|Table of Contents|
|1.||Due Dates for Income Tax Compliance – December 2022|
|2.||Explanatory Notes to the provisions of the Finance Act, 2022|
|3.||Supplementary Commission by travel agent was liable to deduction of TDS u/s 194H: Supreme Court|
|4.||Lessee Eligible for depreciation u/s 32 ,if lessor never claimed title or possession of leased asset- SC|
1.Due Date for Income tax Compliance (November 2022)
|7th December 2022||Deposit of TDS/ TCS deducted/collected for the month of November, 2022|
|15th December 2022||Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of November, 2021 has been paid without the production of a challan|
|15th December 2022||Issue of TDS Certificates for tax deducted in the month of October, 2022 on:
• Transfer of Immovable property (S. 194-IA);
• Payment of Rent for use of Land or Building (S. 194-IB);
• Payment by Individuals/ HUF for carrying out any work, brokerage, professional fee above 50 lakhs (S. 194M).
• Payment by way of consideration for transfer of a Virtual Digital asset (S. 194S)
|15th December 2022||Third instalment of advance tax for the assessment year 2023-24|
|30th December 2022||Furnishing of TDS Return (challan-cum-statement) in respect of tax deducted in the month of November , 2022 on:
• Transfer of Immovable property (S. 194-IA);
• Payment of Rent for use of Land or Building (S. 194-IB);
• Payment by Individuals/ HUF for carrying out any work, brokerage, professional fee above 50 lakhs (S. 194M)
• Payment by way of consideration for transfer of a virtual digital asset (S. 194S)
|30th December 2022||Furnishing of report in Form No. 3CEAD for a reporting accounting year (assuming reporting accounting year is January 1, 2021 to December 31, 2021) by a constituent entity, resident in India, in respect of the international group of which it is a constituent if the parent entity is not obliged to file report under section 286(2) or the parent entity is resident of a country with which India does not have an agreement for exchange of the report etc.|
|31st December 2022||Filing of belated/revised return of income for the assessment year 2022-23 for all assessee (provided assessment has not been completed before December 31, 2022)|
Explanatory Notes to the provisions of the Finance Act, 2022
|The Finance Act, 2022 as passed by the Parliament, received the assent of the President on 30th March, 2022. Explanatory notes to the provisions of the Finance Act (FA), 2022 vide CIRCULAR NO. – 23/2022, DATED 3rd NOVEMBER, 2022; explains the substance of the provisions of the FA 2022 relating to direct taxes. Certain important explanations are as follow:|
|A) Books of accounts to be maintained by trusts or institutions under both the regimes|
|Prior to the amendments made vide FA 2022, there was no specific provision for the books of account to be maintained by such trusts or institutions. In order to ensure proper implementation, books of accounts and other documents required to be maintained by such trust or institution and the place where they are required to be maintained have been prescribed in rule 17AA of the Income-tax Rules, 1962 which has been notified vide Notification No. 94/2022 (GSR 622 E) dated 10.08.2022 published in the Official Gazette.|
|These amendments will be effective from 1st April, 2023 and accordingly apply to the assessment year 2023-24 and subsequent assessment years.|
|B) Penalty for passing on unreasonable benefit to trustee or specified persons.
FA 2022 has inserted a new section 271AAE in the Act to provide for penalty on trusts or institution under both the regimes which is equal to amount of income applied by such trust or institution for the benefit of specified person where the violation is noticed for the first time during any previous year and twice the amount of such income where the violation is noticed again in any subsequent year.
|These amendments will be effective from 1st April, 2023 and accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.|
|C) Clarification in respect of disallowance under section 14A in absence of any exempt income during an assessment year|
|In order to make the intention of the legislation clear and to make it free from any misinterpretation, FA 2022 has inserted an Explanation to section 14A of the Act to clarify that provision of disallowance u/s 14A will be applicable, where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such exempt income.
This amendment is effective from the 1st day of April, 2022
|E) Rationalization of provisions of TDS on sale of immovable property|
|In order to remove inconsistency, section 194-IA of the Act has been amended to provide that in case of transfer of an immovable property (other than agricultural land), tax is to be deducted at source at the rate of 1% of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher. In case the consideration paid for the transfer of immovable property and the stamp duty value of such property both are less than fifty lakh rupees, then no tax is to be deducted under section 194-IA.
This amendment is effective from 1st April, 2022
|F) TDS on benefit or perquisite of a business or profession|
|Value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession is to be charged as business income in the hands of the recipient of such benefit or perquisite. However, in many cases, such recipient does not report the receipt of benefits in their return of income, leading to furnishing of incorrect particulars of income.
Similarly, there are benefits or perquisites received in the course of business / profession which are taxable under some other provisions of “profits and gains of business or profession” or other sections of the Act.
In order to widen and deepen the tax base, a new section 194R has been inserted in the Act to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite.
No tax is to be deducted if the value or aggregate value of the benefit or perquisite paid or likely to be paid to a resident does not Rs.20,000 during the financial year.
Further, the provisions of the said section shall not apply to an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed Rs.1 crore in case of business or Rs.50 lakhs in case of profession during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided.
Vide circular no 12 of 2022 of CBDT dated 16.06.2022 and circular no. 18 of 2022 dated 13.09.2022, the Central Government has issued guidelines for removal of difficulties for operation of section 194R of the Act.
Form 26Q and rule 31A of Income-Tax Rules 1962 have been amended vide G.S.R. 463(E) Notification no. 67/2022 dated 21.06.2022 to also capture details of TDS under section 194R of the Act on benefits and perquisites given in kind.
Applicability: This amendment is effective from 1st July, 2022.
|3.Supplementary Commission by travel agent was liable to deduction of TDS u/s 194H: Supreme Court –[ Singapore Airlines Ltd. v. Commissioner of income-tax, Civil Appeal Nos. 6964 to 6968 of 2015, dated November 14,2022]|
|• Assessee-company engaged in the business of air transport services. The business
mechanism of the assessee involves booking tickets through travel agents. The base fare for air tickets was set by International Air Transport Association (IATA). However, the airlines may
sell their tickets for a net fare lower than the Base Fare, but not higher.
• Travel agents act on behalf of airlines to market and sell tickets and they are entitled too a commission on the basic fare of the ticket fixed by the IATA.
• Airlines Company had executed passenger sales agency (PSA) agreements with travel agents in terms of which they would supply blank tickets to travel agents and would pay standard commission to them on published fare of tickets sold by them.
|• Once these tickets were sold, a designated commission would be paid to travel agent for its services as standard commission.|
|• However, travel agents also charged additional amount over and above net fare i.e.,
supplementary commission – Assessee deducted tax at source on amount of standard commission, but did not make deduction on supplementary commission on ground that it would not fall within ambit of section 194H given that information regarding supplementary commission was available to airlines and these amounts were incidental to transaction by which flight tickets were sold on behalf of air carriers and was for their benefit, airlines could not have absolved themselves of liabilities under IT Act attached to accrual of that additional portion of income by agent.
|• Further, the arrangement between the purchaser of the ticket and the agent is merely a part of the agency agreement and not a separate agreement. The extra benefit gained by the agent on the sale of tickets is due to the agency agreement entered with the airline.|
|• Thus, these amounts were incidental to the transaction by which the air tickets were sold on behalf of airlines and was for the benefit of agents. Such incidental benefit must come under the ambit of the principal-agent relationship.
• The commission under section 194H includes any payment received directly or indirectly by the agent on the behalf of the principal. It does not distinguish the payment based on the source of such receipt.
• Therefore, the amount retained by the agents on sale of air tickets was a supplementary commission, liable for deduction of tax at source, under section 194H.
|• Hence in the case of Singapore Airlines Ltd v. CIT it was clarified that where airlines
Company executed passenger sales agency (PSA) agreements with travel agents in terms of which they would pay commission to them on published fare of tickets sold by them on behalf of airlines, additional amount over and above net fare charged by agents from customers i.e., supplementary commission were incidental to transaction by which flight tickets were sold on behalf of air carriers and assessee was liable to deduct TDS under section 194H on same
|4. Lessee Eligible for depreciation u/s 32 ,if lessor never claimed title or possession of leased asset- Supreme Court [Commissioner of income tax v. SBI Home financer Ltd., Appeal no –3548 of 2007,dated September 13,2022]|
|• The assessee was carrying on the business of leasing and finance. A company ‘WPIL’ approached the assessee for lease/finance for a plant which was being set up at the premises of a company named ‘SIL’.
• Pursuant to such approach, the assessee itself acquired the said plant and leased out the
• The Tribunal held that the ownership of the assessee could not be established or accepted because of the reason that there was a stipulation that a third party, other than the lessee to whom the plant was leased out by the assessee, had a right to purchase.
• In the instant case it was not in dispute that the assessee carried business of leasing and finance. The Tribunal held that the agreement for leasing was genuine. The department did not prefer any appeal nor had filed any cross-objection against such finding. Therefore, the transaction was held to be a lease and not a finance. The income generated out of such lease at the hands of the assessee, therefore, was business income.
• In other words the Tribunal, on facts, found that the assessee was the owner of the plant but for the alleged right of the SIL to purchase the plant after the expiry of the alleged stipulated time.
• High Court by impugned order held that since SIL had neither claimed any title or possession over plant nor claimed depreciation in respect thereof and had also not exercised its option to purchase plant, ownership of assessee in respect of plant could not be disputed for purpose of section 32 and, therefore, assessee was entitled to avail benefit of section 32 – On appeal by revenue it was found that assessee had become owner of plant and machinery – Further lease rentals in entirety had been taxed as a revenue receipt/income accrued and taxable.
|• Therefore the assessee was the owner of the plant for the purpose of section 32 and by leasing it out to the WPIL, the assessee had used the plant wholly for the purpose of its business namely for the purpose of carrying on the business of leasing and as such the income earned thereon by way of a rental of the plant was business income. Thus, the ingredients of ownership and user of the plant in business, as required under section 32, having been fulfilled, the assessee was entitled to depreciation available to it under section 32.|