CBDT quizzes senior officers over cancellation of Tata Trusts' registration

The Central Board of Direct Taxes (CBDT) has summoned senior officials, who were till recently handling the case linked to cancellation of Tata Trusts registration. The tax department is seeking explanation from these officials over the cancellation date to find out if there were lapses.

Tata Trusts, the largest shareholder in the group's holding company Tata Sons with 66 per cent stake had last month moved the Income Tax Appellate Tribunal (ITAT) to challenge the tax department order on cancelling the registration . On October 31, the department had cancelled the registration of six trusts operating under Tata Trusts citing violation of norms applicable to charitable institutions.

The contentious issue that Tata Trusts is challenging is the date of the order, that makes it liable to pay a much higher amount of tax under the new tax provision introduced in June 2016 concerning charitable trusts. The Trusts is of the view that the cancellation should apply retrospectively as it had offered to surrender the registration in 2015, about one year before the new tax provision became effective.

According to sources in the know, CBDT wants officials, who were the in charge of the matter during that period and also post that, to explain the rationale of not resolving the case in the stipulated time period. The officials have been asked to give a rationale for not acting on the Trusts' registration in 2015 after a show-cause notice issued the same year, said two persons privy to the development.

The CBDT is also trying to ascertain whether the Tata Trusts case triggered the special provision in the regulation, one of the sources quoted above said.

A separate wing deals with the taxation aspects of charitable trusts. But, the Tata Trusts case has been lying unresolved for years. It was shifted to the assessment wing of the tax department only in 2018. Accordingly, it was re-opened for tax assessment.

The tax department will prepare the response for the appellate tribunal, where it's contesting Tata Trusts, after getting inputs from the concerned officials.

So far, the department is of the view that giving up the status of a charitable organisation is not valid as it's up to the CBDT to cancel a registration.

In the October order, the tax department had invoked a new provision in the I-T Act--Section 115 (TD). Under this, a trust whose registration is cancelled is required to pay tax on its accreted (past exempted income). The section deals with additional income tax if the trust converts or merges into a non-charitable trust, or if it gets dissolved and fails to transfer its assets/liabilities.

The concerned entities are Jamsetji Tata Trust, RD Tata Trust, Tata Education Trust, Tata Social Welfare Trust, Sarvajanik Seva Trust, and Navajbai Ratan Tata Trust. While these are not the main shareholding trusts, they hold 39,000 shares in Tata Sons, the parent company of the group, a person in the know said. Sir Dorabji Tata Trusts and Sir Ratan Tata Trust are the main entities of Tata Trusts.

The six trusts, in this case, received shares in the form of donation from Tata Sons between 1974 and 1990. This was a violation of the Section 13 of the I-T Act. Following observations by the Comptroller & Auditor General of India (CAG) over the Trusts investments in equity shares, Tata Trusts had approached the tax department to express its desire to surrender the registration of a charitable organisation in early 2015.

The tax demand on Tata Trusts is based on the accumulation of income of the last three assessment years--2015-16, 2016-17 and 2017-18. The asset value of Tata Trusts has risen significantly as most of these investments were made decades ago.

Tax Woes

I-T introduced a special provision to tax certain categories of trusts in 2016.

Invoked the provision in the October 2019 order cancelling the registration of Tata Trusts.

Trusts moved ITAT, challenging the order seeking the cancellation retrospectively.

Tata Trusts had offered to give up charitable trust status in 2015.

According to I-T dept, tax liability to be decided on the date of cancellation and not on the date of surrendering.

New rule says accreted income to be taxed at maximum marginal rate in certain matters.

Deadline to link PAN with Aadhaar extended till December 31: CBDT

The deadline to link permanent account number (PAN) with Aadhaar has been extended till December 31, a CBDT order said Saturday.

Earlier, the deadline was September 30.

This is the seventh time that the government has extended the deadline for individuals to link their PAN with Aadhaar.

The Central Board of Direct Taxes (CBDT) has extended the date for linking PAN and Aadhaar from September 30 to December 31 and a notification has been issued on Friday in this connection, the policy-making body for the Income-Tax Department said.

It is now mandatory to link the two unique IDs for income tax purposes.

The Supreme Court, in September last year, had declared the Centre's flagship Aadhaar scheme as constitutionally valid and held that the biometric ID would remain mandatory for the filing of I-T returns and allotment of PAN.

Section 139 AA (2) of the Income Tax Act says that every person having PAN as on July 1, 2017, and eligible to obtain Aadhaar, must intimate his Aadhaar number to tax authorities.

Aadhaar is issued by the Unique Identification Authority of India (UIDAI) to a resident of India and PAN is a 10-digit alphanumeric number allotted by the IT Department to a person, firm or entity.

Monetary limits won't matter in organised tax evasion, says CBDT

The Central Board of Direct Taxes (CBDT) has permitted tax officials to file appeals against orders in tribunals and courts in case of organised tax evasion — on the basis of merit — even if earlier norms do not permit these filings. Last month, the CBDT had doubled the monetary limits of tax disputes for filing appeals by the income-tax department in high courts and the Supreme Court. The limits for filing appeals in the Income Tax Appellate Tribunal was more than doubled.

However, several references have been received by the board, which state that organised tax-evasion scams are noticed through bogus gains and losses on penny stocks, and that the department is unable to pursue the cases in higher judicial fora given the enhanced monetary limits.

It has been reported that in many cases, tribunals and high courts have recognised the unique modus operandi involved in such scams, and have passed judgements in favour of the revenue. However, in cases where some appellate fora have not given due consideration to the position of law or facts as investigated by the department, there is no remedy available with the department for filing further appeal in view of the prescribed monetary limits.

'High-risk remittance' data under Income Tax department's scanner

The reporting and certification requirement in case of payments to non-residents has come under the Income Tax department’s scanner. The Central Board of Direct Taxes (CBDT) has directed tax sleuths to verify the “high-risk remittance” data and initiate action in the necessary cases.

The CBDT has formulated a set of revised risk parameters for selecting high-risk remittance data from forms 15CA/CB, required to be furnished by an individual if they make any payment to a non-resident, which are taxable and the payment amount during the year exceeds Rs 5 lakh. The apex body wants relevant information to be made available to the assessing officer by August 15.

This follows a 66-page action plan drawn up by the CBDT, where an aggressive strategy was outlined to nab tax dodgers. The CBDT had circulated a strategy paper for tax officials and laid special emphasis on a number of critical areas such as litigation management, widening the tax base, verification of non-permanent account number data, implementation of equalisation levy and the processing of the foreign account tax compliance act (FATCA) data.

“The major part of collections in international taxation charges come from tax withheld from remittances made to non-residents. The strategy to augment revenue through this requires a combination of proactive measures related to enforcement, capacity building (external and internal) and leveraging of available information. Experience gained from the verification of remittance data carried out in the past years has highlighted the need to apply more focused and effective risk parameters in selecting high-risk data for verification. Equally important is the need to process more current information and gradually progress to a state where high-risk information is identified, processed and acted upon on a real-time basis, the CBDT action plan stated.

The Income Tax Act empowers the CBDT to capture information in respect of payments to non-residents, whether taxable or not. To further curb the misuse of certain tax provisions around non-residents, the apex body wants proper checking of their liaison offices in India.

“Form 49C is a strong tool for procuring information about the activities of Liaison Offices, so as to verify the claim of the non-resident that his/her activities in India are not taxable,” the CBDT noted, adding that there is a need for standard operating procedures for effective utilisation of this information. Further, the CBDT asked sleuths to focus on proper implementation of equalisation levy, a new tax, which is withheld at the time of payment to a non-resident service provider. At present, access to the form concerned is available only with the assessing officer of the payer/remitter who is normally an Indian resident. However, the levy actually relates to income of the non-resident recipient and needs to be correlated with the gross receipts of that non-resident, the CBDT said.

Besides, the apex body of direct taxes wants sleuths to initiate action on defaults in immovable property transactions based on annual information returns. For this, the CBDT has suggested matching data on sale of immovable properties over threshold limit with transactions on which tax deducted at source (TDS) has been deducted and accordingly generate list of defaulters.

“It has been observed in several cases that the buyer of the property deducts only at the rate of 1 per cent of TDS on purchase of immovable property from NRIs, which actually requires TDS at 20 per cent. These are high-risk cases, which need to be taken up on a priority basis. Action may be taken in such cases to augment revenues, CBDT said. Other than these, the CBDT wants the tax officer to use more effective tools for detection of non-compliance in TDS and identify defaults. The apex body wants each officer to do at least 20 survey operations during the year. The survey cases may be identified based on the names in the prosecution list, companies showing negative trend in payment, habitual late filers and cases of sick units with negative operating margins.

The CBDT believes that promotion of voluntary compliance through non-intrusive tax administration and strengthening the mechanism for tax deterrence are the cornerstones of the present tax policy and administration. Achievement of these objectives is possible only by way of collection, collation and verification of vital information about financial transactions, by the income-tax department.

To make this effective, CBDT wants tax officials to access to credible and processed information through “Insight Portal” , a reporting portal where reporting entities furnishes the statement of financial transactions (SFTs). CBDT urges those concerned to ensure complete and correct filing of the SFTs. Further, the Special Pilot Projects to identify areas, which can be of vital importance for deepening and widening of the tax base, verification of non-PAN data and the processing of the FATCA, continue to be extremely important functions of the department, said CBDT.

CBDT also asked to cover those sectors, which have not been covered adequately and preferably cases of Statutory Regulatory Orders, Co-operative banks and authorised forex dealers for capturing more PAN cards. According to CBDT, various initiatives were taken to increase the tax base and the number of new return filers, which have shown appreciable results.

CBDT chairman P C Mody pulls up tax officials over pending complaints

Central Board of Direct Taxes (CBDT) Chairman P C Mody has hauled up income-tax (I-T) officials for not resolving grievances in a timebound manner.

In a communication to principal chief commissioners sent on Friday, the CBDT chief said pending cases are a cause of concern and point to a “lackadaisical attitude”.

Citing the pending cases, Mody said despite efforts by the board, it is seen that the number of pending grievances on the Centralized Public Grievance Redress And Monitoring System (Cpgrams) stood at 2,647, of which 885 are pending for over 30 days. Cpgrams is a flagship initiative by the Centre for reforming the governance. Similarly, e-nivaran, an ambitious facility launched by the CBDT for online redress of taxpayers, shows 34,026 cases as pending for resolution.

The platform deals with issues related to refunds, income-tax returns (ITRs) and PAN among others as part of its initiative to reduce instances of harassment of the public when it comes to complaints related to the I-T department. The apex body has mandated the tax department to resolve issues within 30 days.

The CBDT letter also said the redress of grievances is a major aspect of the department’s public relation exercise as also one of the primary focus areas of the government and it is monitored at highest level.

CBDT issues new norms for compounding of offences under black money law

The Central Board of Direct Taxes (CBDT) issued new norms for compounding of offences on Friday. These will replace the old guidelines.

The new guidelines have exclusion provisions, under which, offences done under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Act, 2015, the Benami Transactions (Prohibition) Act, 1988 cannot be compounded in normal cases. This includes money laundering cases. Compounding means that the authorities agree to not prosecute offenders in return for a consideration.

Amit Maheshwari, the managing partner at Ashok Maheshwary & Associates, said, “This clearly shows the government's intent to not allow any breather to such erring tax payers." The new norms will be effective from Monday.

CBDT raises alarm as direct tax collection stands at Rs 10.21 trillion

With four days remaining before the current financial year ends, the Central Board of Direct Taxes (CBDT) has sent a strongly worded letter to senior income-tax officials, warning them of an “alarming situation”.
As of Tuesday, direct tax collection was Rs 10.29 trillion, which is 12.5 percent up compared to the same period a year ago. The revised Budget target for 2018-19 is Rs 12 trillion. 
“Progress based on the online tax accounting system (to calculate dues with interest) has been reviewed and only 85.1 per cent has been collected as of March 23,” goes the letter dated March 26 to principal chief commissioners of income tax.
The CBDT said: “A head-wise analysis of regulator assessment tax (recovery from arrears and current demand) indicated a worsening trend of negative growth in regular collection at minus 6.9 per cent, as against a minus 5.2 per cent in mid-March.”
“The board has discussed strategies through various communications with you (I-T officials) and it was expected that by this time, your strategies would have succeeded, resulting into improved collections. However the figures of collection give a different account,” CBDT said. 
It has asked for urgent action, especially with respect to recovery of arrears and current demand, to achieve the collection target.
“The increase of Rs 50,000 crore in the interim Budget 2019-20 has made the task of achieving the revised target difficult. However, the department has been consistently putting efforts to maximise revenues and make up for the shortfall.
However at the current pace, the possible shortfall is Rs 50,000-60,000 crore,” said an I-T official. He estimated the collection would reach between Rs 11.3 and Rs 11.5 trillion.
The department was pinning hope on advance tax collection in the fourth quarter, ending March 15. It is learnt to have requested banks to credit tax deduction at source (TDS) for the fourth quarter by March 31.
As of March 11, growth in TDS was 18 per cent to Rs 4.44 trillion, while self-assessment tax rose 6.5 per cent to Rs 83,465 crore. However, the regular assessment tax (recovery from arrears and current demand) showed a 5.4 per cent fall, compared to the same period a year before.