Reporting requirement of cash deposit between in Bank & Post office A/c between 1.04.2016 to 09.11.2016. (Income Tax 1st Amendment Rules,2017, CBDT Notification No.2/2017, Dated 6th January 2017)

		Reporting requirement	Due date
1.	Persons having an account with banking company or a cooperative bank to which Banking Regulation Act 1949 applies.	Permanent Account Number  (PAN) or Form 60 (Form of declaration to be filed by a person who does not have either a permanent account number or General Index Register Number and who makes payment in cash in respect of transaction specified in clauses (a) to (h) of rule 114B)	28th February 2017
2.	Where the aggregate of cash deposit between 9th  Novmber  2016 to 30th December 2016 is more than two lakh fifty thousand.	Form 61 (Form of declaration to be filed by a person who has agricultural income and is not in receipt of any other income chargeable to income-tax in respect of transactions specified in Rule 114B)	15th January 2017

Banks & post offices to submit info about cash deposits in the following cases (Section 114E):-

1.     Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to—

(i)                 twelve lakh fifty thousand rupees or more, in one or more current account of a person; or

(ii)             two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.

2.     Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.1.

(Income Tax 1^st Amendment Rules,2017, CBDT Notification No.2/2017, Dated 6^th January2017)

Revised Income Tax Returns - Post De-Monetisation of Currency

It is clarified by the Income Tax department that the provision to file a revised return of income u/s 139(5) of the Act has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income.

By Press Release, Dated 14 December 2016, Income tax department brought to the notice of taxpayer that any instance coming to the notice of Department which reflects manipulation in the amount of income, cash-in-hand, profits etc. and fudging of accounts may necessitate scrutiny of such cases so as to ascertain the correct income of the year and may also attract penalty/prosecution in appropriate cases as per provision of law.

Under Section 139 (5) of the Income Tax Act, 1961, Revised Return can only be filed if any person,

(i)                who has filed a return under Section 139(1) of the Act or

(ii)             in response to notice u/s 142(1), discovers any omission or any wrong statement therein.

Post demonetization of the currency on 8th November, 2016, some taxpayers may misuse this provision to revise the return-of-income filed by them for the earlier assessment year, for manipulating the figures of income, cash-in-hand, profits etc. with an intention to show the current year’s undisclosed income (including the unaccounted income held in the form of demonetized currency in current year) in the earlier return.

All banking companies and cooperative banks required to file AIR report for all cash deposits during the period 09th November, 2016 to 30th December, 2016 in one or more current account of person in excess of Rs 12.5 lakhs or 2.5 lakhs in one or more accounts (other than current account) of a person (Income Tax (30th Amendment) Rules, 2016, (Notification No.104/2016, Dated 15th November 2016))

Now all banking companies and cooperative banks required to file AIR report as required under section 285BA of income tax Act 1961 for all cash deposits during the period 09^th November, 2016 to 30^th December, 2016 in one or more current account of person in excess of Rs 12.5 lakhs or 2.5 lakhs in one or more accounts (other than current account) of a person.

Further quoting of permanent Account Number (PAN) is compulsory in case of cash deposit exceeding fifty thousand rupees during any one day and aggregating deposit more than two lakh fifty thousand rupees during the period of 9^th November, 2016 to 30^th December 2016.

CBDT notifies Income Tax (30^th Amendment) Rules, 2016.

By these rules CBDT amend :-

1. Entry No10 in Rule 114B (Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A) of Income tax Rules, 1962.

S.No.	Nature of transaction	Value of transaction
“10	Deposit with,- (i) a banking company or a co- operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Office.	Cash deposits,- (i) exceeding fifty thousand rupees during any one day; or (ii) aggregating to more than two lakh fifty thousand rupees during the period 09th November, 2016 to 30th December, 2016.”.

Earlier it is read as

S.No.	Nature of transaction	Value of transaction
“10	Deposit with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).	Deposits in cash exceeding fifty thousand rupees during any one day.

2. Rule 114E (Furnishing of statement of financial transaction).

(i) in sub-rule (2), in the Table, New entry inserted after serial No.11 :-

S.No.	Nature of transaction	Class of person (reporting person)
“12	Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to  ̶ (i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or (ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.	(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).”;

(ii) in sub-rule (5), the following proviso shall be inserted, namely:-

“Provided the statement of financial transaction in respect of the transactions listed at serial number (12) in the Table under sub-rule (2), shall be furnished on or before the 31st day of January, 2017.”.

Compensation received by the land owners for the land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ('RFCTLAAR Act'), which has been exempted from levy of income-tax under RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 (Income Tax, Circular No. 36 of 2016, dated 25th October 2016.)

It is clarified by the CBDT that compensation received in respect of of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961.

Income Tax Act 1961

Under the existing provisions of the Income-tax Act 1961 ('the Act'), an agricultural land which is not situated in specified urban area, is not regarded as a capital asset. Hence, capital gains arising from the transfer (including compulsory acquisition] of such agricultural land is not taxable. Finance (No, 2] Act, 2004 inserted section 10(37) in the Act from 01.04.2005 to provide specific exemption to the capital gains arising to an Individual or a HUF from compulsory acquisition of an agricultural land situated in specified urban limit, subject to fulfilment of certain conditions. Therefore, compensation received from compulsory acquisition of an agricultural land is not taxable under the Act (subject to fulfilment of certain conditions for specified urban land).

RFCTLARR Act

The RFCTLARR Act which came into effect from 1st January, 2014, in section 96, inter alia provides that income-tax shall not be levied on any award or agreement made [except those made under section 46) under the RFCTLARR Act Therefore, compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFCTLARR Act), is exempted from the levy of income-tax.

As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land.

The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961.

Chapter VI A deduction allowed on enhanced profits (due to certain disallowance made by assessing officer) (Income Tax Circular No. 37/2016, dated 2nd November 2016)

It has been clarified by the CBDT that deduction under chapter VIA allowed on enhanced profits.

In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits.

Chapter VI-A of the income tax Act, 1961 provides for deduction in respect of certain incomes.

It’s settled by CBDT that Chapter VI-A deduction allowed on such enhanced profits and appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon.

The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed; the deduction needs to be allowed on the enhanced profits.

Some illustrative cases upholding this view are as follows:

If expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80-IB of the Act. This view was taken by the courts in the following cases:

Income-tax Officer - Ward 5(1) vs. Keval Construction, Tax Appeal No. 443 of 2012, December 10, 2012, Gujarat High Court - NJRS-2012-LL-1210-45.
Commissioner of Income-tax-IV, Nagpur vs. Sunil Vishwambharnath Tiwari, IT Appeal No. 2 of 2011, September 11, 2015, Bombay High Court - NJRS-2015-LL-0911-22

 If deduction under section 40A(3) of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of the Act. This view was taken by the court in the following case:

Principal CIT, Kanpur vs. Surya Merchants Ltd., I.T. Appeal No. 248 of 2015, May 03, 2016 Allahabad High Court. - NJRS-2016-LL-0503-77

The above views have attained finality as these judgments of the High Courts of Bombay, Gujarat and Allahabad have been accepted by the Department.

TDS applicability on lump sum lease premium paid for acquisition of long term lease. (CBDT Circular No. 35, Dated : 13th October 2016)

It is clarified by the CBDT that TDS not applicable on lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property. Such payments are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore, such payments are not liable for TDS under section 194-I of the Act.

TDS required to be deducted at prescribed rate from payment of any income by way of rent under section 194-I of the Income Tax Act. “Rent has been defined as 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 machinery or plant or equipment or furniture or fittings”.

In the case of The Indian Newspaper Society (ITA No. 918 & 920/2015), the Hon'ble Delhi High Court has ruled that lease premium paid by the assessee for acquiring a plot of land on an 80 years lease was in the nature of capital expense not falling within the ambit of Section 194-I of the Act. In this case, the court reasoned that since all the rights easements and appurtenances in respect of the said land were in effect transferred to the lessee for 80 years and since there was no provision in lease agreement for adjustment of premium amount paid against annual rent payable, the payment of lease premium was a capital expense not requiring deduction of tax at source under section 194-I of the Act.

Further, in the case Foxconn India Developer Limited (Tax Case Appeal No. 801/2013), the Hon'ble Chennai High Court held that the one-time non-refundable upfront charges paid by the assessee for the acquisition of leasehold rights over an immovable property for 99 years could not be taken to constitute rental income in the hands of the lessor, obliging the lessee to deduct tax at source under section 194-I of the Act and that in such a situation the lease assumes the character of "deemed sale". The Hon'ble Chennai High Court has also in the cases of Tril Infopark Limited (Tax Case Appeal No. 882/2015) ruled that TDS was not deductible on payments of lump sum lease premium by the company for acquiring a long-term lease of 99 years.

In all the aforesaid cases, the Department has accepted the decisions of the High Courts and has not filed an SLP. Therefore, the issue of whether or not TDS under section 194-I of the Act is to be made on lump sum lease premium or one-time upfront lease charges paid for allotment of land or any other properly on long-term lease basis is now settled in favour of the assessee.