on issue of non-convertible Debentures may be apportioned over their lifetime

Incase of claim of premium on non-convertible debentures on proportionate basis, the dispute was that whether the same is a future expenditure provisional in nature. It was held in the case of ACIT Vs CLETA REAL ESTATE PVT. LTD. [2022-VIL-954-ITAT-DEL] that What is important is that the liability to pay premium arises in the year in which the debentures were issued and could be proportionately spread over the period prescribed for maturity of such debentures. The fact that the debentures could not have been redeemed on before the date of their maturity does not make any material difference. Hence like earlier cases, this expenditure was allowed.

 

4. RBI gives payment aggregators a breather to submit applications for authorisation

The RBI had observed that applications received from some Payment Aggregators (PAs) had to be returned as they had not complied with eligibility criteria, including the minimum net worth criterion of Rs. 15 crores by March 31, 2021. This also implied that they have to discontinue their operations within a period of six months from the date of return of application. Though they have the option to apply afresh on meeting the prescribed criteria, ceasing operations may lead to disruption in payment systems. It is also possible that some PAs had not applied to RBI due to non-fulfilment of eligibility criteria. In view of the disruption caused by the COVID-19 pandemic, the RBI has decided to allow another window to all such Payment Aggregators (existing as on March 17, 2020) seeking authorisation under the Payment and Settlement Systems Act, 2007 by September 30, 2022 and shall have a net worth of Rs. 15 crores as on March 31, 2022. The timeline of March 31, 2023 for achieving the net worth of Rs. 25 crores shall, however, remain. Earlier, they were required to apply to RBI by September 30, 2021.

 

PAs are entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period. As per earlier RBI directives, online non-bank PAs (existing as on March 17, 2020) were required to apply to RBI by September 30, 2021 for seeking authorisation under the Payment and Settlement Systems Act, 2007 (PSS Act).

 

5. RBI relaxes rules for checkout on guest transactions

The Reserve Bank of India (RBI) has relaxed card-on-file data storage norms pertaining to guest transactions checkout, whereby now, apart from the card issuer and the card network, the merchant or its payment aggregator involved in the settlement of the transactions can save the data for a maximum of T+4 days or till the settlement date, whichever is earlier. And, acquiring banks have been permitted to store the card-on-file data until January 2023 for handing other post-transactions activities.

 

Guest checkout transactions are those where cardholders decide to enter card details manually at the time of undertaking the transaction. They just need to key in the 16-digit number and do the transaction. This would be a non-tokenized transaction. The complexity of the situation at the back end means that a proper technical solution will time, the industry had informed the central bank.

 

6. TDS u/s. 194C deductible on Common Maintenance Charges

A question is raised by field formations many a times that whether payment of common maintenance charges (CAM) is in the nature of rent liable for TDS @ 10% u/s 194-I of the Income Tax Act, 1961? Like in many earlier cases by Other Courts this time The Hon’ble ITAT Delhi has held in the case of Nijhawan Travel Service Pvt. Ltd. Vs ACIT; that CAM chares have been paid to different parties by executing agreements which do not form part of rent payment. The payment towards CAM charges are in the nature of contractual payment which are made for availing services/ facilities and not for the use of any premises/ equipment, therefore, same would be subject to deduction of tax at source u/s 194C of the Act and not u/s 194I of the Act.

 

7. Share of client pledged by broker cannot be treated as his undisclosed investment

A broker pledges the shares of the clients with banks for obtaining bank finance. It is not justified to take value of shares pledged as undisclosed investment of the broker. Circular No. 395 of NSE dated 07.04.2004 allows the brokers to provide margin trading facility to their clients. For this purpose a broker may use his own funds or borrow from scheduled commercial bank and / or NBFCs, regulated by Reserve Bank of India. Hence incase a broker pledges shares of the clients with banks for obtaining bank finance in order to meet the requirement of depositing margin money by each of the clients as per the regulation of SEBI, the same cannot be taken as the broker’s income. The same was held in the case of DCIT Vs Trustline Securities Pvt. Ltd (ITAT Delhi).

 

(The author is a CA, LL.M & LL.B and Partner at Tax Connect Advisory Services LLP. The views expressed are personal. The author is The Lead - Indirect Tax Core Group of CII- ER and The Chairman of The Fiscal Affairs Committee of The Bengal Chamber of Commerce. He has Authored more than 15 books on varied aspects of Direct and Indirect Taxation. E-mail - vivek.jalan@taxconnect.co.in)