Analysis of Direct Tax

Proposal of Finance Bill-2022

Budget
COMP CT
By CA Bhanwar Borana

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 Preface
This e-booklet highlights the key proposals put forth by the
Honorable Finance Minister in her Union Budget 2022-23. This e-
booklet is for private circulation amongst students and professional.
This e-booklet is intended to give overview of the proposals put
forth and is neither to be construed as comprehensive nor as to
render taxation, legal, economic or financial advice. This e-booklet
should not be relied upon for taking any actions/ decisions on the
contents of the e-booklet and proper professional/ legal advice
should be sought.

Further, this e-booklet contains only the proposals and

amendments as given in the Finance Bill, 2022, which may be
modified before it receives the approval and assent of the
Parliament and the President so it is not relevant for students for
CA/CS/CMA Examination purpose. For examinations always
Finance Act is applicable.

The material used in the preparation of this e-booklet has been

sourced from various sources including the speech of the Finance
Minister, websites of the Government and other publicly available
information.

While all reasonable care has been taken in preparation of this e

booklet, we accept no responsibility for any errors it may contain or
for any omissions or otherwise or for any loss, howsoever caused or
sustained, by the person who relies on it.

Budget
COMP CT
By CA Bhanwar Borana
 Index
Tax Rates for Assessment Year 23-24

Taxation in Case of Virtual

Digital Asset (VDA)

Profit and Gain from Business and

Profession

Capital Gain

Income from Other Sources

Deduction under Chapter VI-A

Return Filing and Assessment

Procedure

TDS / TCS

Taxation of Trust and Institutions

Other Proposed Amendments

 Tax Rates for Assessment Year 23-24

There has been no change in the rates of income tax for all categories of
Assessees in comparison to A.Y. 2022-23.

PROPOSED AMENDMENT

1. In case of Individual, HUF, AOP, BOI, AJP maximum surcharge limit is

15% on tax calculated on LTCG 112A, STCG 111A and Dividend
Income. From AY 23-24 it is proposed to include LTCG 112 also, so
from AY 23-24 maximum surcharge limit of 15% applicable on all
type of LTCG.

2. In the case of co-operative societies, there is change in the rate of

surcharge. The amount of income-tax shall be increased by a
surcharge at the rate of 7% of such income-tax in case the total
income exceeds one crore rupees but does not exceed ten crore
rupees. Surcharge at the rate of 12% of shall continue to be levied in
case of a co-operative society having a total income exceeding ten
crore rupees.

3. In case of domestic company, the rate of income-tax shall be 25% of

the total income, if the total
turnover or gross receipts of
the previous year 2020-21
does not exceed C400 crore
rupees and in all other cases
the rate of Income-tax shall be
30% of the total income.

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4. Section 115JC of the Act, provides for the alternate minimum tax
(AMT) payable by co-operative societies, which is at the rate of
18.5%. However, the Minimum Alternate Tax (MAT) rate for
companies has been reduced to 15%. Therefore, in order to provide
parity between co-operative societies and companies, it is
proposed to reduce the AMT rate at which co-operative societies
are liable to pay income-tax to 15%.

5. Section 115BAB of the Act provides that the new domestic

manufacturing company is required to be set up and registered on
or after 01.10.2019, and is required to commence manufacturing or
production of an article or thing on or before 31st March, 2023 to
claim benefit of 15% Tax Rate. It is proposed to amend section
115BAB so as to extend the date of commencement of
manufacturing or production of an article or thing, from 31st March,
2023 to 31st March, 2024. This amendment will apply in relation to
the AY 2022-23 and subsequent assessment

Budget CA Bhanwar Borana

COMP CT
02
 Taxation in Case of Virtual Digital Asset

BACKGROUND
Virtual digital assets have gained tremendous popularity in recent times
and the volumes of trading in such digital assets has increased
substantially. Further, a market is emerging where payment for the
transfer of a virtual digital asset can be made through another such asset.
Accordingly, a new scheme to provide for taxation of such virtual digital
assets has been proposed in the Bill.

MEANING OF VDA [SECTION 2(47A]

“virtual digital asset” means––
(a) any information or code or number or token (not being Indian currency
or foreign currency), generated through cryptographic means or
otherwise, by whatever name called, providing a digital representation
of value exchanged with or without consideration, with the promise or
representation of having inherent value, or functions as a store of value
or a unit of account including its use in any financial transaction or
investment, but not limited to investment scheme; and can be
transferred, stored or traded electronically;

(b) a non-fungible token (NFT) or any

other token of similar nature, by
whatever name called;

(c) any other digital asset, as the

Central Government may, by
notification in the Official
Gazette specify:

Provided that the Central

G o v e r n m e n t m a y, b y
notification in the Official
Gazette, exclude any digital
asset from the definition of
virtual digital asset subject to
such conditions as may be
specified therein.

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TAXATION OF VDA [ SECTION 115BBH] – APPLICABLE FROM AY 23-24

(1) Where the total income of an assessee includes any income from
the transfer of any virtual digital asset, the income-tax payable shall
be the aggregate of––
(a) the amount of income-tax calculated on the income from
transfer of such virtual digital asset at the rate of thirty percent.;
and
(b) the amount of income-tax with which the assessee would have
been chargeable, had the total income of the assessee been
reduced by the income referred to in clause (a).

(2) Notwithstanding anything contained in any other provision of this

Act,––
(a) no deduction in respect of any expenditure (other than cost of
acquisition) or allowance or set off of any loss shall be allowed to
the assessee under any provision of this Act in computing the
income referred to in clause (a) of sub-section (1); and
(b) no set off of loss from transfer of the virtual digital asset
computed under clause (a) of sub-section (1) shall be allowed
against income computed under any other provision of this Act
to the assessee and such loss shall not be allowed to be carried
forward to succeeding assessment years.

TDS IN CASE OF VDA [ SECTION 194S]- APPLICABLE FROM 1ST JULY,

2022

(1) Any person responsible for paying to a resident any sum by way of
consideration for transfer of a VDA, shall, at the time of credit of such
sum to the account of the resident or at the time of payment of such
sum by any mode, whichever is earlier, deduct an amount equal to 1%
of such sum as income-tax thereon:

Provided that in a case where the consideration for transfer of virtual

digital asset is––

(a) wholly in kind or in exchange of another virtual digital asset, where

there is no part in cash; or
(b) partly in cash and partly in kind but the part in cash is not sufficient to
meet the liability of deduction of tax in respect of whole of such
transfer, the person responsible for paying such consideration shall,
before releasing the consideration, ensure that tax has been paid in
respect of such consideration for the transfer of virtual digital asset.

04
(2) The provisions of sections 203A and 206AB shall not apply to a
specified person.

(3) Notwithstanding anything contained in sub-section (1), no tax shall be

deducted in a case, where––
(a) the consideration is payable by a specified person and the value
or aggregate value of such consideration does not exceed
50,000 during the financial year; or
(b) the consideration is payable by any person other than a specified
person and the value or aggregate value of such consideration
does not exceed 10,000 during the financial year.

(4) Notwithstanding anything contained in this Chapter, a transaction in

respect of which tax has been deducted under sub-section (1) shall
not be liable to deduction or collection of tax at source under any
other provisions of this Chapter.

(5) Where any sum referred to in sub-section (1) is credited to any

account, whether called “Suspense Account” or by any other name,
in the books of account of the person liable to pay such sum, such
credit of the sum shall be deemed to be the credit of such sum to the
account of the payee and the provisions of this section shall apply
accordingly.

(6) If any difficulty arises in giving effect to the provisions of this section,
the Board may, with the prior approval of the Central Government,
issue guidelines for the purposes of removing the difficulty.

(7) Every guideline issued by the Board under sub-section (6) shall be
laid before each House of Parliament, and shall be binding on the
income-tax authorities and on the person responsible for paying the
consideration on transfer of such virtual digital asset.

(8) Notwithstanding anything contained in section 194-O, in case of a

transaction to which the provisions of the said section are also
applicable along with the provisions of this section, then, tax shall be
deducted under sub-section (1).

05
 Explanation. –For the purposes of this section “specified person”
means a person,–

(a) being an individual or a HUF, whose total sales, gross receipts or

turnover from the business carried on by him or profession
exercised by him does not exceed one crore rupees in case of
business or fifty lakh rupees in case of profession, during the
financial year immediately preceding the financial year in which
such VDA is transferred;
(b) being an individual or a Hindu undivided family, not having any
income under the head “Profits and gains of business or
profession”.'.

ANALYSIS AND COMMENTS

1. The proposed section 115BBH seeks to provide that where the total
income of an assessee includes any income from transfer of any
VDA, the income tax payable shall be the aggregate of the amount of
income-tax calculated on income of transfer of any virtual digital
asset at the rate of 30%.

2. However, no deduction in respect of any expenditure (other than

cost of acquisition) or allowance or set off of any loss shall be allowed
to the assessee under any provision of the Act while computing
income from transfer of such asset.

3. Further, no set off of any loss arising from transfer of virtual digital
asset shall be allowed against any income computed under any other
provision of the Act and such loss shall not be allowed to be carried
forward to subsequent assessment years.

4. Further, in order to widen the tax base from the transactions so

carried out in relation to these assets, it is proposed to insert section
194S to the Act to provide for deduction of tax on payment for
transfer of virtual digital asset to a resident at the rate of one per cent
of such sum.

5. Further, in order to provide for taxing the gifting of virtual digital

assets, it is also proposed to amend section 56 of the Act to, provide
that the expression “property” shall include virtual digital asset. If gift
received from non relative of VDA more than 50,000 shall be taxable
under IFOS.

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COMP CT
By CA Bhanwar Borana 06
 Profit and Gain from Business and Profession

EDUCATION CESS NOT ALLOWED AS EXPENSE [Section 40]

Certain taxpayers have been claiming deduction on account of 'cess' u/s
40 of the IT Act claiming that 'cess' has not been specifically mentioned
in the provisions of Section 40(a)(ii) and therefore, cess ought to be an
allowable expenditure. Such assessees placed strong reliance on
judgements such as Sesa Goa Limited vs. JCIT (BOM HC).

It is proposed to include an Explanation retrospectively in the Act itself to

clarify that for the purposes of this sub-clause, the term “tax” includes and
shall be deemed to have always included any surcharge or cess, by
whatever name called, on such tax.

This amendment will take effect retrospectively from 1st April, 2005 and
will accordingly apply in relation to the assessment year 2005-06 and
subsequent assessment years.

ISSUE OF DEBENTURE IS NOT TREATED AS ACTUAL PAYMENT

[Section 43B]

Certain taxpayers are claiming deduction u/s 43B on account of

conversion of interest payable on an existing loan into a debenture on the
ground that such conversion is a constructive discharge of interest liability
and, therefore, amounted to actual payment which has been upheld by
several Courts. As per SC in case of M.M. Aqua Technology Ltd (2021)
issue of debenture for payment of interest is treated as actual payment.

To override above judgment, it is proposed that conversion of interest

payable under clause (d), clause (da), and clause (e) of section 43B, into
debenture or any other instrument by which liability to pay is deferred to a
future date, shall also not be deemed to have been actually paid.

This amendment will take effect from 1st April, 2023 and will accordingly
apply in relation to the assessment year 2023-24 and subsequent
assessment years.

07
EXPENDITURE PROHIBITED UNDER ANY LAW [Section 37]

Expenditure incurred in respect of any offence or which is prohibited

under any law is not allowable. However, under certain judicial decisions
expenditure of compounding nature, benefits provided by pharma
companies to doctors by way of travel, hospitality, gifts and conference
etc. is held to be allowable.

It is proposed that the following expenditure will not be allowed on the

ground that it constitutes an offence/prohibition under any law:

Expenditure incurred for an offence under or which is prohibited by

any law in or outside India;

Any benefit or perquisite provided to a person and acceptance of

such benefit or perquisite by such person which is in violation of any
law or rule or regulation or guidelines governing the conduct of such
person;

Compounding fees in or outside India.

This amendment will take effect from 1st April, 2022.

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COMP CT
By CA Bhanwar Borana 08
 Capital Gain

ECOMPUTATION OF CAPITAL GAINS IN CASE OF GOODWILL [Sec. 50]

Bill proposes to amend Section 50 to insert an Explanation to clarify that

for the purposes of the said section 50, reduction of the amount of
goodwill of a business or profession, from the block of asset in accordance
with sub-item (B) of item (ii) of sub-clause (c) of clause (6) of Section 43
shall be deemed to be transfer.
This amendment will take effect from 1st April, 2021 and will accordingly
apply in relation to the assessment year 2021-22 and subsequent
assessment years.

DEFINITION OF THE TERM “SLUMP SALE”

The Finance Act, 2021, the definition of “slump sale” was amended to
expand its scope to cover all forms of transfer under slump sale. However,
inadvertently, in the last sentence there is reference to the word “sales”
instead of “transfer”
Therefore, it is proposed to carry out consequential amendment by
amending the provision of clause (42C) of section 2 of the Act, to
substitute the word “sales” with the word “transfer”.

This amendment
will take effect
from 1st April,
2021 and will
accordingly
apply in relation
to the
assessment
year 2021-22
and subsequent
assessment
years

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By CA Bhanwar Borana 09
 Income from Other Sources

DIVIDEND RECEIVED FROM FOREIGN COMPANIES [Sec 115BBD]

Presently, dividend received by domestic companies from specified

foreign company is taxed at the concessional rate of 15%.

It is proposed to withdraw the concessional rate of tax. Accordingly, the

dividend income would be taxed at normal income tax rate as applicable
to the domestic companies.
This amendment will take effect from 1st April, 2023 and will accordingly
apply in relation to the assessment year 2023-24 and subsequent
assessment years.

EXEMPTION OF AMOUNT RECEIVED FOR MEDICAL TREATMENT AND

ON ACCOUNT OF DEATH DUE TO COVID-19 [Sec 56(2)(x)]

Following shall NOT be taxable :-

(i) any sum of money received by an individual, from any person, in
respect of any expenditure actually incurred by him on his medical
treatment or treatment of any member of his family, in respect of any
illness related to COVID-19 subject to such conditions, as may be
notified by the Central Government in this behalf, shall not be the
income of such person;

(ii) any sum of money received by a member of the family of a deceased

person, from the employer of the deceased person (without limit), or
from any other person or persons to the extent that such sum or
aggregate of such sums does not exceed ten lakh rupees, where the
cause of death of such
person is illness relating
to COVID-19 and the
payment is, received
within twelve months
from the date of death of
such person, and subject
to such other conditions,
as may be notified by the
Central Government in
this behalf, shall not be
the income of such
person.

10
These amendments will take effect retrospectively from 1st April, 2020
and will accordingly apply in relation to the assessment year 2020-21 and
subsequent assessment years.

It is proposed to amend section 17(2) and to insert a new sub-clause in the

proviso to state that any sum paid by the employer in respect of any
expenditure actually incurred by the employee on his medical treatment
or treatment of any member of his family in respect of any illness relating
to COVID-19 subject to such conditions, as may be notified by the Central
Government, shall not be forming part of “perquisite” and its not taxable
under salary.

CASH CREDITS [Section 68]

It is proposed to amend the provisions of section 68 of the Act so as to
provide that the nature and source of any sum, whether in form of loan or
borrowing, or any other liability credited in the books of an assessee shall
be treated as explained only if the source of funds is also explained in the
hands of the creditor or entry provider.

However, this additional onus of proof of satisfactorily explaining the

source in the hands of the creditor, would not apply if the creditor is a well-
regulated entity, i.e., it is a Venture Capital Fund, Venture Capital
Company registered with SEBI.

This amendment will take effect from 1st April, 2023 and will accordingly
apply in relation to the assessment year 2023-24 and subsequent
assessment years.

EXPENDITURE FOR EARNING EXEMPT INCOME [Section 14A]

Section 14A deals with disallowance of expenditure incurred for earning

exempt income. Various courts have held that in absence of any exempt
income during the year no disallowance can be made.

To overrule the judicial decisions, it is proposed to disallow expenditure

incurred on tax free investments whether or not any exempt income is
accrued or received during the year.

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By CA Bhanwar Borana 11
 Deduction under Chapter VI-A

INCENTIVES TO NPS SUBSCRIBERS FOR STATE GOVERNMENT

EMPLOYEES [Section 80CCD]

Benefit of deduction at 14% of salary towards the contribution to NPS by

employer is now proposed to extend to State Government employees in
addition to Central Government employees.

This amendment is retrospectively applicable from AY 2020-21

NPSNATIONAL
PENSION
SCHEME

CONDITION OF RELEASING OF ANNUITY TO A DISABLED PERSON

[Section 80DD]

U/s 80DD, provide for a deduction to resident individual or HUF, in

respect of (a) expenditure for the medical treatment of a dependant,
being a person with disability; or (b) amount paid to LIC or any other
insurer or administrator or specified company in respect of a scheme for
the maintenance of a disabled dependant.

Sub-section (2) of the aforesaid section provides that the deduction shall
be allowed only if the payment of annuity or lump sum amount is made to
the benefit of the dependant, in the event of the death of the individual or
the member of the HUF in whose name subscription to the scheme has
been made.
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Sub-section (3) of the aforesaid section provides that if the dependant
with disability, predeceases the individual or the member of the HUF, the
amount deposited in such scheme shall be deemed to be the income of
the assessee of the previous year in which such amount is received by the
assessee and shall accordingly be chargeable to tax as the income of that
previous year.
In order to remove this genuine hardship, it is proposed to allow the
deduction under the said section also during the lifetime, i.e., upon
attaining age of sixty years or more of the individual or the member of the
HUF in whose name subscription to the scheme has been made and
where payment or deposit has been discontinued.

Further, it is proposed that the provisions of sub-section (3) shall not apply
to the amount received by the dependant, before his death, by way of
annuity or lump sum by application of the condition referred to in the
proposed amendment.
This amendment will take effect from 1st April, 2023 and will accordingly
apply in relation to the assessment year 2023-24 and subsequent
assessment years.

EXTENSION OF BENEFITS OF TAX INCENTIVES FOR STARTUPS

[Section 80-IAC]
The existing provisions of the section 80-IAC of the Act inter alia, provide
for a deduction of an amount equal to one hundred percent of the profits
and gains derived from an eligible business by an eligible start-up for
three consecutive assessment years out of ten years, beginning from the
year of incorporation, at the option of the assesses subject to the
condition that,-
(i) the total turnover of its business does not exceed one hundred crore
rupees,

(ii) it is holding a certificate of eligible business from the Inter-Ministerial

Board of Certification, and

(iii) it is incorporated on or after 1st day of April, 2016 but before 1st day
of April 2022.

Due to COVID pandemic there have been delays in setting up of such

units. In order to factor in such delays and promote such eligible start-ups,
it is proposed to amend the provisions of section 80-IAC of the Act to
extend the period of incorporation of eligible start-ups to 31st March,
2023.

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By CA Bhanwar Borana 13
 Return Filing and Assessment Procedure

FILING OF AN UPDATED RETURN [Section 139(8A)]

Any person, whether or not he has furnished a return u/s 139(1)/(4)/(5), for
an assessment year (herein referred to as the relevant assessment year),
may furnish an updated return of his income or the income of any other
person in respect of which he is assessable under this Act, for the PY
relevant to such AY, in the prescribed form, verified in such manner and
setting forth such particulars as may be prescribed, at any time within 24
months from the end of the RAY.

Provided that the provision of this sub-section shall not apply, if the
updated return,–
(a) is a return of a loss; or
(b) has the effect of decreasing the total tax liability determined on the
basis of return furnished u/s 139(1)/(4)/(5); or
(c) results in refund or increases the refund due on the basis of return
furnished under u/s 139(1)/(4)/(5),
of such person under this Act for the relevant assessment year.

Provided further that a person shall not be eligible to furnish an updated

return under this sub-section, where––
(a) a search has been initiated u/s 132 or books of account or other
documents or any assets are requisitioned u/s 132A in the case of
such person; or
(b) a survey has been conducted u/s 133A, other than TDS/TCS survey, in
the case such person; or
(c) a notice has been issued to the effect that any money, bullion,
jewellery or valuable article or thing, seized or requisitioned u/s 132 or
u/s 132A in the case of any other person belongs to such person; or
(d) a notice has been issued to the effect that any books of account or
documents, seized or requisitioned u/s 132 or u/s 132A in the case of
any other person, pertain or pertains to, or any other information
contained therein, relate to, such person,
for the assessment year relevant to the previous year in which such
search is initiated or survey is conducted or requisition is made and
two assessment years preceding such assessment year:

14
Provided also that no updated return shall be furnished by any person for
the relevant assessment year, where––

(a) an updated return has been furnished by him under this sub-section
for the relevant assessment year; or

(b) any proceeding for assessment or reassessment or recomputation

or revision of income under this Act is pending or has been
completed for the relevant assessment year in his case; or

(c) the Assessing Officer has information in respect of such person for
the relevant assessment year in his possession under the Smugglers
and Foreign Exchange Manipulators (Forfeiture of Property) Act,
1976 or the Prohibition of Benami Property Transactions Act, 1988 or
the Prevention of Money-laundering Act, 2002 or the Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act,
2015 and the same has been communicated to him, prior to the date
of furnishing of return under this sub-section; or

(d) information for the relevant assessment year has been received
under an agreement referred u/s 90 or 90A in respect of such person
and the same has been communicated to him, prior to the date of
furnishing of return under this sub-section; or

(e) any prosecution proceedings under the Chapter XXII have been
initiated for the relevant assessment year in respect of such person,
prior to the date of furnishing of return under this sub-section; or

(f) he is such person or belongs to such class of persons, as may be

notified by the Board in this regard.

TAX ON UPDATED RETURN [Section 140B]

A. Where no return furnished earlier:

where no return of income u/s 139(1)/(4) has been furnished by an
assessee, he shall before furnishing the updated return, be liable to
pay the tax due together with interest and fee payable under any
provision of the Act for any delay in furnishing the return or any
default or delay in payment of advance tax, along with the payment
of additional tax. The tax payable shall be computed after taking into
account the following:-
(i) Advance Tax Paid;
(ii) TDS/TCS;
(iii) any relief of tax claimed under section 89;
(iv) any relief of tax or deduction of tax claimed u/s 90 or 91 on account of
tax paid in a country outside India;
15
(v) any relief of tax claimed u/s 90A on account of tax paid in any
specified territory outside India referred to in that section; and
(vi) MAT/AMT Credit.

Such updated return shall also be accompanied by proof of payment of

such tax, additional tax, interest and fee.

B. Where return Furnished earlier u/s 139(1)/(4)/(5):

In the case of an assessee, where, return of income u/s 139(1)/(4)/(5)
(referred to as earlier return) has been furnished by an assessee, he
shall before furnishing the updated return, be liable to pay the tax
due together with interest and fee payable under any provision of
this Act for any delay in furnishing the return or any default or delay in
payment of advance tax, along with the payment of additional tax, as
reduced by the amount of interest paid under the provisions of the
Act in the earlier return,.
The tax payable shall be computed after taking into account the
following: -
(i) the amount of relief or tax, referred to in sub-section (1) of section
140A, the credit for which has been taken in the earlier return;

(ii) TDS or TCS, on any income which is subject to such deduction or

collection and which is taken into account in computing total income
and which has not been claimed in the earlier return;

(iii) any relief of tax or deduction of tax claimed u/s 90 or 91 on account of

tax paid in a country outside India on such income which has not been
claimed in the earlier return;

(iv) any relief of tax claimed u/s 90A on account of tax paid in any
specified territory outside India referred to in that section on such
income which has not been claimed in the earlier return;

(v) MAT/AMT credit, which has not been claimed in the earlier return.

The aforesaid tax shall be increased by the amount of refund, if any,

issued in respect of such earlier return.
The updated return, shall be accompanied by proof of payment of such
tax, additional tax, interest and fee.

Additional Tax
The additional tax, payable at the time of furnishing the updated return,
shall be equal to 25% of aggregate of tax and interest payable, as
determined in sub- paragraphs A or B above, if such return is furnished
after expiry of the time available u/s 139(4)/(5) and before completion of
period of 12 months from the end of the
relevant assessment year.
16
However, if such return is furnished after the expiry of 12 months from the
end of the relevant assessment year but before completion of the period
of 24 months from the end of the relevant assessment year, the additional
tax payable shall be 50% of aggregate of tax and interest payable.

It is also clarified that for the purposes of computation of “additional

income-tax”, tax shall include surcharge and cess, by whatever name
called, on such tax.

PROVISION FOR AVOIDANCE OF REPETITIVE APPEALS WHERE AN

IDENTICAL QUESTION OF LAW IS PENDING BEFORE THE HIGH
COURTS OR SUPREME COURT [Section 158AB]

Bill proposes to insert Section 158AB which provides the procedure to stall
an appeal where a collegium of Chief Commissioners or Principal
Commissioners or Commissioners is of the opinion that any question of
law arising in his case for another assessment year or in the case of any
other assessee, which is pending before the jurisdictional High Court or
the Supreme Court.

Bill further proposes that the Principal Commissioner or Commissioner

shall, on receipt of communication from the collegium, direct the
Assessing Officer to make an application to the Appellate Tribunal or the
HC, as the case may be, stating that an appeal on the question of law
arising in the relevant case may be filed when the decision on the question
of law becomes final in the other case.

The Principal Commissioner or Commissioner shall obtain acceptance

from the assessee that question of law in its case is identical to the
question in another case and it shall be bound by the decision of the High
Court or Supreme Court.

Bill further proposes to provide that when in an appeal by revenue an

identical question of law is pending before SC, no direction shall be given
under Section 158AA on or after April 1, 2022.

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REVAMPING OF FACELESS ASSESSMENT SCHEME [Section 144B]
Bill proposes to substitute the old Sub-sections of Section 144B with new
Sub-sections to provide for modified procedure of faceless assessment
for resolving the difficulties faced in its implementation. The provisions of
the proposed amendment to the said section shall apply for faceless
assessment, reassessment or re-computation under Section 143(3) or
under Section 144 or under Section 147 of the IT Act, as the case may be.

Bill also proposes the setting up of various units such as NaFAC, AU, VU,
TU and RU and ensures all communication, among the AU, RU, VU or TU
or with the Assessee or any other person with respect to the information
or documents or evidence or any other details, as may be necessary for
the purposes of making a faceless assessment shall be through the
NaFAC, between the NaFAC and the Assessee exclusively by electronic
mode.

MODIFICATION OF DEMAND NOTICE DUE TO ORDER UNDER IBC, 2016

[Section 156]
Bill proposes to allow the proper officer to modify the demand payable in
conformity with order passed by an Adjudicating Authority under the IBC.
Such notice of demand shall be deemed to be a notice under Section 156
of the IT Act and the provisions of the IT Act shall apply accordingly.
Bill further proposes to provide that where the above order is modified by
the NCLAT or the SC, as the case may be, the modified notice of demand
issued by the AO shall be revised accordingly.

PROCEEDING IN CASE OF RE-ORGANISATION OF BUSINESS

[Section 170/170A]
Presently, various courts have held that the assessment proceedings in
case of predecessor entity are invalid on account of subsequent order of
business reorganization, whereby the predecessor entity ceases to exist
in law

It is now proposed to clarify that such proceedings shall be valid and shall
be deemed to have been made on the successor entity
Presently, there is no separate time limit which allows the successor entity
to file revised return in order to give effect of re-organization

It is now proposed to enable the successor entity to file modified return

within six months from the end of the month in which the reorganization
order is issued.

Budget
COMP CT
By CA Bhanwar Borana 18
 TDS / TCS

TDS IN CASE OF TRANSFER OF IMMOVABLE PROPERTY [Section 194-IA]

Presently, tax at source at 1% is deductible if consideration paid for
purchase of immovable property 50 lakhs or more.

It is now proposed to deduct TDS at 1% of the stamp duty value or

consideration paid, whichever is higher.

This amendment shall be applicable from 01st April 2022.

TDS ON BENEFIT OR PERQUISITE OF A BUSINESS OR PROFESSION

[Section 194R]

Bill proposes to insert new Section 194R w.e.f July 01, 2022 wherein any
person who is responsible for paying any benefit or perquisite to a
resident, arising from carrying out of a business or profession, whether
convertible into money or not, shall be deducted tax in respect of such
benefits or perquisites at the rate of 10 % if such value exceeds J20,000
during the financial year.

For this Section, person responsible for providing such benefits has been
proposed to mean a person providing such benefit or in case of a company,
the company itself including the principal officer. The person who is
responsible to providing such benefits or perquisites shall ensure that tax
has been paid, if such benefit or perquisite, is wholly in kind or partly in cash
and partly in kind, and such cash is not sufficient to meet the liability of
deduction of tax.

This Section is not applicable to an individual or a Hindu undivided family,

whose total sales or receipts does not exceed J 1 crore in case of business
or J 50 Lakhs in case of profession during the financial year immediately
preceding the financial year in which such benefit or perquisite paid.

19
RATIONALIZATION OF PROVISIONS OF SECTION 206AB AND 206CCA

Bill proposes to amend Section 206AB and 206CCA to reduce period of

one year instead of two years for the purpose of definition of 'Specified
Person' to mean as a person who has not filed its return of income for the
assessment year relevant to the previous year immediately preceding the
financial year in which tax is to be deducted or collected.

It is further proposed to amend Section 206AB to reduce the applicability

of the said section in relation to transactions on which tax is deducted
under the Section 194-IA, 194-IB and 194M. As consequence, the reference
of Section 206AB in Sub-section 4 of Section 194-IB has been omitted.
These amendments will take effect from 1st April, 2022

POWER GIVEN TO A.O. FOR PASSING OF ORDER [Section 245MA]

Bill proposes that upon the receipt of order of Dispute Resolution

Committee, if specified order is a draft of proposed order, assessing officer
shall pass an order of assessment, reassessment, computation or in any
other case modify the order within a period of one month from the end of
the month in which such order is received.

The amendment shall be applicable from April 1, 2022.

Budget
COMP CT
By CA Bhanwar Borana 20
 Taxation of Trust and Institutions

APPLICATION OF VOLUNTARY CONTRIBUTION BY TRUST (Section 11)

It is proposed to that voluntary contribution for the purpose of renovation
or repairs of temple, mosque, gurudwara, church etc. [notified u/s 80G(2)]
may be considered as corpus by the trust/institution provided following
conditions are fulfilled:
Such corpus is applied only for the purpose for which it is received;

Does not apply the corpus for making contribution or donation to any
person;

amount is invested is specified mode u/s 11(5) and same is separately

identifiable

This amendment is retrospectively applicable from AY 2021-22.

It is also proposed that for the purposes above provision, where any trust or
institution has treated any sum received by it as forming part of the corpus
and subsequently any of the conditions specified above are violated, such
sum shall be deemed to be the income of such trust or institution of the
previous year during which the violation takes place.

TAXATION OF UNUTILISED INCOME OF TRUST [Section 11(2)/(3)]

Presently, where the trust/institution does not utilize accumulated income
within period of 5 years, then such income is chargeable to tax in the 6th
year.
It is now proposed to tax income remaining to be utilized in the 5th year itself.

APPLICATION ALLOWED ONLY ON ACTUAL PAYMENT [Expln to Sec 11]

Presently, the provision requires 85% of the income is to be applied.
The term application includes expenses accrued/incurred but not paid.
It is also proposed to insert an Explanation to the said section so as to
provide that for the purposes of this section, any sum payable by any trust
or institution shall be considered as application of income in the previous
year in which such sum is actually paid by it (irrespective of the previous
year in which the liability to pay such sum was incurred by the trust or
institution according to the method of accounting regularly employed by it).
It is further proposed to insert a proviso to the said Explanation to provide
that where during any previous year any sum has been claimed to have
been applied by the trust or institution, such sum shall not be allowed as
application in any subsequent previous year.

This amendment is applicable from AY 2022-23.

21
MAINTENANCE OF BOOKS OF ACCOUNT [Section 12A]

Presently, there is no specific provision for maintenance of books of

accounts by trusts/institutions covered by section 10(23C) and section 11
whose income exceeds J2,50,000.

It is proposed to provide for maintenance of specified books of accounts

for the above trusts/institutions.

CANCELLATION OF REGISTRATION [Section 12AB(4)]

Where registration or provisional registration of a trust or an institution has
been granted, and subsequently,

(a) the PCIT/CIT has noticed occurrence of one or more specified

violations during any previous year;
(b) the PCIT/CIT has received a reference from the AO under the
second proviso to section 143(3) for any previous year, or
such case has been selected in accordance with the risk
management strategy, formulated by the Board from time to time,
for any previous year,

the PCIT/CIT shall—

(i) call for such documents or information from the trust or institution or
make such inquiry as he thinks necessary in order to satisfy himself
about the occurrence or otherwise of any specified violation;

(ii) pass an order in writing cancelling the registration of such trust or

institution, after affording a reasonable opportunity of being heard,
for such previous year and all subsequent previous years, if he is
satisfied that one or more specified violation have taken place;

(iii) pass an order in writing refusing to cancel the registration of such trust
or institution, if he is not satisfied about the occurrence of one or more
specified violation;

(iv) forward a copy of the order under clause (ii) or (iii), as the case may be,
to the Assessing Officer and such trust or institution.

NGO
Registration
22
Explanation : The term “specified violation” mean the following violation :-
(a) where any income of the trust or institution has been applied other
than for the objects for which it is established; or

(b) the trust of institution has income from profits and gains of business
which is not incidental to the attainment of its objectives or separate
books of account are not maintained by it in respect of the business
which is incidental to the attainment of its objectives; or

(c) the trust or the institution has applied any part of its income from the
property held under a trust for private religious purposes which
does not enure for the benefit of the public; or

(d) the trust or institution established for charitable purpose created or

established after the commencement of this Act, has applied any
part of its income for the benefit of any particular religious
community or caste;

(e) any activity being carried out by the trust or the institution,
(i) is not genuine; or
.

(ii) is not being carried out in accordance with all or any of the
conditions subject to which it was registered; or

(f) the trust or the institution has not complied with the requirement of
any other law, as referred to in section 12AB, and the order, direction
or decree, by whatever name called, holding that such non-
compliance has occurred, has either not been disputed or has
attained finality.
Section 12AB(5) of the Act is proposed to provide that that the order under
clause (ii) or (iii) of subsection (4) shall be passed before expiry of the period
of six months, calculated from the end of the quarter in which the first notice
is issued by the PCIT/CIT, on or after the 1st day of April, 2022, calling for any
document or information, or for making any inquiry.

Proviso to Section 143(3)

Where the Assessing Officer is satisfied that any trust or institution has
committed any specified violation, as defined in Explanation to section
12AB(4), he shall,
(a) send a reference to the PCIT/CIT to withdraw the approval or
registration, as the case may be; and
(b) no order making an assessment of the total income or loss of such fund
or institution or trust or any university or other educational institution
or any hospital or other medical institution shall be made by him
without giving effect to the order passed by the PCIT/CIT.

In this case time limit to completing assessment shall be extended

accordingly.
23
CLAIM OF EXPENDITURE IN CASE OF DENIAL OF EXEMPTION [Section
13(10)]

Presently, in case of following violations by the trust/institution:

(a) Having receipts from trade, commerce etc while advancing the object
of general public utility, in excess of 20% of total receipt;
(b) Not getting books of accounts audited;
(c) Not filing return of income
the income of the trust/institution is chargeable to tax.

It is now proposed to provide that trust/institution can claim deduction of

expenditure (other than capital expenditure) from the total income
provided following conditions are fulfilled:
(i) such expenditure is not from the corpus of the trust;
(ii) such expenditure is not from any loan or borrowing;
(iii) no depreciation on those assets, whose acquisition cost is claimed as
application of income;
(iv) such expenditure is not in form of any contribution or donation to any
person.

TAXATION OF SPECIFIED INCOME AT SPECIAL RATE [Section 115BBI]

It is proposed to tax specified income at the rate of 30% in the hands of

trust/ institution without allowing any deduction of expenditure.

Specified income means:

a. Income accumulated or set apart in excess of 15% where such
accumulation is not allowed under specific provision of Act;
b. Accumulated amount is not invested in the specified mode of I
nvestment;
c. Income accumulated but not applied for the charitable purposes;
d. Income applied for the benefit of specified person;
e. Income applied for charitable purpose outside India.

Other Amendments Related to Trust

1. Provisions similar to section 11/12/13 incorporated in section 10(23C) also.
2. Exit Tax (Tax on Accreted Income) Section 115TD is now also applicable
in case of Institutions Approved u/s 10(23C)(iv)/(v)/(vi)/(via).
3. It is proposed to insert a new section 271AAE in the Act to provide for
penalty on trusts or institution which is equal to amount of income
applied for the benefit of specified person where the violation is noticed
for the first time during any PY and twice the amount of such income
where the violation is notice again in any subsequent year.

Budget
COMP CT
By CA Bhanwar Borana 24
 Other Proposed Amendments

INTEREST/DIVIDEND AND BONUS STRIPING [Section 97(7)/(8)]

Presently, the provisions in respect of non-allowance of loss incurred

through dividend/bonus stripping is applicable to units of mutual funds and
non-allowance of loss incurred through dividend stripping is applicable to
securities.

It is proposed that units of InvIT, REIT and AIF shall also be covered for the
purpose of such non-allowance of loss for bonus or dividend stripping.

Further, non-allowance of loss incurred through bonus tripping is also

proposed to be made applicable to securities.

BENEFIT OF LOSSES OF ERSTWHILE PUBLIC SECTOR COMPANY

[ Section 79]

Presently, if there is change in voting power of more than 49%, the losses
are not allowed to be carried forward and set-off.

It is now proposed to allow the benefit of set-off of losses incurred by

erstwhile public sector company to new buyer subject to the condition that
new buyer continues to hold directly or through its subsidiaries at least 51%
of voting power in aggregate.

SET-OFF OF LOSS IN SEARCH CASES [Section 79A]

Presently, there is no provision to restrict set-off of loss or unabsorbed
depreciation against income detected owing to search & seizure or survey
(other than TDS survey) though restriction is there for incomes in the nature
of unexplained cash credit or investment.

It is now proposed to provide that set-off of loss or unabsorbed

depreciation will not be allowed against undisclosed income.

PROVISIONS IN RELATION TO ASSESSMENT AND REASSESSMENT

Section 148 of the IT Act provides for issuance of notice to a person before
making the assessment, reassessment or recomputation under Section 147
of the IT Act.
Bill also proposes to insert a new proviso to the effect that approval to issue
notice under Section 148 shall not be required where the proper officer,
with the prior approval of the specified authority has passed an order under
clause (d) of Section 148A that it is a fit case to issue a notice under the said
section.
25
Bill proposes to amend Explanation 1 to Section 148 to increase the scope of
the term 'information'.

With effect from April 1, 2022, the order of assessment or reassessment or

recomputation under the IT Act in search/survey cases shall not be passed
by an Assessing Officer below the rank of Joint Commissioner, except with
the prior approval of the Additional CIT or Additional DIT or Joint
Commissioner or Joint Director.

Bill proposes to amend Section 149 to provide that no notice under Section
148 shall be issued for the relevant assessment year after three years but
prior to ten years from the end of the relevant assessment year unless the
AO has in his possession books of account or other documents or evidence
which reveal that the income chargeable to tax, represented in the form of
an asset, expenditure in respect of a transaction or in relation to an event or
occasion, an entry or entries in the books of accounts which have escaped
assessment amounting to 50 Lakhs or more.

ALLOWING COMMISSIONER (APPEALS) TO LEVY PENALTY

Bill proposes to give powers to Commissioner (Appeals) along with

Assessing Officer to levy penalty in case of following circumstances:

(I) Search has been initiated under Section 132 [Penalty u/s 271AAB];

(ii) Income determined includes any income referred to in Section 68,

Section 69, Section 69A, Section 69B, Section 69C or Section 69D for
any previous year [Penalty u/s 271AAC];

(iii) during any proceeding, if it is found that in the books of account

maintained by any person there is a false entry or an omission of any
entry which is relevant for computation of total income of such person,
to evade tax liability [Penalty u/s 271AAD].

AMENDMENT IN THE PROVISIONS OF SECTION 272A OF THE IT ACT

Bill proposes to amend the Sections 272A relating to compliance with

various obligations under the IT Act by penalizing non-compliance and
acting as a deterrent so as to increase the amount of penalty for failures
listed u/s 272A(2) to J 500 from the existing sum of J 100.

26
 Budget
COMP CT
By CA Bhanwar Borana

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