Amendments introduced vide Finance Act 2020
1.0 The Finance Act 2020, among others, has amended following sections to change the due dates 139, Section 44AB and Section 92F of the Income Tax Act, 1961 (“the Act”).
1.1 Due date of filing of Income Tax Return in case of a company (not having transfer pricing cases) has been extended to 31st October from the earlier 30th September 2020. However, due date of 30th November applicable in case of a company (having transfer pricing cases) has not been amended.
1.2 Due date for furnishing of Tax Audit Report and Transfer Pricing Audit Report has been preponed by one month prior to the date of filing of the Return of income as mentioned above i.e. 30th September and 31st October (for assesses covered by Transfer Pricing provision).
Relaxation measures introduced due to COVID-19
2.0 The CBDT as part of relaxation measures due to COVID-19 vide Notification, has extended due date for filing of Return of Income for Assessment Year 2020-21 to 30th November. The extended due date shall be applicable for all persons. Consequent to the aforesaid extension, due date for filing of Tax Audit Report and Transfer Pricing Audit Report has been consequently extended till 31st October. In effect, no relaxation for a class of corporate assesses (ones covered by Transfer Pricing provision), for whom the dates remain unchanged.
Issues being faced by Companies
3.0 It is pertinent to note that companies having transfer pricing cases, are usually large corporates having global as well as PAN India presence.
3.1 COVID-19 has necessitated prolonged lockdown in the Country. Companies have adopted work from home, which has caused disruption in the office routine. Government has announced various relaxations, including extension of time limit in the Income Tax Act to counter unprecedented economic turbulence.
3.2 Similar extension of time limit has been provided by the SEBI and MCA for submission of annual financials, which has resulted in delay of completion of statutory audit and publishing annual results vis-à-vis normal years. This has direct impact on availability of contemporaneous data for benchmarking the transactions with Associated Enterprises for Arm’s Length Price (ALP). It may be noted that due date for TP audit returns is fixed beyond the normal due date for non-TP returns so as to enable the taxpayers and Chartered Accountants access the latest financial statements filed by different companies to perform benchmarking analysis.
3.3 It is to be noted, spate of new provisions introduced vide Finance Act, 2020, namely WHT on Dividend, TCS on sale of goods, Equalization Levy etc. require detailed preparation. Needless to mention, compliance of these provisions is not only onerous but requires changes in IT infrastructure coupled with training of personnel. Corporates have labored to comply with the new provisions. Almost all these amendments are applicable to the companies under consideration.
3.4 Further, faceless assessment and appeals launched in August 2020 too will require resource allocation by corporates as they struggle to meet deadlines in accordance with the laws framed.
3.5 The past one year is witness to historic changes being made in the field of Direct Taxes. Corporates are gearing up to meet the demands of changed architecture, while the pandemic rages on.
3.6 Due to COVID 19, the Government has also extended due dates for TDS returns, AIR filings etc. The Format of Form 26AS has also been modified to include various additional reporting. It is necessary to carefully consider Form 26AS and reconcile the information required to be submitted in the income tax return with that of Form 26AS. This will require additional efforts and time for many of the corporate entities having voluminous transactions.
3.7 Please note that due to bunching of due date for filing return for all taxpayers on 30th November whether individuals, corporate or non-corporates and/or regardless of requirement of tax audit or TP audit will cause significant administrative difficulty for Chartered Accountants responsible for issuing Tax Audit and TP Audit reports amidst the prevalent circumstances of significant restrictions on travel and office attendance. Even in past years when there were other special circumstances like late issue of new return forms or changes in audit report format, while extending due dates, the CBDT had maintained proper time interval between due dates for non-corporate, corporate and TP audit cases to avoid bunching of return filing compliance for all taxpayers on same date. The current year is an unprecedented extraordinary year which deserves even more liberal considerations.
4.0 Considering genuine hardship being faced by the companies, we humbly pray that due date for filing Return of Income as an exception, only for this year, is extended by at least one month i.e. till December 31st, 2020 specifically for corporates having transfer pricing cases. Accordingly, the due date for filing Tax audit Report and TP Audit Report for such taxpayers may be extended till 30th November 2020.
4.1 Hope to receive your immediate attention and kind consideration.