IT - Ease of Doing Business and Reducing Litigation - Justice Easwar Committee releases draft report
THE Government appointed a Committee on 27th October 2015 headed by Justice RV Easwar, former President of ITAT with the following broad objectives: (DDT 2713 - 28 10 2015)
i) to study and identify the provisions/phrases in the Income Tax Act which are leading to litigation due to different interpretations;
ii) to study and identify the provisions which are impacting the ease of doing business;
iii) to study and identify the areas and provisions of the Act for simplification in the light of the existing jurisprudence;
iv) to suggest alternatives and modifications to the existing provisions and areas so identified to bring about predictability and certainty in tax laws without substantial impact on the tax base and revenue collection.
The Committee has been given a term of one year from the date of its constitution. The first batch of recommendations is to be submitted by 31st January, 2016.
The Committee has prepared a set of recommendations to be placed in the public domain with a view to seeking the response of the stakeholders.
Some of the important recommendations are:
Recommendations to promote ease of doing business and simplify procedures-
1. Enhancement and rationalisation of the threshold limits and reduction of the rates of TDS. TDS rates for individuals & HUFs to be reduced to 5% as against the present 10%.
2. Simplification & rationalisation of the provisions of Section 197 and Rules for lower or non-deduction of TDS, aimed to improve ease of doing business.
3. Proposal for certain amendments in rules 28, 28AA and 28AB to resolve practical difficulties faced by persons granted certificates for lower deduction under section 197
4. Proposal for certain amendments in rule 37BA to obviate hardships arising in relation to claiming of credit for tax deducted under section 199
5. Proposal for certain amendments in rule 30 and 31 in relation to time and mode of payment of TDS and filing of statement of TDS under the provisions of section 200
6. Rationalisation of the provisions for maintenance of books of account and tax audit.
7. A presumptive income scheme for professionals
Recommendations to check or curb litigation/facilitate speedier disposal
1. Amendments to provide that in cases where shares are shown as capital assets and held for one year or less, the Assessing Officer will not re-characterise the surplus on sale as business income, provided the surplus in a year is rupees five lakhs or less; in case they are held for a period more than one year, and shown as capital assets (and not as stock-in-trade), surplus to be taxed as long-term capital gains.
2. Amendments to Section 14A to provide that (i) dividend received after suffering dividend-distribution tax and share income from firm suffering tax in the firm's hands will not be treated as exempt income and no expenditure will be disallowed as relatable to them; (ii) expenditure disallowed shall not exceed the amount claimed. Recommendation for issue of executive instructions that no interest be disallowed if source of investment is directly relatable to taxable income.
3. Amendment to Section 56(2)(viib)(ii) to eliminate taxation of the purchaser of the property on the amount of difference between the sale price and the stamp-duty value.
4. No re-opening or revision of assessments under sections 147 and 263 respectively merely on the basis of audit objections.
5. Amendment to Section 255(3) to enhance the monetary limit for Single Member cases before the Tribunal to rupees one crore from the present rupees 15 lakhs.
6. Amendment to Section 254(2) to reduce the time-limit for rectification of orders of the Tribunal from the present four years to 120 days.
7. No penalty for concealment (i) if assessee has taken a bona fide view of a provision enabling a claim etc. or on the basis of any judicial ruling of any Tribunal, High Courts or Supreme Court and (ii) if any addition or disallowance is made ad hoc on assumptions or without evidence.
8. Deletion of section 143(1D) - Avoiding undesirable delay in issue of refunds
9. Prescribing time limit for disposal of petitions for waiver of penalty and interest under sections 273A, 273AA and 220(2A)
Set off of Refunds due to an assessee:
Adjustment of Refunds due to assessees against erroneous demands shown outstanding in their cases causes great heartburning. Even where the assessee lodges his objection on the CPC Portal pointing out that the demand sought to be adjusted against the refund was not outstanding and therefore is being erroneously adjusted, there is no remedy by which the CPC can take note of the same.
In view of the above, Section 245 is proposed to be suitably amended so as to provide that no set off of refund under this section shall be made by any income-tax authority without giving intimation in writing to such person of the action proposed to be taken under this section and without dealing with the objections if any, filed by such person in response to such intimation served on him.
Moreover, it is settled by several judicial pronouncements that where any demand outstanding against the assessee relates to a point, which stands squarely covered by a decision in favour of the assessee, such demand cannot be adjusted against any refund due to the assessee. Courts have logically explained in this regard that the assessee in such a case would have been undisputedly entitled to stay on recovery of such demand and merely because the Department is in possession of the assessee's funds due to him as his legitimate refund, the same cannot be adjusted against such a demand.
The revenue cannot defend such erroneous adjustments merely on the ground that the system does not provide for any such mechanism. Suitable systems shall be required to be put in place to provide remedy keeping in mind that the assessee's money are being adjusted without the authority of law.
SYSTEM ISSUES
The IT software needs to be strengthened to ensure that the following issues are resolved:
1. Tax Deducted at Source reflected in 26AS not reflected in OLTAS
2. TDS reflected in 26AS and OLTAS are not reflected in Income Tax Department System (ITD).
3. Even self-assessment tax and advance tax challans, are at times, not reflected in ITD and OLTAS for many years.