Ministry of Finance

Clarification on applicability of Tax Deduction at Source on cash withdrawals

Posted On: 30 AUG 2019 8:09PM by PIB Delhi

In order to discourage cash transactions and move towards less cash economy, the Finance (No. 2) Act, 2019 has inserted a new section 194N in the Income-tax Act,1961 (the ‘Act’), to provide for levy of tax deduction at source (TDS) @2% on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from one or more accounts maintained with it by the recipient. The above section shall come into effect from 1st September, 2019.

Since the section provided that the person responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year to deduct income tax @2% on cash payment in excess of rupees one crore,queries were received from the general public through social media on the applicability of this section on withdrawal of cash from 01.04.2019 to 31.08.2019.

The CBDT, having considered the concerns of the people, hereby clarifies that section 194N inserted in the Act, is to come into effect from 1st September, 2019. Hence, any cash withdrawal prior to 1st September, 2019 will not be subjected to the TDS under section 194N of the Act. However, since the threshold of Rs. 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Act shall be counted from 1st April, 2019. Hence, if a person has already withdrawn Rs. 1 crore or more in cash upto 31st August, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS shall apply on all subsequent cash withdrawals.

F.No.173/ 354/ 2019-ITA-l
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

To,

All Principal Chief Commissioners of Income-tax

All Principal Director Generals of Income-tax

Sir/ Madam,

New Delhi, 9 August, 2019

Subject : Clarification with respect to valuation of shares of Startup Companies involving application of Section 56(2)(viib) of the I. T. Act ,1961 -reg.

Instances have come to the notice of the Board that substantial additions have been made by the AOs in “Start up Companies” involving issue of valuation of shares u/s S56(2)(viib).

2. Vide notification no. G.S.R. 127 (E) dated 19.02.2019 issued by the Department for Promotion of Industry and Internal Trade (henceforth referred to as “DPIIT”) and notification no.13/2019 F.No.370142/S/2018-TPL(Pt.) dated 05th March, 2019 issued by the Central Board of Direct Taxes (henceforth referred to as “CBDT”), the Central Government has notified certain class of persons for which the provisions of Section S6(2)(viib) will not apply.

Para 6 of the notification issued by the DPIIT dated 19.02.2019 states that the notification is applicable only with regard to recognized “Start up Companies” where no addition u/s 56(2)(viib) has been made in an assessment order before the date of issue of the notification. This has caused hardship to such companies.

3. The matter has been examined by the Board. To mitigate such hardships, the Central Government has decided to relax the Para-6 of the above-referred notification issued by the DPIIT and make it clear that the notification will be applicable to those Startup Companies also where addition u/s S6(2)(viib) has been made in an assessment order under the IT Act before 19th February, 2019 provided the assessee has subsequently submitted the declaration in Form-2 that it fulfils the conditions mentioned in Para-4 of the above-referred notification.

(Prajn Paramita)
AddI. CIT( OSD)(ITA-1)

Circular No. 16/2019
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North-Block, New Delhi, dated the 7th August, 2019

Subject: – Clarification with respect to assessment of Start up Companies involving application of section 56(2)(viib) of the Income-tax Act, 1961.-reg.

Instances have come to the notice of the Board that notices u/s 143(2)/147 have been issued by the Assessing Officers in respect of Startup Companies, before the issue of notification of the Department for Promotion of Industry and Internal Trade (henceforth referred to as ‘DPIIT’) dated 19.02.2019 or even afterwards which are presently pending for disposal. These companies have been recognized by the DPIIT after the issue of their notification dated 19.02.2019.

2. The DPIIT vide notification no. G.S.R. 127 (E) dated 19.02.2019 , has laid down that the provisions of sect ion 56(2)(viib) of the I.T. Act, 1961 shall not apply to any consideration received by a Startup Company, if the Startup Company fulfils the conditions mentioned in para 4(i) and 4(ii) of th e said notification and is recognized by the DPIIT.

3. In pursuance to the above, the Central Board of Direct Taxes (CBDT) had issued notification no.13/2019/F.No. 370142/5/2018-TPL{Pt.)J dated 05th March, 2019 reiterating that the provisions of clause (viib) of sub-section (2) of section 56 of the said Act shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares, if the said consideration has been received from a person, being a resident, by a company which fulfils the conditions specified in para 4 of the notification dated 19.02.2019 issued by DPIIT.

4. In the light of the above, the following procedure is laid down with regard to the assessment of such startup entities involving the issue of section 56(2)(viib).

(i) Where the Startup Company has been recognised by the DPIIT but the case is selected under “limited scrutiny” on the single issue of applicability of section 56 (2)(viib), no verification on such issues will be done by the AOs during the proceedings u/s 143(3)/147 of the I.T. Act, 1961 and the contention of such recognized Startup Companies on the issue will be summarily accepted.

(ii) Where the Startup Company has been recognized by the DPIIT but the case is select ed under “limited scrutiny” with multiple issues or under “complete scrutiny” including the issue u/s 56(2)(viib), the issue of applicability of sect ion 56 (2)(viib) will not be pursued during the assessment proceedings and inquiry or verification with regard to other issues in such cases shall be carried out by the Assessing Officer, only after obtaining approval of his/her supervisory officer. Due procedure as per LT. Act shall be followed with regard to other issues for which the case has been selected.

(iii) Where the Startup Company has not got DPIIT approval and the case is selected for scrutiny, inter alia on the grounds of applicability of section S6(2)(viib) or any other issue/s, then also inquiry or verification in such cases shall be carried out by the Assessing Officer , as per due procedure, only after obtaining approval of his/her supervisory officer.

5. Hindi version to follow. ~~~

(Prajna Paramita)
Addl.C1T-OSD(ITA-I), CBDT
(F.No . 173 /149 /2019-ITA-I)

CBDT Circular No. 18 of 2019

F.No. 370142/1/2019-TPL (Pt-1)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)
***
Dated: 8th August, 2019

Clarification in respect of filling-up of the ITR forms for the Assessment Year 2019-20

The Income-tax return (ITR) forms for the Assessment Year (AY) 2019-20 were notified vide notification bearing G.S.R. 279(E). dated the 1st day April, 2019. Subsequently, the instructions for filing ITR forms were issued and the software utility for e-filing of all the ITR forms were also released. After notification of the ITR forms various queries have been raised by the stakeholders in respect of filling-up of the ITR forms. In order to address such queries, following clarifications are issued. __

Question.1: I am a non-resident. The Taxpayer Identification Number (TIN) is not allotted in my jurisdiction of residence. How do I report the same in the column on “residential status”?

Answer: In case TIN has not been allotted in the jurisdiction of residence, the passport number should be mentioned instead of TIN. Name of the country in which the passport was issued should be mentioned in the column “jurisdiction of residence”.

Question.2: I am a director in a foreign company which does not have PAN. How do I report the same against the column “Whether you were Director in a company at any time during the previous year?”

Answer: You should choose “foreign company” in the drop-down provided for “type of company”. In such case, PAN is not mandatory. However, PAN should be mentioned, if such foreign company has been allotted a PAN.

Question.3: Whether an individual who is a non-resident, or resident but not ordinary resident (RoNR) is also required to disclose details of his directorship in a foreign company which does not have any income accruing or arising in India?

Answer: Yes.

Question.4: I have held shares of a company during the previous year, which are listed in a recognized stock exchange outside India. Whether I am required to report the requisite details against the column “Whether you have held unlisted equity shares at any time during the previous year?”

Answer: No.

Question.5: I have held equity shares of a company which were previously listed in a recognised stock exchange, but delisted subsequently, and became unlisted. How do I report PAN of company in the column “whether you have held unlisted equity shares at any time during the previous year”?

Answer: In such cases, PAN of the company may be furnished if it is available. In case PAN of delisted company cannot be obtained, you may enter a default value in place of PAN, as “NNNNN0000N”.

Question.6: In case unlisted equity shares are acquired or transferred by way of gift, will, amalgamation, merger, demerger, or bonus issue etc., how to report the “cost of acquisition” and “sale consideration” in the relevant column?

Answer: You may enter zero or the appropriate value against “cost of acquisition” or “sale consideration” in such cases. Please note that the details of unlisted equity shares held during the year are required only for the purpose of reporting. The quantitative details entered in this column are not relevant for the purpose of computation of total income or tax liability.

Question.7: I hold shares in an unlisted foreign company which has been duly reported in the Schedule FA. Whether I am required to report the same again in the column “Whether you have held unlisted equity shares at any time during the previous year?”

Answer: Yes.

Question. 8: I have held unlisted equity shares as stock-in-trade of business during the previous year. Whether I have to report the same in the column “Whether you have held unlisted equity shares at any time during the previous year?”

Answer: Yes.

Question. 9: Please clarify whether holding of equity shares of a Co-operative Bank or Credit Societies, which are unlisted, are required to be reported?

Answer: The details of equity shareholding in any entity which is registered under the Companies Act, and is not listed on any recognised stock exchange, is only required to be reported.

Question. 10: I have sold land and building to a non-resident. Whether I need to report the PAN of buyer in the table A1/B1 in Schedule CG?

Answer: As mentioned in ITR form, quoting of PAN of buyer is mandatory only if tax is deducted under section 194-IA or is mentioned in the documents.

Question.11: I am resident and have sold land and building situated outside India. Whether I need to report the details of property and identity of buyer in Schedule CG?

Answer: The details of property and name of buyer should invariably be mentioned. However, quoting of PAN of buyer is mandatory only if tax is deducted under section 194-IA or is mentioned in the documents.

Question. 12: Whether it is mandatory to provide ISIN details and scrip-wise computation of Long Term Capital Gains (LTCG) arising on sale of Shares/Mutual Funds units on which STT has been paid?

Answer: The tools for computation of LTCG under sections 112A and 115AD have been provided in the departmental utility for the convenience of taxpayers. These are optional tools designed for computation of the final figures of LTCG, which is then populated in the respective items in Schedule CG. Alternatively, the taxpayers can themselves compute the aggregate long term gain or loss manually, and input the same directly in the respective items in Schedule CG.

Question.13: An unlisted company is required to furnish details of assets and liabilities in the Schedule AL-1 of ITR-6? Please clarify whether details of assets held as stock-in-trade of business are also required to be reported therein.

Answer: In case jewellery/motor vehicle etc. is held as stock-in-trade of business, the drop-down value “stock-in-trade” should be selected against the field “purpose for which used”, while filling up details in the relevant table (table „I‟ or table „H‟). In such cases, only the aggregate values are required to be filled up, and the particular details of each asset held as stock-in-trade is not required to be reported.

Question.14: I hold foreign assets during the previous year which have been duly reported in the Schedule FA. Whether I am required to report such foreign asset again in the Schedule AL (if applicable)?

Answer: Yes.

Question.15: An unlisted company is required to furnish details of shareholding as at the end of previous year in the Schedule SH-1 of ITR-6. Please clarify whether these details are required to be furnished in case of an unlisted foreign company.

Answer: Not required.

Question.16: An unlisted company is required to furnish details of assets and liabilities in the Schedule AL-1 of ITR-6. Please clarify whether these details are required to be furnished in case of an unlisted foreign company.

Answer: Not required.

Question.17: Please clarify whether a farmer producer company as defined in section 581A of Companies Act, 1956 is required to furnish details of shareholding in the Schedule SH-1 of ITR-6?

Answer: No. However, please ensure to tick the option „Yes‟ against the item “whether the company is a producer company as defined in section 581A of Companies Act, 1956?” in Part-A General.

Question.18: A company is required to disclose break-up of all payments and receipts during the year, in foreign currency, as per Schedule FD of ITR-6 (if it is not required to get the accounts audited u/s 44AB). Please clarify whether only the receipts/payments related to business operations in India are required to be reported in Schedule FD?

Answer: Yes. In Schedule FD, the break-up of receipts and payments in foreign currency is required to be reported only in respect of business operations in India.

Question.19: In schedule TDS, one is required to enter the head under which corresponding receipt has been offered. In some cases, TDS is deducted by the payer in current year, but corresponding income is to be offered in future years. How to fill up Schedule TDS in such cases?

Answer: In such cases, no TDS credit should be claimed under the
column “in own hands” for the current year. If this is done, the column “Corresponding receipt offered” is greyed-off and is not required to be filled up.
(Salil Mishra)
Director (TPL-IV)

CBDT Circulars On Enhancement of Monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal. High Courts and SLPs/appeals before Supreme Court – Amendment to Circular 3 of 2018 Measures for reducing litigation

Circular No. 17/2019

F. No. 2791Misc. 142/2007-ITJ(Pt.)
Government of India
Ministry of Finance
Department of Revenue
Central Board Direct Taxes
Judicial Section
New Delhi. 8th August 2019

Subject: –Further Enhancement of Monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal. High Courts and SLPs/appeals before Supreme Court –Amendment to Circular 3 of 2018 Measures for reducing litigation.’

Reference is invited to the Circular No.3 of 2018 dated 11.07.2018 (the Circular) of Central Board of Direct Taxes (the Board) and its amendment dated 20th August 2018 vide which monetary limits for filing of income tax appeals by the Department before Income Tax Appellate Tribunal. High Courts and SLPs/appeals before Supreme Court have been specified.

Representation has also been received that an anomaly in the said circular at para 5 may be removed.

2. As a step towards further management of litigation. it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly. the table for monetary limits specified in Para 3 ofthe Circular shall read as follows:

S.No. Appeals/SLPs in Income-tax matters Monetary Limit (Rs.)
1 Before Appellate Tribunal 50.00.000
2 Before High Court 1.00.00.000
3 Before Supreme Court 2.00.00.000
3. Further, with a view to provide parity in filing of appeals in scenarios where separate order is passed by higher appellate authorities for each assessment year vis-a-vis where composite order for more than one assessment years is passed. para 5 of the circular is substituted by the following para:

“5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If in the case of an assessee. the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. Further. even in the case of composite order of any High Court or appellate authority which involves more than one assessment year and common issues in more than one assessment year no appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In case where a composite order/ judgement involves more than one assessee, each assessee shall be dealt with separately:’

4. The said modifications shall come into effect from the date of issue of this Circular.

5. The same may be brought to the notice of all concerned.

6. This issues under section 268A of the Income-tax Act.1961.

7.
Copy to:
Hindi version will follow .

(Neetika Bansal
Director. (ITJ)
CBDT. New Delhi
Director. (ITJ)
CBDT. New Delhi

Circular No. 3/2018

F No 279/Misc. 142/2007-ITJ (Pt)
Government of India
Ministry of Finance
Department of Revenue
Central Board Direct Taxes
New Delhi the 11th July, 2018

Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court-measures for reducing litigation-Reg.

Reference is invited to Board’s Circular No. 21 of 2015 dated 10.12.2015 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Income Tax Appellate Tribunal, High Courts and SLPs/ appeals before Supreme Court were specified.

2.In supersession of the above Circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs/ appeals before Supreme Court keeping in view the monetary limits and conditions specified below.

3.Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:

S. No.Appeals/ SLPs in Income-tax mattersMonetary Limit (Rs.)

1.Before Appellate Tribunal20,00,000
2.Before High Court50,00,000
3.Before Supreme Court1,00,00,000

It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.

4.For this purpose, ‘tax effect’means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as ‘disputed issues). Further, ‘tax effect’shall be tax including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.

5.The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeals shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed. In case where a composite order/judgement involves more than one assessee, each assessee shall be dealt with separately.

6. Further, where income is computed under the provisions of section 115J13 or section 115JC, for the purposes of determination of ‘tax effect’, tax on the total income assessed shall be computed as per the following formula-

(A — B) + (C D) where,

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);
B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions;
C = the total income assessed as per the provisions contained in section 115JB or section 115JC;
D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 1I5dCwas reduced by the amount of disputed issues under the said provisions:

However, where the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

7.In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Pr. Commissioner of Income-tax/ Commissioner of Income Tax shall specifically record that “even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this Circular”. Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits.

8.In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value and also bring to the notice of the Tribunal/ Court the provisions of sub section (4) of section 268A of the Income-tax Act, 1961 which read as under :

“(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case.”

9, As the evidence of not filing appeal due to this Circular may have to be produced in courts, the judicial folders in the office of Pr.CsIT/ CsIT must be maintained in a systemic manner for easy retrieval.

10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:

(a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or

(b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra fires, or

(c) Where Revenue Audit objection in the case has been accepted by the Department, or

(d) Where the addition relates to undisclosed foreign assets/ bank accounts.

11. The monetary limits specified in para 3 above shall not apply to writ matters and Direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute and rules. Further, in cases where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A/ 12AA of the IT Act, 1961 etc., filing of appeal shall not be governed by the limits specified in para 3 above and decision to file appeals in such cases may be taken on merits of a particular case.

12. It is clarified that the monetary limit of Rs. 20 lakhs for filing appeals before the ITAT would apply equally to cross objections under section 253(4) of the Act. Cross objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/ not pressed. Filing of cross objections below the monetary limit may not be considered henceforth. Similarly, references to High Courts and SLPs/ appeals before Supreme Court below the monetary limit of Rs. 50 lakhs and Rs. 1 Crore respectively should be pursued for dismissal as withdrawn/ not pressed. References before High Court and SLPs/ appeals below these limits may not be considered henceforth.

13.This Circular will apply to SLPs/ appeals/ cross objections/ references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/ appeals/ cross objections/references. Pending appeals below the specified tax limits in pare 3 above may be withdrawn/ not pressed.

14.The above may be brought to the notice of all concerned.

15.This issues under Section 268A of the Income-tax Act 1961.

16.Hindi version will follow.

(Neetika Bansal)
Director (ITJ),
CBDT, New Delhi.