Draft Report of Justice R. V. Easwar (Retd) Committee To Simplify The Provisions Of The Income-tax Act, 1961

The ten member Committee which was constituted on 27th October, 2015 under the Chairmanship of Justice R.V Easwar (retd.) former Judge, Delhi High court has given its draft report of recommendations for “simplification of the Income-tax Act” and “promoting ease of doing business”. The report contains 27 suggestions for amendments to the Income-tax Act and 8 recommendations for reform through administrative instructions.

All stakeholders have been requested to e-mail their comments/views on the proposals to taxviewsindia@gmail.com or send by post to Room No 1604, 16th Floor, Block E-@, Pratyaksha Kar Bhavan, DR. S.P.M Civic Centre, Jawaharlal Nehru Marg, New Delhi 110002. The Comments/views should reach the committee not later than 23rd January, 2016. After receiving the feedback, the committee will finalise the report and submit it to the Central Government before 31st January, 2016.


EXECUTIVE SUMMARY Of RECOMMENDATIONS MADE BY THE INCOME TAX SIMPLIFICATION COMMITTEE

Recommendations to check or curb litigation/facilitate speedier disposal

(a) 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), sur-plus to be taxed as long-term capital gains.

(b) 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 ex-ceed the amount claimed. Recommendation for issue of executive instruc-tions that no interest be disallowed if source of investment is directly relatable to taxable income.

(c) Amendments to Section 50C to bring it in line with Section 43C so far as it relates to agreements for sale of property executed prior to the date of reg-istration of sale deed, fixing the sale price.

(d) 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.

(e) No re-opening or revision of assessments under sections 147 and 263 respectively merely on the basis of audit objections.

(f) Amendment to Section 255(3) to enhance the monetary limit for SMC cases before the Tribunal to rupees one crore from the present rupees 15 lakhs.

(g) 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.

(h) 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 disallow-ance is made ad hoc on assumptions or without evidence.

(i) Deletion of section 143(1D) – Avoiding undesirable delay in issue of re-funds

(j) Making of fresh claim during assessment proceedings

(k) Stay of disputed demand under certain circumstances

(l) Prescribing time limit for disposal of petitions for waiver of penalty and interest under sections 273A, 273AA and 220(2A)

Recommendations to promote ease of doing business and simplify procedures:

(a) 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%.

(b) Simplification & rationalisation of the provisions of Section 197 and Rules for lower or non-deduction of TDS, aimed to improve ease of doing business.

(c) 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

(d) Proposal for certain amendments in rule 37BA to obviate hardships arising in relation to claiming of credit for tax deducted under section 199

(e) 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

(f) Rationalisation of the provisions for maintenance of books of account and tax audit.

(g) A presumptive income scheme for professionals

(h) Deferment of ICDS

(i) Exemption to non-residents not having Permanent Account Number (PAN), but who furnish their Tax Identification Number (TIN) in their country of resi-dence from the applicability of TDS at a higher rate under section 206AA

(j) Amendment to section 234C to provide relief where a new business is started during the financial year

(k) Grant of timely refund with interest and also providing for payment of higher interest in case of delayed refund

(l) Rationalization of the provisions relating to set off of refunds due to an assessee

(m) Release of property attached under section 281B on submission of bank guarantee


6 comments on “Draft Report of Justice R. V. Easwar (Retd) Committee To Simplify The Provisions Of The Income-tax Act, 1961
  1. CA.V.Anantaraman., B.Com., F.C.A says:

    TDS Provisions – Transport Contractors
    1) As per Provision of 194 C of the Income Tax Act, 196,1 though a transport contractor is not required to deduct tax at source, obtaining PAN of the owner of the vehicle and informing Income Tax Department is mandatory. Unfortunately, many of the drivers do not divulge the PAN of owner of the vehicle which results in wordy duel between the parties concerned. Hence it is suggested that it should be made mandatory to specify permanently in the vehicle itself, the name, address and PANo of the owner like Registration number of the vehicle, FC date etc.
    2) In majority of the cases, interaction is only between Broker, Driver and the Assessee. It is also difficult to elicit information as to the number of transport vehicles owned by an individual making him liable for Tax Deducted at Source U/s 194C of the Income Tax Act, 1961. This item of information should be added as one of the specified Financial Transactions to be reported in Form 61A by the concerned RTO who issues fitness certificate so that it will come in AIR information. It is suggested that necessary amendments to see 285 BA of the Income Tax Act, 1961 and Rule 114E of the Income Tax Rules 1962 be made to solve the Problem of person responsible for paying any sum to a Transport operator.
    3) Provisions of See 40A(3) of the Income Tax Act, 1961 as to Payment of Lorry Freight is very harsh especially in respect of payment to drivers who come from long distance. The drivers should be considered as agent of the consignee and clause (k) of Rule 6DD should cover such Contingencies or else specific provisions should be made to overcome the Problem.

  2. G C Das says:

    Provisional attachment under section 281B comes to an end after assessments are completed. However this fact is not known to the SRO. On many occasions he forces the assessee to bring a clearance from AO which is cumbersome. Assessing officer should make mention of the same in the attachment order or in case the assessment is over he should communicate the same to the SRO immediately so that hardship is avoided.

    ii) Regarding audit object some concerete action is required. Most of the objections are not in conformity with the judicial precedents.This unnecessarily throws enoromous work on the authority. Being an audit objection they are apprehensive. There should be monthly meetings at senior level to sort out the difficulty and drop the objections. It will not pose difficulty as there is an audit wing in the department headed by Commissioner.

    iii)Application of provisions of section 14A should be streamlined. Like Evidence Act some examples in simple lanuage should be appended to the section to limit the application of section. Rule 8D should be simplified

  3. N. DEVANTHAN says:

    iT IS TRUE THE AMOUNT OF SURPLUS CANNOT DETERMINE OR CHANGE THE NATURE OF INCOME-but ONE MUST APPRECIATE THE RECOMMENDATION IS AIMED AT /PROPELLED BY TO CURB LITIGATION HENCE PEDANTIC VIEW SHOULD NOT BE SEEN

  4. N Devanathan, Adv. says:

    a)blood curdly provisions like 40 (a) (ia) should be removed

    b) TDS provisions, terms Royalty, discount commission, and similar payments must be defined by way of examples from the case law

    c) prior period expenditure when it is taken earlier year automatic application of section 155 and consequential carry forward of profit/loss
    d) TP provision should not be used as a vehicle for tax collection rather than to look at tax avoidance

    e) CIT (A) be outsourced for upto particular monetary limit to kill the Himalayan arrears The Frecnh system of this type was adminisered in Pondicerry before independence

    Rule 8D (2) doe not reflect the correct measurement of expenditure and large investments companies suffers crores and thus legal pound of flesh is extracted

    d) shome committee report that the assesee should be treated as customer must be put into practice

    e) repeatedly various celebrities in tax law accountablity on the department which is lacking

    d) Appelas against 119 (2)(b) 9r (c) should be vest with
    ITAT

    e) section 80AC is nothing pickpocket of relief granted by the parliament – It is to be clarified that time limit u/s139 (1) also applies to time limit provided under section 139 (4) of the Act. CBDT is getting report from the CIT on application and such reports are always biased

    f) Trust must be permitted to carry on business subject to small percentage of tax / or by way of presumptive tax

    g)Departmnt on account of audit objections treating current assets/goods used for trade as “intangible asset” which gives raise to litigations (see case of T.V. Cahnnels)

    h)In some cases prosecution is launched for non payment of interest which has undertaken by the buyer of the property without any rhyme or reason (one case is pending in chennai)

    i) Some sort of lok adalat type be performed for one time settlement of all litigation matters so as to reduce the heavy load of the Courts ( Courts have less number of judges)

    j) Finally the committee reports should not be used to put under dust bin and political considerations should not weigh for implementation

  5. D.D.PHANSE says:

    As I understand, it is discretion of ITO only after 5 lac he may treat it otherwise than assessee’s claim. Till 5 lac it will be mandatory for him to accept the claim of assessee.

  6. sunil gupta says:

    in caSE OF SHARES SHOWN AS INVESTMENT

    It is absurd to say that if surplus is upto 5 lakhs then it is to be treated as short term capital gains otherwise as business income

    the amount of surplus cannot determine or change the nature of income earned

    example if 5 lacs st gains if 5.01 lakhs then business income

    totally illogical

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