Taxation & Accountancy

The Finance (No.2) Act 2019 increased the surcharge rate for individuals, Hindu Undivided Families (HUFs), Body of Individuals (BOIs) and Association of Persons (AOPs) as a measure to raise resources from ‘super rich’ taxpayers, from erstwhile maximum rate of 15% (for income above Rs. 1 Cr) to 25% (for income between Rs. 2 Cr to Rs. 5 Cr) and 37% (for income above Rs. 5 Cr).

Such increase has unintentionally adversely impacted AOPs formed by Indian companies for bidding and executing infrastructure projects. Infrastructure is the fundamental enabler for growth and has been identified by the Government as one of the five significant economic pillars for ‘Aatmanirbhar Bharat’ with a National Infrastructure Pipeline of Rs. 100 lakh crore. As AOP is a preferred mode of operation for several infrastructure companies which operate in India and abroad, higher surcharge on AOPs is counter-productive and adversely dampens the efforts to attract investments in the infrastructure space. AOP being a business entity, it seems a levy of higher surcharge intended for ‘super rich’ taxpayers is an unintentional anomaly which needs to be corrected.

Therefore, we request the Government to reduce the surcharge on AOPs to a level of 10%/15% as it was prior to enhancement by Finance (No.2) Act 2019. However, if a complete rollback is not possible, a specific carve out for infrastructure sector or relief to Indian Companies, in their capacity as member of AOP, by allowing their share of income in the AOP to be subject to surcharge rate applicable to Indian companies (i.e. 7% / 12%) instead of the enhanced surcharge rate for AOPs i.e. 25% / 37% may be considered.

A detailed representation on the issue is attached herewith for your kind consideration.

We welcome the proactive steps taken by the Government to provide relief to taxpayers on various direct tax compliances by issuing Notification No.35/2020 dated 24 June 2020 under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

The Notification has extended the due dates for several compliances falling due between 20 March 2020 and 31 December 2020. In particular, the time limit for filing return for non-corporate taxpayers and taxpayers liable to audit (other than Transfer Pricing cases) has been extended to 30 November 2020. However, there is no relaxation from payment of interest under section 234A for delayed filing of return except where the self-assessment (SA) tax payable is less than Rs. 1 lakh.

The levy of interest under s.234A for filing of return within the extended due date of 30 November 2020 where SA tax payable is more than Rs. 1 lakh will cause great hardship to many taxpayers (especially senior citizens) who are unable to compile the relevant information in timely manner for computing the SA tax due to disruption caused by COVID-19 pandemic. Since interest under s.234A is for delayed filing of return for which due date is extended till 30 November 2020 and the Government is otherwise compensated for delay in payment of taxes by levy of interest under s.234B, we believe that it is incorrect to levy interest under s.234A amidst the unprecedented and extraordinary circumstances caused by COVID-19 pandemic. We sincerely request for review of the Notification on this aspect.

Our detailed representation on the issue is attached herewith for your kind consideration and remedial action.

The Finance Bill 2020 was passed by both houses of Parliament on 24 March 2020 without any discussion or debate and received Presidential assent on 27 March 2020. There were many amendments at the enactment stage of Finance Bill 2020, including the introduction of a new Equalisation Levy on e-commerce transactions with effect from 1 April 2020.

While many of our suggestions in Post Budget Memorandum on Direct Taxation were addressed in the amendments (like duplicated tax on dividends from REITs/Invits, extending s.80M deduction to foreign dividends, deferring dates of new TDS under section 194-O and TCS under sections 206C(1G)/(1H), etc), the enacted provisions give rise to many practical challenges/ implementation issues to the stakeholders. These will need to be addressed through legislative changes or issue of Notifications or clarificatory Circulars, as may be appropriate to the context.

In the wake of Covid-19 pandemic lockdown, the Government notified Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 on 31st March 2020 to give effect to various Direct/Indirect Tax and Statutory Compliance relaxation announced on 24th March 2020. The Ordinance will need to be regularised through an Amendment Bill when the Parliament next convenes for monsoon session post lifting of Covid 19 lockdown. Our members feel that the passing the Amendment Act, to regularise the said Ordinance, will provide a window to make legislative changes to address some of the pressing difficulties arising out of enactment stage changes.

While deferring the applicable date of new TDS under s.194-O for e-commerce transactions and TCS under s.206C(1G)/(1H) for Liberalised Remittance Scheme, overseas tour package and sale of goods from 1 April 2020 to 1 October 2020, the enactment stage changes give CBDT power to issue guidelines for removing difficulties faced in implementation of the new TDS/TCS provisions.

In view of the same, the Bombay Chamber is pleased to submit a memorandum on enactment stage changes in Finance Bill, 2020 on Direct Taxation for your kind consideration. It broadly covers the following :-

• Issues on new residency rules and perquisite taxation for contributions to PF, NPS and ASF in excess of Rs. 7.50 lakhs
• Issues related to TDS on dividends
• Issues related to TDS and TCS provisions including suggestions on issues on which guidelines can be issued on TDS u/s. 194-O and TCS u/s. 206C(1G)/(1H)
• Issues related to Equalisation Levy on e-commerce transactions through non-resident e-commerce operator.

We trust our suggestions shall be duly considered and appropriate notifications/clarifications will be announced at the earliest. If required, we shall be happy to elaborate on any of the issues in the representation.