Tuesday, December 27, 2016

CBDT issues clarifications on ‘Direct Tax Dispute Resolution Scheme, 2016

The Direct Tax Dispute Resolution Scheme, 2016 incorporated as Chapter X of the Finance Act,
2016 provides an opportunity to tax payers who are under litigation to come forward and
settle the dispute. The provisions of the Scheme have been clarified vide Circular No.33 of 2016
dated 12.09.2016. Subsequently, further queries have been received from the field authorities
and other stakeholders. Now the Govt. has considered the queries and decided to clarify the
same in the form of questions and answers.

Click here to view clarifications on ‘Dispute Resolution Scheme, 2016’

Sellers shouldn’t aggregate all cash transactions to consider Rs 2 lakh limit of AIR reporting: CBDT

Provisions of Rule 114E(2) provides that persons liable to tax audit should report transaction of cash sales of goods or services to Income-Tax Department in AIR. Such reporting requirement is there only when receipt of cash payment exceeds two lakh rupees. Doubts were raised whether all cash transactions would be aggregated to consider the aforesaid limit of Rs 2 lakhs.

The CBDT vide Press Release, dated 22-12-2016 has clarified that aforesaid cash transactions did not require aggregation.The reporting requirement in AIR is on receipt of cash payment exceeding Rs 2 lakh for sale of goods or services per transaction.

Editor’s comment:

Seller is required to report details of cash sales in AIR only when transaction value of such sales exceeds Rs 2 lakhs. Suppose, if any seller has made cash sales of 20 transactions at Rs 20 lakhs then he is not required to report such transactions if value of each transaction does not exceed Rs 2 lakhs.

No disallowance of service tax just because it is paid by service provider out of its own pocket


a) Assessee was engaged in business of broking in Government and other securities. As clients of assessee did not pay service tax to it, assessee paid service tax out of its own resources and claimed deduction of same under section 37(1).

b) The Assessing Officer disallowed claim for deduction holding that obligation to pay service tax was on customer/client and same could not be shifted to assessee. The High Court held as under:

1) It is undisputed that the obligation under the Finance Act, 1994 to pay the service tax is on the assessee being the service provider. This obligation has to be fulfilled by the service provider whether or not it receives the service tax from its clients/customers.

2) Non-payment of such service tax into the treasury would normally result in demand and penalty proceedings under the Finance Act, 1994. Therefore, the payment is on account of expediency, exclusively and wholly incurred for the purposes of business, therefore, deductible under section 37(1). - [2016] 76 taxmann.com 211 (Bombay)

Small traders accepting e-payments can save 46% tax under new presumptive tax regime: FinMin

If a small trader makes his transactions in cash on a turnover of Rs. 2 Crore, then his income under the presumptive scheme will then be presumed to be Rs. 16 lakhs @ 8% of turnover. After availing of Rs. 1.5 lakhs of deduction under Section 80C, his total tax liability will be Rs. 2, 67,800. However, if he shifts to 100% digital transactions under the new announcement made, his profit will be presumed to be at Rs. 12 lakhs @ 6% of turnover, and after availing of Rs. 1.5 lakhs under Section 80C, his tax liability now will be only Rs. 1,44,200. Here, digital transactionincludes payment received by Cheque or through any other digital means.

Apart from making a tax saving by migrating to banking mode, the small businesses would be able to build their books which may also help them get bank loans easily. Also, if transactions are carried out through banking channels, then anybody having annual turnover up to Rs. 66 lakhs will have zero tax liability after availing the benefit of Section 80C, after amendment of this new rate structure.