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Partner, Direct Tax
The Finance Act 2023, inserted in Section 43B(h) of the Income Tax Act 1961, is a significant move towards fostering economic growth, emphasizing the need for fair business practices. This guide is here to help individuals better understand and comply with this section, ensuring prompt payments to micro, small, and medium enterprises (MSME’s).
This amendment aims to address the issue of working capital scarcity in this industry and promote prompt payments to micro and small businesses.
Coming to this month’s Taxation Times, here’s what we have:
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 Reading!
Best Regards,
UJA Tax Team
The Finance Act 2023 introduced a pivotal amendment to the Income Tax Act of 1961 by adding subsection (h) to Section 43B. This amendment, effective April 1, 2024, emphasizes timely payments to micro and small enterprises (MSMEs). The section outlines specific criteria for allowable expenses and disallowances, impacting the taxable income computation of enterprises. As per the amendment,
To summarize, if any sum payable to micro & small enterprises (suppliers) is not paid within the time limit mentioned above, then expenses are not allowed as deductions while computing the taxable income of an enterprise. Those expenses will be allowed only after payment is made to the supplier.
Even though, the government has tried its best to clarify the provisions of these acts through a number of notifications and OMs, due to the involvement of multiple acts and types of business activities, there are a number of challenges in the practical implication of Section 43B(h), which can be described below. The government can provide clarification in respect of these issues and can help in smoothing the implication of the provision in § 43B(h).
In view of the discussion above, this amendment to Section 43B is a boom for the growth of micro and small enterprises. It will accelerate their performance due to timely payments to them and no default from the buyer side. On the other hand, it will lead to high tax consequences for the buyers if a delay happens in their actual payment. Hence, we have to ensure timely payments to the MSME’s.
Facts:
The assessee-company entered into some international transactions.
TPO made certain TP adjustments.
The Assessing Officer passed the final assessment order under Section 143(3) read with Section 92CA(4) without passing the draft assessment order as required to be passed under Section 144C(1).
On appeal, the Commissioner (Appeals) partly allowed the appeal of the assessee.
The assessee filed an appeal before the ITAT.
Held:
Assessee-company entered into some international transactions; TPO made certain TP adjustments – Assessing Officer passed a final assessment order under section 143(3) read with section 92CA(4) without passing draft assessment order as required to be passed under section 144C(1) – Whether passing of draft assessment order as prescribed under Section 144C(1) is mandatory (held, yes) – Whether assessee cannot be estopped from challenging assessment order, which was passed on basis of admission by the assessee itself that it does not want to challenge draft assessment order (held, yes) – Whether, therefore, the final assessment order passed by the assessing officer without passing draft assessment order as prescribed under Section 144C(1) was without jurisdiction and void-ab-initio.
In Favour of: The Assessee
Facts:
The assessee was an individual assessee who, for the year under consideration, was a resident of India.
The assessee filed his return of income belatedly by offering to tax his global income. Some of his income was from United States of America Company (USA), which suffered tax in the USA @ 24.37 percent. Since such a USA salary was again offered to tax in India, the resident assessee filed Form No. 67 claiming foreign tax credit in terms of Section 90/90A read with Indo-USA DTAA. The CPC denied the aforestated claim of FTC to the assessee for a solitary reason of not filing FTC claim Form No.67, accompanying certificates, statements, etc., within the time limit of filing ITR prescribed under Section 139(1) as specified under Rule 128(9) of the Income Tax Rules, 1962, which expired on August 31, 2019.
On appeal, the Commissioner (Appeals) also confirmed the action of the CPC and thus denied the claim of FTC to the assessee, as the mandatory requirement of filing Form No. 67 in terms of Rule 129(9) was admittedly filed belatedly, i.e., beyond the prescribed due date for filing the return of income under Section 139(1).
Held :
A careful reading & conjunct consideration of the provisions of Section 90/90A of the Act and the provisions of DTAA, prima facie, shows that, the provisions of DTAA in general do not prevail over the provisions of the Act and the rules made thereunder. Section 90/90A of the Act also does not provide so. However, wherever the DTAA has provided the taxation of a particular category of income at certain rates, the charging of that income at different rates as per the Act, may come in conflict with the DTAA, and hence, the taxes over that category of income will be levied at the rates, so provided in the DTAA. But where no such rates on an income or a category of income on the status of an assessee have been prescribed in the DTAA, then there cannot be any conflict with the Act. Where there is no specific provision in the agreement, it is basic law, i.e., the Income-tax Act/Rules, that will govern the taxation of income.
Income – Deemed to accrue or arise in India (Elimination of double taxation – Foreign tax credit) – Whether belated filing of Form No. 67, certificate and statement as envisaged under rule 128(9) of IT Rules, 1962 any time before it is actually processed or before final assessment is actually made is sufficient compliance of said rule and, thus, assessee would be entitled to foreign tax credit
In Favour of: The Assessee.
CBDT notifies Annexure “Agreement Between The Government Of The Republic Of India And Government Of Samoa For The Exchange Of Information With Respect To Taxes”
CBDT releases an order to waive off the tax demand outstanding as of January 31, 2024; capped at Rs. 1 lakh per assessee.
ORDER F. NO. 375/02/2023-IT-BUDGET
A record of over 8.18 crore Income Tax Returns (ITRs) filed for A.Y. 2023-2024 upto 31.12.2023; Y-o-Y increase of 9%
Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA, 194-IB, 194M and 194S in the month of January, 2024
Fourth installment of advance tax for the assessment year 2024–25
Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of February, 2024 has been paid without the production of a Challan
Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA, 194-IB, 194M and 194S in the month of February, 2024
Country-By-Country Report in Form No. 3CEAD for the previous year 2022–23 by a parent entity or the alternate reporting entity, resident in India, in respect of the international group of which it is a constituent of such group.
Uploading of statement [Form 67], of foreign income offered to tax and tax deducted or paid on such income in previous year 2022-23, to claim foreign tax credit [if return of income has been furnished within the time specified under section 139(1) or section 139(4)
Furnishing of an updated return of income for the Assessment Year 2021–22
Australia concludes consultation on applying OECD Transfer Pricing Guidelines Retrospectively
