Extension of Due date to file Income Tax Return from 31 July, 2016 to 5 August, 2016

CBDT has extended due date of filing Income Tax Returns from 31st July, 2016 to 5th August, 2016. CBDT has mentioned Bank Strike on 29th July, 2016 as the reason for extension of due date in its order u/s 119 of Income Tax Act.

Salaried Employees and Businessmen or Professionals not subjected to audit are required to file return by 31st July of each Assessment Year. For this year date has been extended to 05th August, 2016.

IT Return due date extended to 05th August, 2016

Budget 2016 Highlights

Finance minister Arun Jaitley is presenting Union Budget 2016-17 in Parliament. Here are the key highlights of his speech:

Agriculture and farmers’ welfare:
•Look to double farmer income by 2020
•Govt will reorient interventions in farming sector; we need to optimally utilize water resources
•28.5 lakh hectares will be brought under irrigation
•A dedicated irrigation fund with Rs.20,000 crore under Nabard
•Major programme for sustainable groundwater management
•Govt to set apart Rs.412 crore to encourage organic farming
•Access to market is critical for farmers
•Implementing Pradhan Mantri Gram Sadak Yojana as never before—scheme to be allocated Rs.19,000 crore in FY17; Rs.27,000 crore in total—to advance completion target to 2019 from 2022
•To support farmers after calamities, special focus has been given to ensure timely flow of credit, target is Rs.9 trillion in FY17
•We have to ensure benefit of minimum support price reaches all parts of country—remaining states will be encouraged to take up decentralized procurement, effective arrangement of pulse procurement
•E-market portal for connecting breeders and farmers
•Visible rise in yield of honey
•90% of domestic honey is now exported
•Allocation of Rs.35,984 crore for farm sector: FM
Rural areas:
•Cluster-facilitation teams under MGNREGA to optimize water resources
Rs.38,500 crore allocated for MNREGA in 2016-17, the highest ever if entire amount is spent
•As of 1 April 2015, 18,542 villages were not electrified—as on 23 Feb 2016, 5,542 villages have been electrified
•2.87 trillion to be given grant-in-aid for gram panchayats and municipalities; it is quantum jump of 228%
•Govt committed to achieve 100% village electrification by 1 May 2018
•We need to spread digital literacy in rural areas—plan to launch digital literacy mission for more than 6,000 households in rural areas
•Modernization of land records essential—to be implemented as a central sector scheme
•Govt to develop 300 ‘rurban’ clusters
Social sector
•To embark on scheme to provide LPG connections in womens’ names
•Gratitude to 75 lakh households that have given up LPG subsidies
•Almost 2.2 lakh new patients of end-stage renal diseases get added in India every year
•Propose to start National Dialysis Programme with fund generated under PPP scheme
•3,000 stores to be opened for quality medicines under PM Jan Ausadhi Yojana in 2016-17
•SC and ST entrepreneurs—Rs.500 crore to promote this under Stand-Up India
•Next big step by focusing on quality education—commitment to improve higher education institutions
•Decided to set up a higher education financing agency (non-profit)—initial corpus of Rs.1,000 crore
•Digital depository for school-leaving certificates other academic certificates
•Entrepreneurship education and training o be provided in schools and colleges
Job creation:
•Will pay EPF contribution of 3.33% for all new employees joining EPFO to incentivize employers
•National Career Service—35 million job-seekers have registered; propose to interlink state employment exchanges with National Career Service
•Retail trade—biggest employer in country
•Small and medium-shops should be given option to remain open all 7 days on voluntary basis
•Model shops bill on voluntary basis for states to be adopted
Infra and investment:
•Roads sector: Nearly 85% of stalled projects back on track
•Speeded up road construction—to allocate Rs.55,000 crore for roads and highways, additional Rs.15,000 crore to be raised by National Highways Authority of India (NHAI) through bonds. Total allocation of Rs.97000 crore.
•Total allocation of Rs.2.18 trillion for roads and railways
•Pace of completion of road projects to rise to 10,000km in 2016-17
•Total outlay for infrastructure in Budget Estimates is at Rs.2.21 trillion
•Passenger traffic on roads more efficient now—This is a totally unreformed sector; absolution of Permit Raj is the medium-term goal; to open up road transport sector in passenger segment; states will have choice of adopting new legal framework; provision for more efficient public transport sector
•Ports—to develop new greenfield ports
•Civil aviation—plan for reviving underserved airports; to partner with state govts to develop some of these airports
•Natural resources: To incentivise gas production from deep sea, high temperature areas
•Govt has achieved highest coal production growth in over 2 decades
•Power sector—drawing up plan spanning 15-20 years to augment capacity in nuclear power sector
•Initiative to reinvigorate private sector—public utility resolution of dispute bills; new credit rating system for infrastructure
•Further reforms in FDI policy—area of insurance and pension, stock exchanges etc
•Duty drawback scheme widened to include more products, countries
•FDI policy should address farmers, food processing industry—100% FDI through Foreign Investment Promotion Board route for marketing of food products produced and processed in India
•Department of disinvestment to be renamed
Financial sector reforms:
•Bankruptcy code to be introduced
•RBI Act 1934 to be amended to provide statutory basis for monetary policy framework
•Financial data management centre to be set up
•New derivative products
•Stressed assets—ARCs have an important role—necessary amendment to Sarfaesi Act will be done
•Central legislation to deal with fraudulent schemes
•To amend Sebi act for more benches for SAT
•Banks—Rs.25,000 crore to be provided for recapitalization of public sector banks, which are grappling with stressed assets; Govt stands solidly behind these banks.
•Banking board bureau to be operationalized during this year
•Debt recovery tribunals to be strengthened for speedier dispute resolution
•To undertake massive rollout of ATMs over next 3 years
•Insurance firms owned by government will be listed on stock exchanges
Ease of doing business:
•Initiatives include introducing targeted delivery of subsidies through Aadhaar, with a social security platform for use of Aadhaar; direct benefit transfers on a pilot basis for fertilizers
•Bill to amend Companies Act—enabling environment for start-ups
•Create closer engagement between states and districts—Ek Bharat, Shresth Bharat
•70th anniversary of Independence in 2017—Ek Bharat, Shresth Bharat is a part of this mission
Fiscal situation:
•Fiscal Responsibility and Budget Management (FRBM) roadmap: Prudence lies in adhering to fiscal targets
•Budget and Revised estimates for FY15-16 at 3.9% and 3.5% of GDP respectively
•Total expenditure in budget—Rs.19.78 trillion
•Retaining fiscal deficit target at 3.5% for FY17
•Plan/Non-plan classification to be done away with from FY17-18
•Revenue deficit target at 2.5% of GDP
•FRBM: Better to have a fiscal target range; Must review working of this Act—to set up A committee to review FRBM
•Seventh Pay Commission—Made interim provisions while recommendations are being reviewed—restructured more than 1,500 central schemes; Allocated Rs.100 crore each for celebrating birth anniversaries of Pandit Deendayal Upadhyay and Guru Gobind Singh
Tax reforms:
•Relief to small taxpayers, measures for moving towards pension society, reducing litigation, simplification of taxation
•Ceiling of tax rebate at Rs.5,000 for income less than Rs.5 lakh
•Relief to people living in rented houses—Deduction for rent paid will be raised from Rs.20,000 to Rs.60,000 to benefit those living in rented houses
•Presumptive taxation schemes—to increase turnover limit to Rs.2 crore—relief for many in MSME category
•Extend presumptive taxation scheme to all professionals with gross receipts up to Rs.50 lakh
•Corporate tax rate reduction should be calibrated with benefits of phasing out exemptions
•Corporate tax rate for establishments with turnover less than Rs.5 crore lowered to 29% of surcharge plus cess
•Make in India—100% deduction of profits for start-ups adhering to certain conditions; MAT will apply
•To implement GAAR from 1 April 2017
•To reduce customs duty on refrigerated containers
•Exemptions for braille paper
•Pension society—Exemption of service tax for NPS, EPFO to employees
•Affordable housing—100% deduction on profits for flats up to 30 sq.m in metro cities from 2016-19; MAT will apply
•First-time home buyers—relief on housing loans for up to Rs.50 lakh
•Surcharge on luxury cars costing more than Rs.10 lakh
•0.5% Krishi Kalyan surcharge cess on all taxable services from 1 June 2016, to be given to agriculture development
•Environment—Pollution cess on all vehicles
•To impose additional duty on jewellery
•Change excise duty on branded ready-made garments
•Revive clean energy cess on coal, others
•Increase duty on tobacco products (other than beedi) by 10-15%
Reducing litigation:
•Tax evasion will be countered strongly
•Limited period compliance window to declare undisclosed income
•Black money—3 lakh tax cases pending before authority—a new dispute resolution scheme will be set up where taxpayer can settle case by paying disputed tax and interest with certain conditions
•On retrospective tax amendments—committed to providing stable tax regime; committee will be chaired by revenue secretary
•One-time scheme for dispute resolution for pending retrospective tax amendment case
•Justice Easwar committee recommendation—abolishing 13% cesses levied by various ministries
•Rationalizing TDS provisions for income tax
•Non-residents without PAN—higher rate won’t apply on furnishing alternate ID
•To amend customs act
Use of technology:
•Will use technology in tax department in a big way
•To expand scope of e-assessment for taxpayers in 7 big cities
•Govt will pay interest @9% in case of delay in giving appellate orders beyond 90 days
•Impact of tax proposals will lead to revenue gain of Rs.19,610 crores

Source: LiveMint.com

Role of deeming fiction of Sec. 50C to claim relief under Sec. 54/54F

Section 50C of the Income-tax Act (the Act) was introduced with effect from 1st April, 2003 by the Finance Act, 2002. The purpose of this section was explained thus by the Memorandum to the Finance Bill 2002:

"The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property.

It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act."

II. Controversies relating to deeming fiction of Section 50C:

When this provision was introduced the Legislature would not have envisaged that so much of controversy would arise as has happened already.

To illustrate the following few case laws may be gone through-

1. The Mumbai Bench of ITAT in the case of Raj Babbar v. ITO [2013] 29 taxmann.com 11/56 SOT 1 (Mumbai - Trib.) held that where investment in new asset was more than net consideration received as well as full value of consideration computed as per section 50C, assessee would not be chargeable to capital gains.2. The Indore Bench of ITAT in the case of Dhanveer Singh Gambhir v. ITO [2015] 56 taxmann.com 205/68 SOT 343 (Indore - Trib.) decided in favour of Revenue by holding that while allowing deduction under section 54 of the Act from long-term capital gain, provision of section 50C was not applicable. The Bangalore Bench of ITAT in the case of Gouli Mahadevappa v. ITO [2011] 128 ITD 503/[2010] 8 taxmann.com 15 (Bang.) held that for computing Capital Gain, section 50C has to be taken into consideration but the exemption under section 54F or 54 of the Act being a complete Code in itself, exemption has to be worked out as per the provisions of that section itself. This decision which was cited before the Indore Bench in this case was distinguished after making the following observations at para.14 of its order "As per the provisions of Section 54, exemption is allowable with reference to the amount of Capital Gain and not with reference to the amount of net consideration. Therefore, the issue which arose with reference to exemption under Section 54F wherein exemption is allowed with reference to amount of net consideration does not arise in granting exemption under Section 54." The decision of the Bangalore Bench in the case of Gouli Mahadevappa(supra) was approved by the Karnataka High Court on the point of allowing exemption with reference to section 54F of the Act in Gouli Mahadevappa v. ITO [2013] 33 taxmann.com 47/215 Taxman 145 (Kar). The Karnataka High Court also enlarged the deduction under section 54F of the Act by holding that "where capital gain is assessed on notional basis, whatever amount is invested in new residential house within prescribed period under section 54F of the Act, entire amount so invested, would get benefit of deduction, irrespective of fact that funds from other sources are also utilized for new residential house." The assessee had claimed, apart from investing the net consideration, a further sum of Rs.4 lakhs invested out of agricultural income under section 54F of the Act and this claim which was negatived till the Tribunal's stage was allowed by the High Court.3. The ITAT Jaipur Bench in the case of Nand Lal Sharma v. ITO [2015] 61 taxmann.com 271 (Jp. - Trib.) following the decision of the Delhi High Court in the case of CIT v. Smt. Nilofer I. Singh [2009] 309 ITR 233/176 Taxman 252 (Delhi) held that while computing exemption under section 54 of the Act, actual sale consideration has to be taken into consideration and not stamp duty valuation under section 50C of the Act. The Delhi High Court in Smt. Nilofer I. Singh's case (supra) held that "the expression 'full value of consideration' used in section 48 does not have any reference to market value but only to consideration referred to in sale deeds as sale price of assets which have been transferred".4. The Mumbai Bench of ITAT in the case of Bhaidas Cursondas & Co. v. Addl. CIT [2015] 59 taxmann.com 373/154 ITD 521 (Mum.) has held that deeming provision under section 50C applies to compute capital gains and not to determine written down value of relevant block of assets.


"Amendment proposed in Section 50C: The scope of section 50C was extended w.e.f. A.Y. 2010-11 to the transaction which were executed through agreement to sell or power of attorney. However, the present provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement. Hence, the Committee has suggested to amend the provisions of Section 50C to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value as on the date of the agreement shall be deemed to be the full value consideration of the property. Such provision shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before a date of agreement for transfer of the asset"

Actually this issue identified by the Reforms Panel arose in the case decided by the ITAT Kolkata Bench in the case of Heilgers Development & Construction Co. (P.) Ltd. v. Dy. CIT [2013] 32 taxmann.com 147 (Kol. - Trib.) wherein the issue was decided against the assessee in the absence of official confirmation of increase in prices.


It is suggested that suitable explanation may be added to section 50C of the Act clearly explaining that investment can be made in section 54/54F in appropriate cases covering the deemed value as adopted in section 50C of the Act for the purpose of claiming exemption under these provisions. It is also suggested that the recommendation of the Tax Reforms Panel (with regard to adopting stamp duty value on the date of a genuine sale agreement)should be accepted, even if there is an increase in stamp value on the date of executing and registering sale deed.

New Framework for BEPS: OECD

The OECD today agreed a new framework that would allow all interested countries and jurisdictions to join in efforts to update international tax rules for the 21st Century. The proposal for broadening participation in the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project will be presented to G20 Finance Ministers at their next meeting on 26-27 February in Shanghai, China.


This new forum will provide for all interested countries and jurisdictions to participate as BEPS Associates in an extension of the OECD’s Committee on Fiscal Affairs (CFA). As BEPS Associates, they will work on an equal footing with the OECD and G20 members on the remaining standard-setting under the BEPS Project, as well as the review and monitoring of the implementation of the BEPS package.


The BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low or no tax environments, where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or 4-10% of global corporate income tax (CIT) revenues. Given developing countries’ greater reliance on CIT revenues, the impact of BEPS on these countries is particularly damaging.


“Drawing on the G20’s leadership, countries worldwide are working closer than ever to shut down the loopholes that facilitate tax avoidance,” said OECD Secretary-General Angel GurrĂ­a. “The plan we are presenting today will create the largest and most inclusive forum for discussions and decisions on implementing the BEPS measures and ensuring a stronger and fairer international tax system. It is another strong signal that behaviour which was considered both legal and normal in the past will no longer be accepted.”


The framework’s mandate will focus on the review of implementation of the 4 BEPS minimum standards, in the areas of harmful tax practices, tax treaty abuse, Country-by-Country Reporting requirements for transfer pricing and improvements in cross-border tax dispute resolution. It will also ensure ongoing data gathering on the tax challenges in the digital economy and measuring the impact of BEPS, as well as monitoring implementation of the remainder of the BEPS package and finalising the remaining BEPS standard-setting work, notably as concerns work on tax treaties and transfer pricing.


BEPS Associates will also work to support implementation of the BEPS package, particularly in developing countries, through the development and provision of practical toolkits that address the top priority issues they have identified.


If endorsed by the G20 at the Finance Ministers meeting in Shanghai on 26-27 February, the new framework will hold its first meeting in Kyoto, Japan in Jun

Transfer Pricing Wish List: Budget 2016

Transfer pricing has been at the core of tax litigation in India over the past few years. All of the cases that have made headlines in Indian taxation news relate to transfer pricing issues. The uncertainty on some transfer pricing issues such as marketing intangibles, selection of comparables, payment of royalties, and loss-making operations, have resulted in increased litigation and are creating hurdles for business and investments in India.

The new government showed its resolve to reduce litigation on transfer pricing and provide certainty by bringing in significant amendments in the last Budget, including the rollback mechanism for Advance Pricing Agreements (APAs) and allowing the use of range and multiple-year data. Additionally, the government has made several attempts on the administrative side to reduce the litigation and introduce a taxpayer-friendly regime. However, certain ambiguities continue to exist. In the upcoming budget, we hope to see appropriate steps being taken to address these ambiguities, some of which are listed below:

A. Detailed rules and guidance to taxpayers
·  Provide guidance and clarity on the applicability of the transfer pricing documentation i.e. country-by-country reporting from the OECD’s BEPS Action 13 and its other aspects, including the threshold, period covered, and the filing and frequency of documentation. Certain protective measures would need to be built in the law with respect to automatic exchange of information with other countries to safeguard confidentiality. Also, the right threshold amount would be critical to save Small and Medium Enterprises (SMEs) from compliance costs and burden.
·  Provide guidance and clarity on transfer pricing implications relating to the issue of marketing intangibles or Advertisement, Marketing and Promotion (AMP) expenses, especially guidance on cases where such AMP expenses require a separate compensation. The government should also provide clarity in cases where such AMP expenses should be absorbed by an Indian company.
·  Provide clear guidance in terms of valuation methodologies to be adopted for arriving at the arm's length price for financial transactions such as loans and guarantees.
·  Provide clarity on the use of Base Rate or LIBOR rates with respect to outbound and inbound financial transactions.
·  Provide guidance for benchmarking transactions of royalty in cases where it can be benchmarked on an aggregated basis with other transactions (under the Transactional Net Margin Method) or where it requires separate benchmarking.
·  Currently, the tax authorities’ documentation requirements for management fee transactions are impractical and requires a more balanced approach. In this context, providing detailed guidance on the level and form of documentation required would provide certainty.
·  Provide proper guidance along with examples for computation of various economic adjustments such as working capital adjustment, risk adjustment, capacity adjustment, etc.
B. Legal amendments to rationalise the transfer pricing provisions
·  Currently, companies can be added or removed from the comparable set during a transfer pricing assessment due to the availability of current year data. This leads to an ambiguous situation for taxpayers while preparing a transfer pricing study report in the current year and during its assessment proceeding after two years. Additionally, the fresh analysis is not in line with the contemporaneous documentation requirement (which requires the documentation to be in place before filing the return of income), which if not adhered may result in penal consequences. Hence, the transfer pricing provisions which currently allow fresh analysis at the assessment stage should be amended.
·  Make an amendment stating that transfer pricing provisions do not apply to the issuance of shares and other similar transactions (where no income arises) and that no reporting or compliance is required in such cases. This would be in line with several court judgements and the government’s intention of reducing the compliance burden.
·  The threshold of INR 10 million for maintaining mandatory documentation for international transactions with associated enterprises should be increased suitably.
·  Converge and align the Customs and Transfer Pricing Regulations, specially the methodologies applied for determining the arm's length price/fair market value of import payments made to overseas group companies by their Indian counterparts.
·  Exclude the applicability of deemed international transactions in genuine cases where transactions are structured, for commercial reasons. Common business transactions with unrelated third parties such as global sourcing arrangements, global contract manufacturers, etc. should not be considered as deemed international transactions. Also, transactions between two resident entities should not be included in this definition since there is no tax avoidance or shifting of profits outside India.
Domestic Transfer Pricing
·  Transaction of directors' remuneration should be removed from the purview of domestic transfer pricing or at least non-shareholder directors' remuneration should not be subject to transfer pricing.
·  Domestic transfer pricing provisions should not be applicable to domestic entities in a tax-neutral scenario i.e. in cases where taxes have been paid at the maximummarginal rate by either of the related parties.
·  Extend the APA programme to specified domestic transactions, at least for high value transactions.
Safe harbour provisions - bringing in rationality
·  The current mark-ups/operating margins expected from the transactions covered under the safe harbour provisions are on the higher side. The government should consider a 2-3% true-down from the current margins, so that the taxpayers can reconsider adopting the safe harbour regime.
·  Extend the safe harbour regulations to include services such as investment advisory services, marketing support services, and captive R&D services other than R&D in IT.
·  Provide relaxation in the maintenance of documentation for taxpayers fully covered and opting for safe harbour as it leads to an unnecessary compliance burden and increases costs.
·  Amend the safe harbour rules for outbound loans which are currently based on the SBI prime lending rate and LIBOR rates.
C. Tax administrative aspects
·  Provide clarity on selecting cases for transfer pricing scrutiny and reference to the Transfer Pricing Officer (TPO) for domestic transfer pricing. TPOs should not be burdened with cases of domestic transfer pricing where there is no tax arbitrage.
·  Risk-based criteria for selecting cases for transfer pricing scrutiny should be defined and made available publicly, with a focus on high-risk transactions/cases.
·  Transfer pricing scrutiny should be carried out over 2-3 years instead of the current annual scrutiny.
·  Dedicated benches of the Income Tax Appellate Tribunal (ITAT) should be introduced/enhanced to adjudicate pending transfer pricing cases. Steps should be taken to address the huge back-log of transfer pricing cases.
·  Allow the due cognisance of international guidance wherever the Indian regulations are silent or do not provide the necessary guidance on particular transfer pricing issues.
·  Withdraw rights given to the Assessing Officer (AO) to appeal against the directions of the Dispute Resolution Panel (DRP) as it defeats the purpose of the introduction of the DRP. Similarly, the rights of revision provided to the Commissioner under section 263 should be curtailed in cases of directions issued by the DRP.
·  Steps should be taken to strengthen the administrative mechanism of APAs to deal with the overwhelming response from taxpayers and concluding APAs promptly.
·  Enable taxpayers to file bilateral APAs, in the absence of a clause for the provision of a corresponding adjustment in tax treaties.

PAN Mandatory on sale or purchase of goods or services exceeding 2 Lakhs

PAN Mandatory on sale or purchase of goods  or services exceeding 2 Lakhs

In order to curb Black Money and reduce cash transaction, CBDT following the recommendation of Special Investigation Team(SIT) on Black Money has made quoting of  Permanent Account Number (PAN) mandatory on Sale or purchase, by any person, of goods or services of any nature  exceeding two lakh rupees per transaction. (Rule 114B) from 1st January 2016

The seller/service provider shall have to obtain a copy of PAN of the buyer and quote the same on Invoice.

If the person does not have a permanent account number, he shall make a declaration in FormNo.60 giving therein the particulars of such transaction.

For all the Form 60 declarations of not having PAN received from the buyers, Seller shall have to file a half yearly online return in a specified Form 61. Last date for filing Form 61 is 31st  October for the half year ending 30th September and 30th April for the half year ending 31st March. Since rules are applicable from January 1, 2016 hence first report in form 61 will be for the period January, 2016 to March 31, 2016.

Above requirement of filing half yearly return in Form 61 is only applicable to those person who are required to get their books of accounts Audited u/s. 44AB of Income Tax Act.

The seller shall have to maintain the copy of PAN or Form 60 obtained from buyer for a period of 6 years from the  year of Transaction.

Receipt of cash payment exceeding two lakh rupees for sale

From 1st April, 2016, every person who receives cash payment exceeding two lakh rupees for sale, from any person, of goods or services of any nature shall be required to file a statement in Form 61A giving particulars of such transactions in a financial year whether or not the buyer has submitted PAN or declaration in Form 60. The statement in Form 61A is required to be filed annually by 31st May from FY 2016-17

Sub-rule 3(b) of Rule 114E states that a person required to report cash receipts shall aggregate all the transactions of the same nature in respect of that person during the financial year for determining the threshold amount.

Thus, if a seller receives payments of Rs. 20,000 from a single customer 10 times, he shall have to report the same in Form 61A.

Some professional have inferred the threshold of Rs. 2 Lakhs per transaction i.e. receiving payments of Rs. 1,90,000 2 times shall not be required to be reported. However, in my opinion, the threshold is to be calculated per person and not per transaction.

The above requirement of reporting cash receipts from a person exceeding Rs. 2 Lakhs is only applicable to those person who are required to get their books of accounts Audited u/s. 44AB of Income Tax Act.

Filling Income Tax Form No.39

Filling  Income Tax Form No.39

The Form No.39 is to be used by those Prospective Income Tax Practitioners, who have already commenced (entered into) the Profession of Income Tax Practice as per Rule 54(1) of the Income Tax Rules, 1962 & now desirous to enlist their names as Authorized Income Tax Practitioners in the “Register of Income Tax Practitioners” maintained by the Jurisdictional Commissioners of Income Tax in Form No.38 under Rule 53 of the Income Tax Rules, 1962.

Before filling the Application in Form No.39, we must know two things – (1) Eligibility for using the Form, and (2) Clearly understanding applicable portions of the Application in Form No.39:

(1)            It is a well known fact or everyone knows that the Subsection (2) of Section 288 of the Income Tax Act, 1961 allows Eight (8) Categories of Persons to appear before IT Authorities & represent their clients, i.e., Income Tax Assessees.    However, as per the definition given for the “Authorized Income Tax Practitioner” in Rule 49(a) of the Income Tax Rules, 1962 only Three (3) Categories of Persons* [*hailing under Clauses (v), (vi) and (vii) of Subsection (2) of Section 288 of Income Tax Act, 1961 alone] could act as Income Tax Practitioners.     In fact, even the prescribed Form No.39 also, as seen from its contents, could be useful for those Three (3) Categories of Persons* only [*hailing under Clauses (v), (vi) and (vii) of Subsection (2) of Section 288 of Income Tax Act, 1961 alone] for Enlistment/Registration as Authorized Income Tax Practitioner.     

(2)            For a detailed & clear understanding, let us have a look at the prescribed Format of Form No.39 and Relevant ACTION POINTS (Vide page Nos. 1.1098 and 1.1099 of Taxmann’s 51st Edition of Income Tax Rules published in 2014:

[See rule 54]


The Chief Commissioner or Commissioner of Income Tax,

I hereby apply for registration as an authorized income tax practitioner under Clause (v) / (vi) / (vii) of Section 288(2) of the Income Tax Act, 1961.

The following particulars are furnished herewith –

1. Name in full [block letters]:
2. Father’s Name:
3. Permanent Residential Address:
4. Present Residential Address:
5. Professional Address(es) in India:
6. Principal Place of Profession in India:
7. If partner in a firm, name of the firm and other partners:

* I Certify that I have passed the Accountancy Examination of ________________ (a true copy  
    of the certificate enclosed.

* I Certify that I have acquired the Educational Qualification of _______________ (a true copy  
    of the certificate enclosed.

* I Certify that I was an income tax practitioner within the meaning of Clause (iv) of Sub-section (2) of Section 61 of the Indian Income Tax Act, 1922, and was actually practicing immediately before 1st April, 1962 as such and some of the cases in which I appeared in that capacity are as below:
Name and Address
of Assessee
Assessment Year
Designation of Income Tax Authority before whom appeared

I Certify that I have been practicing as an authorized income tax practitioner since _________
and that I have not so far made any application for registration as an authorized income tax practitioner to any other Chief Commissioner or Commissioner of Income Tax.



I, ____________________________ do declare that what is stated in the above application is true to the best of my information and belief.

Date: _________                                                                                                                       _________
* Delete inappropriate words.



The Form is relevant for any person who wishes to have his name entered as an authorized Income Tax Practitioner in the Register maintained for that purpose by the Chief Commissioner or Commissioner.     Such a person should furnish an application in this Form


The applicant must ensure that he fulfills the relevant requirements prescribed in Section 288(2) of the Act.


The Application must be submitted to the Chief Commissioner or Commissioner within whose area of jurisdiction the person has been practicing.


The Application must be accompanied by true copy of the document evidencing the professional or educational qualification of the Applicant.


The Chief Commissioner or Commissioner will issue the Certificate of Registration after ensuring that the applicant satisfies the prescribed requirements and that he has been practicing before Income Tax Authorities for not less than one year on the date of application.


The Applicant must ensure that the particulars furnished in the application represent the true state of affairs, as to facts.   If at any time the Chief Commissioner or Commissioner is satisfied that the Certificate was obtained by misrepresentation as to an essential fact, he will order the removal of the name of the Income Tax Practitioner from the Register mentioned above.


The Three Cases to be mentioned in the Application may be even those where the applicant may have appeared as an assistant or junior to another authorized representative or counsel.

In the “First Para” of the prescribed application Form No.39 (that appeared next to “To Address” in the format), there is a clear mention of Clauses (v), (vi) and (vii) of Subsection (2) of Section 288. 

Therefore, the applicant must retain only one Clause (to which he/she relates) in the “First Para” of the prescribed application Form No.39 (that appeared next to “To Address” in format), from the three Clauses (v), (vi) and (vii) of Subsection (2) of Section 288, and mark ‘x’ on remaining two clauses, which are not applicable.    

Then, next followed is “Seven (7) General Particulars” to be furnished by the applicant, after that we could find there “Three (3) Paras” each one among these starred (*) 3 paras exclusively pertains to each Clause of (v), (vi) or (vii) of Subsection (2) of Section 288 respectively.     Here, one could easily understand that the “3rd Para” exactly/exclusively/specially/actually pertains to Clause (vii) of Subsection (2) of Section 288 only.    The contents of the 3rd Para reveals that there by followed with a ‘body of the frame/format’ appended is to mention some of the cases in which the applicant under Clause (vii) has appeared in the capacity of Income Tax Practitioner in the repealed Indian Income Tax Act, 1922 (prior to coming into existence of the present Income Tax Act, 1961) or before 1st April, 1962.

Therefore, the applicant must Use & Fill the blank (_ _ _ _) in only one para among the starred (*) 3 paras - First or Second or Third Para as applicable.     Thus,   

(1)            If applicant is under Clause (v) of Subsection (2) of Section 288, he/she could Use & Fill the blank of First Para only.

(2)            If applicant is under Clause (vi) of Subsection (2) of Section 288, he/she could Use & Fill the blank of Second Para only.

(3)            If applicant is under Clause (vii) of Subsection (2) of Section 288, he/she could Use & Fill the blank of Third Para only.

Therefore, the Form No.39 clearly allows / insists / mandates that the applicants using the Form No.39 must fill it in tune with the above applicable clause only.

Whereas the Third Para is only applicable to applicant under Clause (vii) of Subsection (2) of Section 288, there is no need to adhere or touch the Third Para by the applicants under Clause (v) or (vi) of Subsection (2) of Section 288.

While the state of factual applicable position is as above, there is still much hue & cry over Enlistment of Authorized Income Tax Practitioners.


As of now, 54 years have been completed from enactment & implementation of the Income Tax Act, 1961 & 53 years have been completed from adaption of the Income Tax Rules, 1962.    Yet, there is still much hue & cry over interpretation of or understanding about the specific applicability of the condition laid under Rule 55, why?      Whether even the Publishers of Books on Income Tax Rules, 1962 are also indirectly causing support for the anomaly?


No doubt, the publishers are bound to publish the texts of Act & Rules as it is, but the gist, notes, tips, or action points, etc., to be added & provided by the Publishers, Editors, Content-Writers in those books for the convenience or easy understanding by the readers/users of books of those Acts/Rules, should not be misguiding the readers & users of those books.     Even when such gist, notes, tips, or action points, etc., are to be either supplied or approved by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT), the intellectual Content-Writer/Editor working for & on behalf of the Publishers should bring the anomaly, variance or irregularity identified in the draft supplied for printing & publishing, to the knowledge of the concerned authors/authorities/department for adapting the suitable correction. 

The “ACTION POINTS” appended to the Form No.39 are rather misguiding, than being helpful, to both the applicants & IT Authorities.     Among those Seven (7) listed under “ACTION POINTS” appended to the Form No.39, apart from the true & correct state of points in Point Nos.1, 3, 4 and 6, the Point No.2 is clearly stating to “ensure that the applicant correctly fulfils the relevant requirements prescribed in Section 288(2) of the Act”, but the Point Nos. 5 and 7 are somewhat misleading.

The Point No.5 read as “The Chief Commissioner or Commissioner will issue the Certificate of Registration after ensuring that the applicant satisfies the prescribed requirements and that he has been practicing before income tax authorities for not less than one year on the date of application”.     The contents of this Point No.5 may be True & Correct if it is applicable to all the Three (3) Clauses as per Income Tax Law.     Here it is to be noted that whereas the Point No.2 is emphasizing & clearly stating to “ensure that the applicant correctly fulfils the relevant requirements prescribed in Section 288(2) of the Act”, insisting anything extra by Rules, in addition to the actually prescribed in Act is Ultra-Virus.     Therefore, the Point No.5 has to be read “The Chief Commissioner of Commissioner will issue the Certificate of Registration after ensuring that the applicant satisfies the prescribed requirements and, if applicable,   he has been practicing before income tax authorities for not less than one year on the date of application”.

The Point No.7 read as “The three cases to be mentioned in application may be even those where the applicant may have appeared as an assistant or junior to another authorized representative or counsel”.     In fact, this Point No.7 ought to read as “The three cases to be mentioned in application, if the applicant is under Clause (vii) of Section 288(2) of the Act, may be even those where the applicant may have appeared as an assistant or junior to another authorized representative or counsel”.

Since, the above highlighted-in-green words are not mentioned in Point Nos. 5 and 7 of the “ACTION POINTS” appended to the Form No.39, entire gamut & array is causing further support to the subjected anomaly, even when such notes or “ACTION POINTS” appended to a prescribed Format does not have any legal validity.

Now, let us view & study the aspect of applicability of the condition “and has been practicing before income tax authorities for not less than one year on the date of application” from the angle of Rule 54 of the Income Tax Rules, 1962.     The Sub-rule (1) of Rule 54 of the Income Tax Rules, 1962 clearly states “to apply to the Chief Commissioner or Commissioner within whose area of jurisdiction the applicant has been practicing”.     Thus, it could be understood that the Rule 54(1) is also insisting to have commenced the practicing by applicants before submitting the application.     This condition is rather different from that of the condition laid under the Rule 55.     However, the condition of the Rule 54(1) is affirmative to just prove by any means to have commenced the practicing, such as, submitting a certificate obtained from the Senior ITP or from any IT Assessee only, whose “Returns of Income” have been prepared & submitted by the applicant.     

Further, when the condition of “and has been practicing before income tax authorities for not less than one year on the date of application” laid under the Rule 55 pertains exclusively to the Clause (vii) of Subsection (2) of Section 288 of the Act only, the stubborn Income Tax Authorities seldom agree that.    Further, the words “… before the Income Tax Authorities ...” in the condition laid under the Rule 55 are undoubtedly providing an undue advantage to the Income Tax Authorities to easily reject the applications.     To convince such stubborn authorities, there is only a way of starting practice by the aspirants at a place quite opposite to the doors of the Office of the Income Tax Department.

In this regard, it should be noted that the Subsection (2) of Section 288 of the Income Tax Act, 1961 has been very clearly & gracefully drafted showing & specifically mentioning with the independent essential prerequisite imposed in each & every clause under in each & every clause.     However, the Rule 55 of Income Tax Rules, 1962 has been in a clumsy form, which has been causing confusion to the IT Authorities and that has tend to harm applicants under Clause (v) and (vi).     In fact, particularly this aspect of clumsiness prevailed in Rule 55 is not only leading to misinterpretation and thereby preventing the educated unemployed youth to enter (as first generation ITPs) into the dignified profession of Income Tax Practicing, but also leading to lay heavy burden on Government Exchequer by way of introducing TRP Scheme, etc.

- Syeda Khaderbi, M.A., M.Com.,

[Elsewhere in this article, I have inadvertently referred the name & title of “Taxmann’s”, because while writing this article I had picked up this book from our library almost mechanically and there are no ulterior motive in so referring that title. There are many other publishers who are publishing books on Income Tax & committing similar errors.   Further, I hereby request all the publishers of the Income Tax Rules, 1962 to publish the “ACTION POINTS” with due corrections as suggested, after seeking due permission from the concerned Authorities].  


The above article has been contributed on our portal by Mrs. Syeda Khaderbi. She can be contacted at syedakhaderbi@gmail.com

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