New TCS Law – Aggressive or balanced

Finance Act, 2020 amended provisions relating to TCS w.e.f. 1-10-20. On 29.9.20, CBDT issued guidelines for its implementation and on 30.9.20, CBDT issued a press release clarifying its applicability. In a nutshell, following may be summarized:-

• TCS shall be applicable only on the receipt exceeding Rs. 50 lakh by a seller from a particular buyer.
• TCS is made applicable to only those sellers whose turnover exceeds Rs. 10 crore in last Financial Year.
• TCS not applicable on export of goods.
• TCS is not an additional tax but is in the nature of advance income-tax/TDS for which the buyer would get the credit against his actual income tax liability
• Seller of goods shall collect tax @ 0.1 per cent (0.075% up to 31-3-2021)
• TCS shall be applicable only on the amount received on or after 1.10.20. Amount received to include advance received for sale as well as consideration for sale made before 1.10.20.
• No adjustment on account of sale return or discount or indirect taxes including GST is required to be made for TCS computation/collection.

Is it not too aggressive for CBDT to make TCS applicable on advance received even though the provision of 206C(1H) uses the term sale consideration. Further, to collect TCS on a value inclusive of GST, makes the government look like it is reeling under a tax revenue target pressure while making the laws. Ignoring the sales return scenario altogether for collection of TCS is perhaps another indication of the same. The only silver lining to the dark cloud is perhaps the rate of TCS and the ambit of its applicability.  

Important Statutory developments

• CBDT has amended Form 3CD, Form 3CEB & ITR 6 applicable for AY 2020-21. The changes are related to reporting of information about concessional tax regime opted by the person under sections 115BAA, 115BAB, 115BAC & 115BAD. The board has also notified Form 10-IF to exercise option under section 115BAD.

• CBDT authorizes Income-tax authorities to upload information relating to GST return in Form 26AS.

• CBDT issues clarification of various issues for smooth implementation of TDS u/s 194-O (for ecommerce operators) and new TCS provision u/s 206(1C) wef 1^st October 2020. Inter alia, it is clarified that TCS u/s 206(1H) to be applied on sale consideration inclusive of GST.

• CBDT has issued a press release to further clarify the doubts regarding applicability of section 206C(1H). It has clarified that TCS is required to be collected when yearly receipts exceeds Rs. 50 lakhs that too in respect of the amount received after 01-10-2020.

• CBDT has clarified that there is no requirement of scrip wise reporting for day trading and short-term sale or purchase of listed shares in the Income Tax return unless eligible for benefit of grandfathering.

• CBDT notifies Faceless Appeal Scheme, 2020 applicable w.e.f. September 25, 2020.

• CBDT to give effect to the Faceless Appeal Scheme, 2020, has notified the jurisdiction of income tax authorities to facilitate smooth functioning of the regional faceless appeal centers.

• CBDT allows ‘insurer’ to make application for grant of non-deduction of tax certificate u/s 195(3)

• CBDT prescribes parameters for compulsory selection of returns for Complete Scrutiny during FY 20-21 and conduct of assessment proceedings in view of the Faceless Assessment Scheme, 2020 as well as difficulties amidst COVID pandemic.

• Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 is notified after it received the assent of the President on 29.09.2020. The Bill was passed by the Parliament in September 2020.

Important Judicial Precedents

• Payment for additional Floor Space Index (FSI) is not a business/ commercial right eligible for 25% depreciation as an intangible asset u/s 32(1)(ii). Depreciation @10% as applicable to building can be allowed.
  V. Hotels Ltd. (Bom HC)

• Where assessee paid subscription or membership fee to club on behalf of its employees, said amount was to be allowed as deduction u/s 37(1).
  Apollo Tyres Ltd (Ker HC)

• Capital gains taxable even if land is classified as agricultural land in revenue records, but is too small for carrying out agricultural operations.
  Jairam G Kimmane (Bang ITAT)     

• Department could not keep search action in abeyance for a long period of almost one year from date of last authorisation more so, when after a period of one year nothing was searched.
  Mum ITAT – Narang International Hotels (P.) Ltd

• B/F short-term capital loss not to be set off against exempt capital gains; ITAT allowed carry forward of losses.
  Mum ITAT – Goldman Sachs Investments (Mauritius) Ltd.