Taxation Times

February 2025

1	Introduction
2	Article: New Tax Reforms Aim to Simplify Filing Process for Individuals and Small Businesses
3	Case Laws
4	Circulars and Notifications: January 2025
5	Tax Calendar: February 2025
6	Tax News from Around the World

Introduction

by Anjali Darak

Manager - Direct Tax

As the world continues to adapt to economic shifts, tax authorities are implementing new reforms aimed at simplifying the filing process and ensuring a more efficient collection system. The latest changes, announced by the Department of Taxation, are geared towards individuals and small businesses. These updates are expected to reduce the burden of compliance and increase transparency within the tax system.

Coming to this month’s Taxation Times, here’s what we have:

An article on New Tax Reforms Aiming to Simplify the Filing Process for Individuals and Small Businesses.

Case laws from various courts & jurisdictions.

Tax Compliance Calendar – February 2025;

Circulars & Notifications—January 2025;

Tax News from around the world

We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in

Happy New Year!
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Best Regards,
UJA Tax Team

New Tax Reforms Aim to Simplify Filing Process for Individuals and Small Businesses

As tax season approaches, a wave of new reforms is set to transform the way individuals and small businesses navigate the tax filing process. With an increasing emphasis on simplifying complex procedures and enhancing efficiency, these changes aim to reduce the burden on taxpayers while ensuring smoother compliance with the law. The latest updates, introduced by the Department of Taxation, include advanced digital tools, new filing options, and educational initiatives designed to make the tax system more accessible and user-friendly. These reforms mark a significant shift towards modernization, with the goal of fostering a more transparent and streamlined tax experience for all.
Here’s an overview of the key considerations:

Streamlining the Filing Process

One of the key aspects of the 2025 reforms is the overhaul of tax filing requirements for individuals. The new system introduces a simplified, user-friendly online portal that integrates various tax credits, deductions, and filing categories into a one-stop shop. By utilizing AI-driven tools, the portal will automatically fill out several fields based on the taxpayer’s previous filings, reducing the time spent on gathering and entering information.

“Filing taxes should not be a complicated and stressful process,” said Henry Tran, Director of the Department of Taxation. “Our goal is to ensure that taxpayers can easily meet their obligations without the need for external assistance unless absolutely necessary.”

Support for Small Businesses

Small businesses, which have long struggled with the complexity of tax compliance, will also benefit from these new changes. The government has introduced a flat-rate tax system for businesses with annual revenues under $1 million. Under this new system, small businesses can now calculate their tax liability using a fixed percentage based on their revenue, removing the need for complicated expense tracking and reporting.

“The small business sector is the backbone of the economy, and it is crucial that we support entrepreneurs in managing their tax responsibilities,” said Tran. “This new initiative reduces administrative costs and allows business owners to focus on growing their ventures instead of navigating a confusing tax code.”

Enhanced Transparency and Education

The reforms also include provisions aimed at improving taxpayer education and enhancing transparency within the tax system. The government plans to launch a series of educational programs that will help individuals and business owners understand the tax laws, available credits, and the impact of their filings.

“We believe that an informed taxpayer is a confident taxpayer,” said Tran. “By providing resources and guidance, we can ensure that everyone is able to comply with the tax code effectively.”

What’s Next?

The reforms are set to take effect in the upcoming tax season. Taxpayers and business owners are encouraged to begin familiarizing themselves with the new filing system through online resources and community outreach programs. While some of the provisions may take time to fully implement across all regions, the shift toward digitalization and simplification is seen as a major step forward in modernizing the country’s tax framework. As the tax season approaches, experts predict that the updates will lead to smoother processing, reduced errors, and faster refunds for millions of taxpayers. However, they also caution that it may take some time for all taxpayers to adjust to the new system, particularly those who have relied on traditional paper filing methods in the past.

Conclusion

The recent tax reforms represent a significant step toward modernizing and simplifying the tax system for individuals and small businesses. With streamlined filing processes, a more accessible online platform, and support for small business owners, these changes are poised to reduce the administrative burden on taxpayers while promoting greater compliance. Additionally, the focus on transparency and taxpayer education will empower individuals and businesses to better navigate the system.

While the full impact of these reforms will unfold over time, they offer a promising outlook for a more efficient, user-friendly tax experience. Taxpayers and small business owners are encouraged to stay informed and take advantage of the new resources available as they prepare for the upcoming filing season. The hope is that these changes will foster a tax environment that is not only simpler but also fairer for all.

Case Laws

DATE: DECEMBER 20, 2024

[2025] 170 taxmann.com 90 (Hyderabad - Trib.) image IN THE ITAT HYDERABAD BENCH 'B' VITP (P.) Ltd v. Dy. Commissioner of Income-tax

Section 115JB, read with sections 32 and 263, of Income-tax Act, 1961

Minimum alternate tax – Payment of Tax (Revision) – Assessment year 2017-18 – Assessee-company (earlier known as FDPL) was engaged in business of developing and operating IT/ITES Parks in SEZ – It filed its original return declaring loss of certain amount – Thereafter, assessee merged with company VITP as per scheme of amalgamation approved by NCLT – Assessment was completed – Principal Commissioner observed that depreciation as per book was of lesser amount but assessee claimed same at higher amount in ITR – Hence, he passed a revision order on ground that an excess claim of depreciation had been allowed by Assessing Officer while framing assessment which had resulted in short computation of book profit – It was noted that assessee had specifically pointed out facts regarding claim of depreciation in its reply to show cause notice issued by Principal Commissioner – Further, claim of depreciation was revised in pursuant to merger, and consequently, revised financial statements were prepared wherein assessee had claimed book depreciation, and hence, there was no discrepancy in claim of assessee on account of depreciation while computing book profit – Whether, on facts, impugned order passed by Principal Commissioner was based on incorrect facts and was not sustainable in law and liable to be quashed – Held, yes [Paras 12 and15]

Facts:

The assessee-company was engaged in the business of developing and operating information technology/information technology enables services (IT/ITES) Parks in Special Economic Zones. The assessee filed its original return of income for the year under consideration declaring loss under the head profit & gain from business/profession. Thereafter, the assessee filed its revised return of income.
The case of the assessee was selected for scrutiny through CASS. However, in the meantime, the assessee merged with company VITP as per the scheme of amalgamation approved by the NCLT Hyderabad. The assessment was completed under section 143(3) read with section 144C (3) whereby the Assessing Officer had made an addition on account of the transfer pricing adjustment.
Thereafter, on examination of the record, the Principal Commissioner observed that the depreciation as per the book was Rs. 12.72 crores but the assessee claimed the same at Rs. 17.60 crores in the ITR. Hence, the Principal Commissioner passed a revision order under section 263 on the ground that an excess claim of depreciation to the extent of Rs. 4.88 crores had been allowed by the Assessing Officer while framing the assessment which had resulted in the short computation of the book profit. Accordingly, the assessment order was set aside with the direction to the Assessing Officer to make requisite inquiries and proper verification with regard to the issue of excess claim of depreciation.

Held:

The Principal Commissioner has initiated the proceedings under section 263 only on the issue of excess claim of depreciation on the part of the assessee while computing the book profit under section 115JB. [Para 8]
The assessee has brought to the notice of the Principal Commissioner that initially the book depreciation of Rs. 24.04 crores was claimed as a deduction on the computation of book profit under section 115JB, which is in consonance with the depreciation debited in the profit and loss account. Since there was a merger of the assessee with VITP, a revised return of income was filed by the assessee for the period from 1-4-2016 to 1-2-2017, wherein the book depreciation of Rs. 20.63 crores was claimed as a deduction for the computation of book profit under section 115JB. All these facts are also reflected in the return of income filed by the assessee under section 139(1), and as per entry No. 44 of the return of income, the depreciation was claimed at Rs. 24.04 crores. [Para 10]
Thereafter, the assessee has filed the revised return of income, and relevant entry No. 44 is showing the claim of depreciation. [Para 11]
Thus, in the original return of income as well as in the revised return of income, the claim of the assessee is not as stated by the Principal Commissioner in the show cause notice wherein the Principal Commissioner has alleged that the assessee has claimed depreciation of Rs. 17.60 crores in the ITR, which is not the correct fact as emerged from the record. Since those figures, as taken by the Principal Commissioner, are part of the return of income of the VITP and not of FDPL, which was subjected to revision under section 263. Further, the profit and loss account also reflects the claim of depreciation of Rs. 24.04 crores. The claim of depreciation was revised in pursuance of the merger, and consequently, the revised financial statements were prepared for the special purpose for the period from 1-4-2016 to 1-2-2017, wherein the assessee has claimed the book depreciation of Rs. 20.63 crores, and hence, there was no discrepancy in the claim of the assessee on account of depreciation while computing the book profit. [Para 12]
It is further noted that in the return of income in the case of VITP, the depreciation and amortization as per entry No. 44 of the return of income is shown at Rs. 17.60 crores, and this amount was taken by the Principal Commissioner while invoking the provisions of section 263. [Para 13]
From these facts, as discussed above, it is clear that the Principal Commissioner invoked the provisions of section 263 on the basis of incorrect facts, whereas the claim of depreciation in the return of income filed by the assessee was found in order by the Assessing Officer as per the details furnished by the assessee. It is also noticed that there is no discrepancy in the claim of the assessee in the book depreciation while computing the book profit under section 115JB as the amount of the claim is the same as reflected in the profit and loss account. Further, all these details were available before the Principal Commissioner as well as before the Assessing Officer. However, without considering the facts and details objectively, the Principal Commissioner has passed the impugned order and directed the Assessing Officer to re-verify the claim of the assessee. It is pertinent to note that as per the order sheet in detail and the office note of the National E-Assessment Centre, the Regional Assessing Officer of the Assessment Unit has admitted the fact that the assessment order passed in the case of the assessee is not sustainable being passed against the non-existing entity. [Para 14]
Accordingly, in the facts and circumstances as discussed above, the impugned order passed by the Principal Commissioner under section 263 is based on incorrect facts, is not sustainable in law, and is liable to be quashed. [Para 15]

In Favour of: The Assessee

2025] 170 taxmann.com 89 (Jodhpur - Trib.) image IN THE ITAT JODHPUR BENCH Patel Minerals (P.) Ltd. v. ACIT

Reference: Section 56 of the Income-tax Act, 1961, read with rule 11UA of the Income-tax Rules, 1962

Income from other sources – Chargeable As (Share premium) – Assessment year 2015-16 – Assessee-company issued 1,70,000 shares at face value of Rs. 10 and at premium of Rs. 20 per share at total consideration of Rs. 51 lakhs including premium received for Rs. 34 lakhs during year – Assessing Officer asked assessee to justify premium as per section 56(2)(viib) and rule 11UA – Assessee submitted share valuation report which was not as per rule 11UA but valuation of shares was done as per ‘Adjusted Net Asset Method’ and as per ‘future earning analysis’ – Assessing Officer noted that future earning analysis method was not allowed in rule 11UA but that rule allowed two methods discounted free cash flow method and ‘Book value of net asset method – Difference between Adjusted Net Asset Method taken by assessee and ‘Book value of net asset method’ was that as per rule 11UA assessee should have taken book value of asset but assessee had adopted present market value of asset – Assessing Officer also noted that no evidence was submitted by assessee to justify present market value taken – Therefore, same was re-calculated as per book value of asset according to rule 11UA, and was considered as nil – Assessing Officer thus made addition of Rs. 51 lakhs as income of assessee under section 56(2)(viib) – Whether since assessee company had filed valuation report obtained from an Accountant as per requirement of rule 11UA which was based on relevant rule for valuation of shares and thus, discharged his onus by submitting relevant report in support of fair market value adopted, however, said report of accountant was not considered by lower authorities, impugned addition made by Assessing Officer was not justified and same was to be deleted – Held, yes [Para 8.4].

Facts:

The assessee, a private limited company, filed its income tax return declaring loss. The case was initially selected for limited scrutiny to verify the share premium but was later converted into a complete scrutiny assessment with approval from the Principal Commissioner.
A notice under section 143(2) was issued on 13-4-2016, followed by detailed questionnaires under section 142(1).
During assessment proceedings, it was revealed that the assessee had not commenced any business activities in the relevant financial year. The assessee claimed revenue expenditure for routine operational expenses incurred while exploring business opportunities.
The assessee issued 1,70,000 shares at Rs. 30 per share (Rs.10 face value + Rs. 20 premium), raising Rs. 51 lakhs including premium received for Rs. 34 lakhs during year.
The Assessing Officer noted that the assessee was not doing any business activity and, thus, asked the assessee to justify the premium as per section 56(2) (viib) and rule 11UA. The assessee submitted a share valuation report which was not as per rule 11UA, but the valuation of shares was done as per ‘The adjusted Net Asset Method and as per ‘future earning analysis. The Assessing Officer noted that the future earning analysis method was not allowed in rule 11UA, but that rule allowed two methods: the discounted free cash flow method and the book value of net asset method.
He also noted that no evidence was submitted by the assessee to justify PMV (present market value) taken. Therefore, the same was re-calculated as per book value of asset according to rule 11UA and was considered as Nil. The Assessing Officer, based on that observation, added Rs. 51 lakhs as income of the assessee-company.
On appeal, the Commissioner (Appeals) upheld the Assessing Officer’s addition, reasoning that the valuation method used by the assessee did not align with Rule 11UA.

Held:

The provision of the Act and relevant rules prescribed that fair market value can be determined for the unquoted shares that are not listed and shall be estimated to be the price they would fetch if sold in the open market on the valuation date, and for that, the assessee may obtain a report from the merchant banker or an accountant in respect of such valuation. Having gone through the provision of the Act and relevant rules, it is noted that during assessment proceedings, the appellant/assessee company filed a valuation report obtained from an accountant as per the requirement of Rule 11UA of the Income Tax Rules. In the said report, the valuation of equity shares is carried out using various methods, i.e., fair market value, net asset value, future earning method, and discounted cash flow method. The Assessing Officer has made an addition on the basis that the Fair Market Value Method and Future Earning Method are not prescribed methods under Rule 11UA, and in view of the negative net worth, the entire consideration received by the company, i.e., Rs 51 lakhs, including face value and share premium, is liable to be an addition under Section 56(viib). The Commissioner (Appeals) did not discuss why the report of an accountant placed on record, which is based on the relevant rule for valuation of shares, is not considered, and he has simply confirmed the view of the Assessing Officer. The assessee supported that the valuation done was as prescribed by the rule and that the report of the independent accountant submitted by the assessee was not doubted or challenged on any of the aspects. The assessee has discharged his onus by submitting the relevant report in support of the fair market value adopted by the assessee. The bench noted that the assessee-appellant had placed on record the report of the accountant dated 5-1-2015 that the fair market value of the share shall be determined under various methods of valuation, including the discounted cash flow method. However, as per the explanation given under the provision of section 56(2)(viib), the fair market value of the shares shall be the value as may be determined in accordance with rules 11U and 11UA of the I.T. Rules. Therefore, it is mandatory that the fair market value of the shares for the purpose of section 56(2)(viib) be determined as per the method prescribed under rules 11U and 11UA only, and thus the fair market value of shares determined by any other method is not to be considered. The co-ordinate bench in Idana Pet Industries P. Ltd. v. ITO/ACIT in ITA No. 320/Jodh/2023 has held that the matter of valuation of unquoted equity shares has been completely left to the discretion of the assessee. It is his option whether to choose the NAV Method (Book Value) under clause (a) or to choose the DCF Method under clause (b), and the Assessing Officer cannot adopt a method of his own choice. The assessee valued the share at Rs.158 per share, and the allotted share is Rs.100, which is much less than the NAV, which is not contravening section 56(2). Further, all the investment in equity shares is accumulated from the directors and son of the director. So, the addition related to contravening section 56(2) is not justified. On being consistent with the finding so recorded in the case law relied on and considering the facts of the case on hand being similar, no reason is found to sustain the addition of Rs. 51 lakhs made by the Assessing Officer and sustained by the Commissioner (Appeals), and therefore, the Assessing Officer is directed to delete the addition so made in the hands of the assessee. In the result, the appeal of the assessee is allowed. [Para 8.4]

In Favour of: The Assessee

Circulars and Notifications January 2025

Circulars / Orders

CLARIFICATION REGARDING ORDERS UNDER SECTION 201 OF THE INCOME-TAX ACT, 1961 UNDER E-APPEAL SCHEME, 2023

Central Board of Direct Taxes (‘the Board’) issued an order u/s 246(6) of the Income-tax Act, 1961 (‘the Act’) dated 16.06.2023 vide F.No.370149/97/2023-TPL specifying the scope of the e-Appeals Scheme, 2023 notified vide Notification No.33/2023, dated 29th May, 2023 in F.No.370142/10/2023-TPL. A query has been received in the Board regarding whether orders u/s 201 of the Act made in pursuance of any action under section 133A of the Act shall fall under the exceptions provided at point (ii) (3) of the first para of the Board’s order, dated 16-6-2023 vide F.No.370149/97/2023-TPL.

The matter was examined by the Board, and it is hereby clarified that orders u/s 201 of the Act shall not be considered as assessment orders covered under the exceptions provided in the first para of the aforesaid Board’s order, dated 16-6-2023 vide F.No.370149/97/2023-TPL. Therefore, all the appeals against such orders u/s 201 of the Act shall be decided by the Joint Commissioner (Appeals) under the e-Appeals Scheme, 2023.
This clarification may be brought to the attention of all concerned.

ORDER F. NO. 225/17/2025-ITA-II, DATED 28-1-2025

Press Release

CBDT NOTIFIES AMENDMENTS IN INCOME-TAX RULES, 1962 TO PRESCRIBE CONDITIONS FOR APPLICABILITY OF PRESUMPTIVE TAXATION REGIME FOR NON-RESIDENT CRUISE SHIP OPERATORS

As a measure to promote investment and employment, the Finance (No. 2) Act, 2024, inter alia, provided a presumptive taxation regime for non-residents engaged in the business of operating cruise ships. Further, an exemption has been provided for any income of a foreign company from lease rentals of cruise ships, received from a related company that operates such a ship or ships in India. The applicability of this presumptive taxation regime is subject to the conditions as prescribed.

The conditions which have been prescribed for non-residents engaged in the business of operating cruise ships provide that such non-resident shall: —

(a) Operate a passenger ship having a carrying capacity of more than 200 passengers or length of 75 meters or more for leisure and recreational purposes and having appropriate dining and cabin facilities for passengers;
(b) Operate such ship on scheduled voyage or shore excursion touching at least two sea ports of India or same sea ports of India twice;
(c) Operate such ship primarily for carrying passengers and not for carrying cargo; and
(d) Operate such a ship as per the procedure and guidelines, if any, issued by the Ministry of Tourism or Ministry of Shipping.
CBDT Notification No. 9/2025, dated 21-1-2025, has been published in https://egazette.gov.in/

PRESS RELEASE, DATED 21-1-2025

Notifications

S.O. 244(E)

In exercise of the powers conferred by clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (43 of 1961) read with Rules 5C and 5D of the Income-tax Rules, 1962, the Central Government hereby approves Central Power Research Institute (CPRI) (PAN: AAAAC0268P),Bengaluru under the category of ‘Research Association’ for ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 read with rules 5C and 5D of the Income-tax Rules, 1962. 2. This Notification shall apply with effect from the date of publication in the Official Gazette (i.e. from the Previous Year 2024-25) and accordingly shall be applicable for Assessment Years 2025-2026 to 2029-2030.

Notification No. 07/2025/F. No. 203/20/2024/ITA-II, DATED 14-01-2025

S.O. 21(E).

In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the said Act), the Central Government hereby specifies that no deduction of tax shall be made under the provisions of section 194Q of the said Act by a person, being a buyer, in respect of purchase of goods from a Unit of International Financial Services Centre, being a seller, subject to the following conditions, namely: -(a)the seller shall –(i)furnish a statement-cum-declaration in the format provided in Form No. 1 annexed to notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number S.O. 1135(E), dated the 7th March, 2024 (hereinafter referred to as the said Form) to the buyer giving details of previous years relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under sub-sections (1A) and (2) of section 80LA of the said Act; and (ii) such statement-cum-declaration so furnished shall be verified in the manner specified in the said Form, for each previous year relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under sub-sections (1A) and (2) of section 80LA of the said Act; (b)the buyer shall –(i)not deduct tax on payment made or credited to the seller after the date of receipt of copy of the statement- cum-declaration in the said Form from the seller; and (ii) furnish the particulars of all the payments made to the seller on which tax has not been deducted in pursuance of this notification in the statement of deduction of tax referred to in sub-section (3) of section 200 of the said Act read with rule 31A of the Income-tax Rules, 1962. 2. The relaxation under this notification shall be available to the seller only during the said previous years relevant to the ten consecutive assessment years as declared by the seller in the said Form for which deduction under section 80LA of the said Act is being opted and the buyer shall be liable to deduct tax on payments made or credited for any other year. 3. For the purposes of this notification, –(a) the “seller” under all circumstances shall remain an International Financial Services Centre Unit within the meaning of sub-clauses (a) and (d) of the Explanation to section 80LA of the said Act; and (b) the expressions- (i) “buyer” shall have the same meaning as assigned to it in the Explanation to sub-section (1) of section 194Q of the said Act; (ii) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005); and (iii) “Unit” shall have the same meaning as assigned to it in clause ((zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005). 4. The Principal Director General of Income-tax (Systems) or the Director General of Income-tax Systems), as the case may be, shall lay down procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents and the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies. 5. This notification shall come into force on the 1st day of January 2025.

No. 3/2025/F. No. 275/109/2024-IT(B), DATED 02-01-2025

Tax Calender: February 2025

07th February 2025

Due date for deposit of Tax deducted/collected for the month of January 2025. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income-tax Challan

14th February 2025

Due date for issue of TDS Certificate for tax deducted under section 194-IA/194-IB/194M/194S in the month of December 2024

15th February 2025

Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending December 31, 2024.

Tax News from Around the World

United States: New IRS e-Filing Requirement for Small Businesses

European Union: Proposed Digital Tax on Tech Giants

Australia: Reform of Superannuation Taxation

Canada: Climate Tax Credit for Families