Income tax updates from the month of October 2019

Objective: The objective of this document is to summarize all the updates of Income Tax (Notifications, Circulars, other amendments and updates) in one place. The same are being summarized below, along with our opinions on certain clarifications.

1. CBDT has given clarifications on set off of brought forward loss due to additional depreciation & MAT credit if companies opt for 22% tax[1]

1.1 Domestic Company wants to opt for 22% tax is not eligible to set off of brought forward loss on account of additional depreciation

As per the provisions of newly inserted Sec 115BAA, total income of the company (opted for 22% tax) shall be computed without any deduction towards:

• SEZ u/s 10AA
• Additional depreciation @20% u/s 32(1)(iia)
• Investment allowance in respect of new plant and machinery u/s 32AD
• Accelerated capital deduction u/s 35AD
• Chapter VI-A - 'C - Deductions in respect of certain incomes' i.e. 80IA, 80IB, 80IC etc… However, deduction u/s 80JJAA (in respect of employment of new employees)
• Tea development benefit u/s 33AB
• Site restoration benefit u/s 33ABA
• Scientific research benefit u/s 35
• Agricultural extension project benefit u/s 35CCC
• Skill development project u/s 35CCD
• Further, total income shall be computed without set off of any brought forward loss if such loss is related to above mentioned deductions.
• Based on the above, CBDT clarified that, a domestic company which would exercise option for 22% tax shall not be allowed to set off of any brought forward loss on account of additional depreciation for that assessment year (AY) in which option exercised and for any subsequent AY's.
• Further, it is clarified that as there is no time line for opting 22% tax, a domestic company having brought forward losses on account of additional depreciation, can exercise option after set off of losses so accumulated.

1.2 Domestic Company wants to opt for 22% is not eligible to claim brought forward MAT credit

• CBDT clarified that MAT u/s 115JB itself not applicable, if domestic company opt for 22% tax. Accordingly, credit of MAT also not eligible to claim.
• Further, it is clarified that as there is no time line for opting 22% tax, a domestic company having brought forward MAT credit, can exercise option after utilising the accumulated credit.

Our Comments

• Amendment has been made only in Sec 115JB (i.e. MAT is not applicable if domestic companies opt for 22%) by way of Taxation Laws (Amendment) Ordinance, 2019 and no amendment is made u/s 115JAA (i.e. Utilising brought forward MAT credit against normal tax liability).
• In many judicial pronouncements, courts held that CBDT does not have any power to override the provisions of the Act and Rules. Further, CBDT circular is not binding on the assessee.
• Sec 115JAA deals with utilisation of brought forward MAT credit against normal tax liability and no restriction on the same by Taxation Laws (Amendment) Ordinance, 2019, in case company opt for 22% tax. Hence, companies are eligible to utilise accumulated MAT credit against normal tax liability even if they opt for 22%.

1.3 Effective Tax Rate (ETR) schedule for FY 2019-20 (AY 2020-21)

2. CBDT exempted authorized dealers & full-fledged money changer (FFMC) from TDS on cash withdrawals[2]

Exemption to:

• Authorized dealer, its franchise agent & sub-agent; AND
• Full-fledged money changer (FFMC) licensed by RBI and its franchise agent

Purpose of cash withdrawal:

• Purchase of foreign currency from foreign tourists/non-residents visiting India/resident Indians on their return to India, in cash as per the directions/guidelines issued by RBI; OR
• Disbursement of inward remittances to the recipient beneficiaries in India in cash under Money Transfer Service Scheme (MTSS) of the RBI

Compliance by AD/FFMC:

• Certificate to the bank stating that cash withdrawal is only for the above-specified purposes & directions/guidelines issued by RBI have been complied with

3. CBDT designated Special Court (one or more first class magistrate) in the state of Karnataka for the purpose of trail of offences punishable under Chapter XXII (Offences & Prosecutions) of the Act[3]

The Central Government may designate one or more first-class magistrate courts as Special Court in consultation with the Chief Justice of the High Court for trial of offences punishable under Chapter XXII of the Income Tax Act, 1961.   

Some of the offences punishable under Chapter XXII (Offences & Prosecutions) are mentioned below:

• Fails to pay TDS to the Central Government (CG) under the provisions of Chapter XVIIB
• Fails to pay TCS to the CG
• Fails to pay Dividend Distribution Tax (DDT)
• Fails to facilitate to inspect the books of account/other documents to the authorized officer u/s 132(1)(iib) - Search & Seizure

After consultation by CG with the Chief Justice of the Karnataka High Court, CBDT has notified Special Court in the below mentioned areas in the state of Karnataka:

• Ballari
• Belagavi
• Chitradurga
• Dakshina Kannada Mangaluru
• Dharwad
• Gadag
• Mandya
• Mysuru
• Tumakuru
• Udupi
• Uttara Kannada Karwar

4. CBDT notified protocol amending 'India - Morocco DTAA'[4]

5. Income-tax compliance calendar for the month of November, 2019

Thank you for the patient reading. Hope this document has added value to your knowledge.

Disclaimer: This document had been written to provide updates under Income Tax in a simple manner.  The author shall not be responsible for any of the decision made based on the contents of this document.

The author can also be reached at jnr@cajvk.in

1. [1] Refer Circular No.29/2019 dated 02-Oct-2019
2. [2] Refer Notification No.80/2019 dated 15-Oct-2019
3. [3] Refer Notification No.79/2019 dated 11-Oct-2019
4. [4] Refer Notification No.84/2019 dated 22-Oct-2019