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KEY DIRECT TAX CHANES MADE BY LOK SABHA IN FINANCE BILL

  1. Finance Bill 2022 introduced Section 115BBH wherein gain on sale of Virtual Digital Assets (“VDA”) was brought within the ambit of taxation. It was further proposed that the loss, if any, shall not be
    allowed to be adjusted under any other provision of the Income Tax Act, 1961 (“the Act”). Now, clause (b) of sub-section (2) of section 115BBH of the Act has been amended where no set-off of loss from the transfer of the VDA shall be allowed against any income computed under any
    provision of this Act.
  2. Sub-section 3 to section 115BBH of the Act has been inserted which states that definition of transfer shall apply to any VDA irrespective of the fact whether it is held as a capital asset or trading asset
    and tax on any gain from VDA shall be chargeable to tax in accordance with the provisions of Section 115BBH of the Act only.
  3. Sub-section (1) of section 115BBH of the Act has been amended to insert a non-obstante clause to override all other provisions of the Act that notwithstanding anything contained under any other
    provision of the Act, the income from the transfer of VDA shall be taxed at the rate of 30% under section 115BBH.
  4. The section 115BBH has been amended to insert the word “if any” after the word “cost of acquisition”. In cases where cost of acquisition of VDA is NIL or can not be ascertained, the income arising from such transfer shall still be taxable under section 115BBH of the Act.
  5. Section 194S was introduced and is applicable in cases where TDS is required to be deducted on towards transfer of VDA. In cases where consideration is not wholly or partly in cash or full consideration in paid in a mode other than cash, payer shall ensure that the tax has been paid in respect of such consideration. Now, it is the responsibility of the payer to ensure that the tax required to be deducted has been paid.
  6. Where a transaction is subject to TDS under section 194S, the deduction or collection can be made under any other provision of the Act except section 194-O. In other words, where the transaction attracts TDS under any other provision of the Act and the consideration is discharged in the form of VDA, the TDS shall also be required to be deducted on such transaction if TDS is applicable on such transaction under any other provision of the Act.
  7. The Finance Bill 2022 proposed to insert Section 139(8A) which provided for updated return and lists the cases where updated return can not be filed. It was proposed that a person can not file updated return for the assessment year relevant to the previous year in which such search is initiated or survey is conducted or requisition is made and two assessment years preceding such assessment year. Now the words “two assessment years” has been substituted with “any assessment year” to restrict filing of updated return for earlier assessment years as well.
  8. Fourth proviso to Section 139(8A) has been inserted which states that return of loss can also be updated provided the updated return should be a return of income.
  9. Fifth proviso to Section 139(8A) has been inserted which provides that if as a result of furnishing of an updated return for a previous year the:
    • loss or any part thereof carried forward;
    • Unabsorbed depreciation carried forward;
    • Tax credit carried forward under section 115JAA;
    • Tax credit carried forward under section 115JD is reduced for any subsequent year, updated return for each subsequent year shall also be required to be filed.
  1. Explanation 3 to Section 40(a)(ii) of the Act has been inserted with retrospective effect from assessment year 2005-2006 which states that the term ‘tax’ shall include and be deemed to have always included ‘surcharge’ or ‘cess’. Therefore, the amendment is retrospective in nature and shall apply from assessment year 2005-2006 onwards.
  1. Sub-section (18) to Section 155 of the Act has been added which provides that where the deduction on account of surcharge and cess has been claimed and allowed as deduction in any earlier assessment year, it shall be deemed that the income has been under reported for the purpose of section 270A(3) of the Act and accordingly the assessing officer shall re-compute the total income for such assessment year. Further, the exclusions as provided under section 270A(6) shall not
    be applicable in this case. However, such addition shall not be deemed to be under reporting of income where the assessee makes an application to the assessing officer requesting AO to re-compute the total income of the previous year without allowing the deduction of surcharge or cess and assessee pays the due amount within the specified time.
    Further, limitation period as provided in Section 154 of the Act for the purpose of passing rectification order shall be reckoned from the end of the previous year commencing from 01-04-2021.
  1. It has been clarified that the exemption on LTCG to the extent of Rs. 100,000/- is available to non-residents as well and the tax shall be levied on LTCG in excess of Rs. 100,000/-. Additionally, TDS will also be deducted on LTCG in excess of Rs. 100,000/- only.
  1. Sub-section (2A) to section 170 of the Act has been introduced and it is stated that where there is succession, the assessment, reassessment or other proceedings made on the predecessor during the course of pendency of such succession shall be deemed to have been made on the successor. The provisions in relation to assessment, reassessment or other proceedings shall apply to successor as if it would have applied to the predecessor. Further the word “reorganization” has been replaced with the word “succession”. The term succession is wider in comparison and covers most of the business arrangements where business is restructured. It has further been amended to cover the cases where the assessment proceedings were initiated during the pendency of succession and completed at a later stage. The term “made” has been replaced with “made or initiated” to cover such situations.
    New Section 170A has been introduced where successor to the business shall, within a period of 6 months from the end of the month in which order of succession was issued, file a modified return. Further, the terms “Business Reorganization” and “Successor” has been specifically defined where:

“Business reorganization” means the reorganization of business involving the amalgamation or de-merger or merger of business of one or more persons;
“Successor” means all resulting companies in a business reorganization, whether or not the company was in existence prior to such business reorganization.

  1. Section 153 of the Act has been amended where time-limit to complete the assessment proceedings for assessment year 2020-2021 has been increased by 6 months. Now, the assessment proceedings should be completed within 18 months from the end of the Assessment Year in which income was first assessable i.e., 30th September, 2022 in this case.
  2. Section 153B of the Act has been amended wherein the time-limit to complete the assessment for assessment year 2021-2022 has been provided in accordance with the following table:

Date of search Time-limit for completion of assessment

On or after 01-04-2021 Within 12 months from the end of the financial year in which notice was served
Between 01- 04-2020 On or before 30-09- 2022

and 31-03-2021

Before 01 Within 12 months from the end of the financial year in which last of the authorisations for 04-2019 and search/requisition was executed 31-03-2020.
In addition to above, assessment under section 153A of the Act shall be completed on or before 30th September, 2022:

  • Where last authorization for search under section 132 or requisition under section 132A was executed at any time during the financial year commencing from 01-04- 2020; or
  • In the case of a person referred to in section 153C, the books of accounts or documents or assets seized or requisitioned were handed over to the AO having jurisdiction over the person at any time during the financial year commencing from 01-04-2020.
  • Finance bill proposed to introduce Section 158AB for the purpose of avoidance of repetitive appeal before Income-tax Appellate Tribunal or to the Jurisdictional High Court. In this connection, following changes has been made to the section:
    • Section 158AB shall override the respective provisions providing time limits and procedural directions for filing an appeal to ITAT or the High Court
    • Time limit to file the application with the ITAT has been increased to 120 days from the earlier proposed 60 days.
    • All the provisions of appeal to ITAT and High Court shall apply in this case as well where appeal is filed under section 158(4) of the Act.

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