Mazars Tax Update | Edition 23.20

August 2020

This newsletter is a weekly compilation of most interesting and recent news related to tax.

Direct Tax News

Deadlines for filing IT return for F.Y.2018-19 (A.Y. 2019-20) extended to 30th September 2020

Notification No. 56/2020/ F. No. 370142/23/2020-TPL; dated 29th July 2020

The Central Board of Direct Taxes (CBDT) extended the due date for filing the belated and revised return of income for Assessment Year (A.Y.) 2019-20 to 30th September 2020.

CBDT provided relief to senior citizens for payment of self-assessment tax for F.Y. 2019-20 (A.Y. 2020-21)

The CBDT announced relief to senior citizens for payment of self-assessment tax. Earlier relaxation provided was that individuals having self-assessment tax liability exceeding Rs one lakh in F.Y. 2019-20 can file their returns by 30 November this year against the earlier requirement of July 31. However, they were required to pay the tax by 31 July otherwise interest at the rate of one percent per month was to be charged.

Now, CBDT has notified that senior citizens can pay part of their taxes by 31 July so that their remaining tax liability is no more than Rs one lakh. Interest will not be charged if they pay the remaining tax by November 30.

Faceless e-assessments are expected to be completed by September 2020

Sh. S K Gupta, the Pr. Chief Commissioner of Income-Tax and Member, Central Board of Direct Taxes (CBDT), said that they have targeted to complete all e-assessments cases by mid-September. The scheme of faceless e-assessment that eliminates physical interface between an assessing officer and an assessee was announced by the Finance Minister in the 2019 budget speech as a step towards transparent tax administration and is being done for the first time this year. He stated that the work has picked up since July, after having addressed all the issues related to infrastructure, manpower, hardware, and software.

Income-tax authorities to share information with the Competition Commission of India

Notification No. 57/2020-Income Tax dated 30th July 2020

The CBDT authorized the Income Tax Authority to share information or details in its possession with the Competition Commission of India (CCI). However, it is clarified that only relevant and precise information will be shared after forming an opinion that the furnishing of such information is necessary to enable the CCI to perform its functions under the law being administered by it. The CCI has also been asked to maintain absolute confidentiality in respect of information being furnished

Judicial Pronouncements

Payables include amounts paid for determining disallowance u/s 40(a)(ia)

Shree Choudhary Transport Co vs. ITO; Civil Appeal No(s). 7865/2009

The facts of the case are that the taxpayer had entered into a contract with Aditya Cement Limited for transporting cement to various places in India. The payments were made to the taxpayer by Aditya Cement Limited after due deduction of the TDS. The taxpayer in turn hired trucks that belonged to different operators/owners and made payments to them without deducting TDS from the money received by him and the balance amount was shown as commission income.

The Supreme Court held that Section 194C(1) clearly says that – “Any person responsible for paying any sum to any resident…….” and the assessee firm was responsible for making payment to the truck owners operators as the operator/owner of that truck became the sub-contractor and all the requirements of Section 194C came into operation. Disallowance u/s 40(a)(ia) is not limited to the amount outstanding (‘payable’) but also to expenses that had already been incurred and ‘paid’ by the taxpayer

Freebies to the doctors by pharmaceutical, medical and other healthcare sector are allowed as a business expense

Medley Pharmaceuticals Ltd vs. CIT (ITAT Mumbai; ITA No.2344/Mum/2018)

The Mumbai Tribunal observed that the IMC (Professional Conduct, Etiquettes & Ethics) Regulation, 2002 deals with and only regulates the conduct of registered medical practitioners and not the pharmaceutical companies or allied healthcare sector. The enlargement of the scope of MCI regulation to the pharmaceutical companies by the CBDT is extending provision of the Income-tax Act or under the MCI Regulations, beyond its scope.

Therefore, the Hon’ble Tribunal held that freebies given to doctors by pharmaceutical companies and other medical and the healthcare sector would not attract “Explanation” to Sec. 37 of the Act as is allowed as deduction.