Notification No.:50/2017-S.O.1866(E):Arm’s Length Price for International Transactions and specified domestic transactions under section 92C for A.Y.2017-18 and A.Y. 2018-19

The Central Government in Notification No. 50/2017 dated 9th June, 2017 has issued the variations for which the price for the international  transactions will be considered as arm’s length price for the purposes of section 92C.

The notification reads as follows:

S.O. 1866(E).—In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961)(hereinafter referred to as the ‘Act’), read with proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm’s length price determined under section 92C of the Act and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one per cent. of the latter in respect of wholesale trading and three per cent. of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for assessment year 2017-18 and assessment year 2018-19.

Explanation.- For the purposes of this notification, “wholesale trading” means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:—
(i) purchase cost of finished goods is eighty per cent. or more of the total cost pertaining to such trading
activities; and
(ii) average monthly closing inventory of such goods is ten per cent. or less of sales pertaining to such trading

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Settled view on Deemed Dividend u/s 2(22)(e)

The CBDT vide Circular No.19/2017 dated 12/06/2017 provided a settled view on deemed dividends u/s section 2(22)(e).

The section reads as follows:

Section 2(22) clause (e) of the Income Tax Act, 1961 (the Act) provides that “dividend” includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profit.

Based on the various decisions in courts namely CIT vs. Creative Dyeing & Printing Pvt. Ltd., CIT vs Amrik Singh,  CIT, Agra vs Atul Engineering Udyog  the board has settled that  trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word ‘advance’ in section 2(22)( e) of the Act.

It also provided that henceforth appeals may not be filed on this ground.

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Section 194IB: TDS on Payment of rent by certain Individuals or Hindu Undivided Family.

The section provides for deduction of TDS@5% on rent paid by an Individual or HUF to a resident individual exceeding Rs.50,000/- a month.

The section reads as follows:

194-IB. (1) Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per cent of such income as income-tax thereon.

(2) The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

Explanation.—For the purposes of this section, “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.]

The CBDT vide. G.S.R. 561(E) has prescribed the rules and form to be filled for deduction under this section.

It is prescribed that TDS under Section 194-IB of the Act shall be paid within a period of 30 days from the end of the month in which deduction is made and shall be accompanied by challan-cum-statement in Form No. 26QC. The tax shall be paid electronically within prescribed time. The person deducting TDS under Section 194-IB shall furnish certificate in Form No. 16C to the payee within 15 days from the due date of furnishing challan-cum-statement in Form No. 26QC. Further, Form No. 16C i.e. certificate for tax deducted at source and Form No. 26QC i.e. challan-cum-statement of deduction of tax under Section 194-IB of the Act have been prescribed.

Further, the notification has also prescribed rules and format for Form 26QC and Form 16C.

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Cost Inflation Index with 2001-02 as base year announced for the purposes of Capital Gains

Central Government  vide S.O. 1790(E) has notified Cost Inflation Index with base year as 2001-02 for the purposes of Capital Gains calculation under The Income Tax Act, 1981.

Sl. No. Financial Year Cost Inflation Index
1 2001-02 100
2 2002-03 105
3 2003-04 109
4 2004-05 113
5 2005-06 117
6 2006-07 122
7 2007-08 129
8 2008-09 137
9 2009-10 148
10 2010-11 167
11 2011-12 184
12 2012-13 200
13 2013-14 220
14 2014-15 240
15 2015-16 254
16 2016-17 264
17 2017-18 272

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TDS and ITR Filing in case both parents are dead of minor

In Notification no.5 dated 29th of May, 2017 CBDT has clarified that in case of minor whose both parents are dead in such cases then such minor’s income is taxable in the hands of the minor.Further, the TDS deducted and interest earned shall be reported against the PAN of the minor and Income tax returns shall be  filed by the minor through  his/her guardian.

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Extension of Date of furnishing of SFT under Section 285BA of the Act (F.No.279/Misc./M-63/2017-ITJ)

The CBDT has extended the date of filing of Statement of Financial Transactions by reportable entities of reportable transactions as specified in Rule 114E of Section 285BA of The Income Tax Act,1961 for A.Y. 2017-18 FROM 31st May, 2017 to 30th June, 2017 by issuing an order under section 119 of the act dated 31st May, 2017.

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Press Release by CBDT in regard to SFT under Section-285BA.

CBDT has issued circular dated 26/05/2017 giving clarification on furnishing of Statement of Financial Transactions(SFT) & SFT Preliminary Response

Section 285BA of the Income-tax Act, 1961 requires furnishing of a statement of financial transaction (SFT) for transactions prescribed under Rule 114E of the Income-tax
Rules, 1962. The due date for filing such SFT in Form 61A is 31st May 2017.

The press release In case there are reportable transactions for the year, the reporting person/entity is required to register with the Income Tax Department and generate Income Tax Department Reporting Entity Identification Number (ITDREIN) The same can be generated by logging-in to the e-filing website with the log in ID used for the purpose
of filing the Income Tax Return of the reporting person / entity. Entity having PAN can take only PAN based ITDREIN. Entity having TAN can generate an ITDREIN only when such TAN’s Organisational PAN is not available.

The registration of reporting person (ITDREIN registration) is mandatory only when at least one of the Transaction Type is reportable. A functionality “SFT Preliminary Response” has been provided on the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year.

The entire cicular has been provided below for reference:

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