CBDT Issues Explanatory Notes to Finance (No.2) Act, 2014
CBDT has yesterday issued Explanatory Notes to the Provisions of the Finance (No.2) Act, 2014 which came into effect on 6.8.2014. What is the purpose of explaining the Finance Act six months after enactment? But the CBDT does that every year. Maybe it takes about six months for the budget makers to understand the budget. Some of the explanations are given below:
Capital gains exemption in case of investment in a residential house property: The sub-section (1) of section 54 of the Income-tax Act, before its amendment by the Act, inter alia, provided that where capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house, then, the amount of capital gains to the extent invested in the new residential house is not chargeable to tax under section 45 of the Income-tax Act.
The provisions contained in sub-section (1) of section 54F of the Income-tax Act, before its amendment by the Act, inter-alia, provided that where capital gains arises from transfer of a long-term capital asset, not being a residential house, and the assessee within a period of one year before or two years after the date of transfer, purchases, or within a period of three years after the date of transfer constructs, a residential house, then, the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax.
Certain courts had interpreted that the exemption is also available if investment is made in more than one residential house. The benefit was intended for investment in one residential house within India. Accordingly, sub-section (1) of section 54 of the Income-tax Act has been amended to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India.
Similarly, sub-section (1) of section 54F of the Income-tax Act has been amended to provide that the exemption is available if the investment is made in one residential house situated in India.
Enabling CBDT to relax provisions relating to levy of fee under section 234E of the Income-tax Act: As per the existing provisions of the Income-tax Act, a deductor/collector is required to furnish periodical tax deducted at source (TDS)/tax collected at source (TCS) statements (quarterly) containing the details of deduction/collection of tax made during the quarter by the prescribed due date. Delay in furnishing of TDS/TCS statement results in delay in granting of credit of TDS/TCS to the deductee/collectee and consequently leads to delay in issue of refunds to the deductee/collectee or raising of infructuous demand against the deductee/collectee.
In order to provide effective deterrence against delay in furnishing of TDS/TCS statement, the Finance Act, 2012 inserted section 234E in the Income-tax Act to provide for levy of fee of Rs.200 per day for late furnishing of TDS/TCS statement from the due date of furnishing of TDS/TCS statement to the date of furnishing of TDS/TCS statement. The levy of fee under section 234E of the Income-tax Act has proved to be an effective tool in improving the compliance in respect of timely submission of TDS/TCS statement by the deductor/collector. However, the levy of fee under section 234E of the Income-tax Act could not be waived / reduced even in the cases where the delay in filing of TDS/TCS statement was due to circumstances beyond the control of the deductor/collector.
For removing the genuine hardship faced by the deductors/collectors due to levy of fee mandated by the section 234E of the Income-tax Act, section 119 (2)(a) of the Income-tax Act has been amended to enable the CBDT to relax the provisions of the section 234E of the Income-tax Act in suitable cases.
Power of Survey
The provisions contained in section 133A of the Income-tax Act enable the Income-tax authority to enter any premises in which business or profession is carried out for the purposes of survey. An income-tax authority acting under this section may impound and retain in his custody any books of account or documents inspected by him during the course of survey. However, prior to its amendment by the Act, the said section provided that such income-tax authority shall not retain in his custody any such books of account or document for a period exceeding ten days (exclusive of holidays) without obtaining the approval of the Chief Commissioner or Director General therefor, as the case maybe.
Section 133A has further been amended to provide that an income-tax authority may, for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions of Chapter XVII-B or Chapter XVII-BB, as the case may be, enter any office, or a place where business or profession is carried on, within the limits of the area assigned to him, or any such place in respect of which he is authorised for the purposes of the said section by such income-tax authority who is assigned the area within which such place is situated where books of account or documents are kept.
It has also been provided that an income-tax authority while acting under sub-section (2A) of section 133A, may place marks of identification on the books of account or other documents inspected by him and take extracts and copies thereof. He may also record the statement of any person which may be useful for, or relevant to, any proceeding under the Income-tax Act.
Mode of acceptance or repayment of loans and deposits: e-loans allowed. The provisions contained in section 269SS of the Income-tax Act, before its amendment by the Act, inter-alia, provided that no person shall take from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft, if the amount of such loan or deposit or aggregate of such loans or deposits is twenty thousand rupees or more. Similarly, the provisions of section 269T of the Income-tax Act, before amendment made by the Act, inter-alia, provided that no loan or deposit shall be repaid otherwise than by an account payee cheque or account payee bank draft, if the amount of such loan or deposit together with interest or the aggregate amount of such loans or deposits together with interest, if any payable thereon, is twenty thousand rupees or more.
In the present times many banking transactions take place by way of internet banking facilities or by use of payment gateways. Accordingly, the provisions of the said sections 269SS and 269T have been amended to provide that acceptance or repayment of any loan or deposit by use of electronic clearing system through a bank account shall not be prohibited under the said sections if the other conditions regarding the quantum etc. are satisfied.
CBDT Circular No. 01/2015., Dated: January 21, 2015