STRATEGY FOR IMPROVING ADVANCE TAX COLLECTION

As per the provisional figures, during Financial Year 2015-16, advance tax contributed Rs.3,56,601 crore to the overall gross direct taxes collection of Rs. 8,66,851 crore. In comparison to F.Y. 2014-15, this marks an increase of 7.81% over previous year collection of Rs. 3,30,768 crore. Further, under the Major-head ‘Corporate tax’, the advance tax collection was Rs. 2,95,579 crore as against the collection of Rs. 2,74,066 crore under the same head during the F.Y. 2014-1 5. This amounts to a growth of 7.85%. Advance tax collection under the head ‘Income Tax’ for F Y. 2015-16 was Rs. 61,019 crore as against Rs. 56,687 crore for F.Y. 2014-15 which is a growth of 7.64%.

2. The overall contribution of advance tax with respect to the gross direct taxes collection for F.Y. 2015-16 is 41.13%. Data of advance tax payments by the top 1000 advance tax payer companies of the country shows that the contribution of these corporate to the overall corporate advance tax collected during F.Y. 2015-16 is about 01%. Therefore, monitoring of the advance tax payment by the Corporates should be one of the major focus areas of the field formations, i.e. – PrCCsIT/DsGIT/CCsIT and below, for achievement of the budgetary target.

2.1 It is expected each authority in the field formation should monitor at least some top cases within their jurisdictional areas, in both the categories – Corporate and Non-corporate. The number of cases that must be monitored by different levels of authorities should be – ITOs 25 cases, DCsIT/ACsIT 50 cases, Addl/JCsIT 50 cases, CIT 100 cases, DsGIT/CCsIT 100 cases. In case of Principal CCsIT such monitoring should include the top 100 cases of their Regions.

3. Board guidelines for increasing advance tax collection that can be followed by the field authorities are as below:

♣ Following upon recent amendments in the Act that have advance tax connotations:

  • As per provision of section 43CA of the Income-tax Act, 1961, Real Estate companies have to be assessed on a turnover (based on stamp duty value or circle rate) in respect of all transactions relating to land or building or both. This will have an impact in case of Real Estate developers and traders in India where immovable property is kept as stock-in-trade;
  • In case of Individual & Hindu Undivided Families, as per amendment to Section 56, any property acquired at a price lower than the Circle Rate, is treated to have been received for inadequate consideration and the balancing amount is the income of such person. This will have consequences for advance tax incidence. Where the consideration for shares received is more than the face value, the difference is taxable u/s 56(2)(viib) from the F.Y. 2012-13 as income from other sources in the case of a company in which the public is not substantially interested;
  • Corporate are liable for Minimum Alternate Tax (MAT). Similarly non-corporate entities like limited liability partnership, etc. under certain specified circumstances, are liable for Alternative Minimum Tax (MAT). These should be monitored for advance tax payments. Specifically Banks, State Power Generation, Mining sector and Transmission utilities maybe closely monitored;

♣ Practice of deferring advance tax payments and payments of tax as Self-Assessment Tax should be watched. Recourse to provisions of section 210 of the Income-tax Act, 1961 may be taken up in such cases, if necessary;

♣ The quarterly Financial Statements of large and medium corporations available in the Public domain under the Companies Act should be examined and co-related with the advance tax paid by them for the relevant quarter;

♣ Information furnished to the field formations by I & CI Directorate and Systems Directorate should be pursued vigorously, especially in cases of invalid/no-PAN AIR transactions;

♣ Cases where substantial additions were made and confirmed in appeals should be identified, and such assesses should be persuaded to pay the additional tax on similar issues as advance tax. Here also, recourse to issue of notice u/s 210 may be taken if necessary;

♣ Sectorial analysis of the growth trend of various industries should be done and individual cases showing large variation should be monitored. Focus should be on sectors which have shown signs of turnaround.

♣ Analysis of survey cases of part 5 years where additional income was detected could be useful. It should be examined whether there has been an increase in advance tax for subsequent years since the survey;

♣ As per Section 40(a)(iib), any amount paid by way of royalty, license fee, privilege fee, service charge or any other fee or charge or by whatever name called which is levied exclusively on or is appropriated directly or indirectly) from a State Government Undertaking (defined therein) by a State has been brought to tax. The same will have Advance tax connotations and need to be monitored.

♣ The PrCCsIT/CCsIT/PrCsIT/ should identify companies and funds in their charge, which are liable for Dividend Distribution Tax as per the provision of section 115O and monitor timely payment of tax for the current year.

♣ By Finance Act, 2013, Commodities Transaction Tax has been introduced on sale of commodity derivatives. Jurisdictional PrCCsIT/CCsIT should list the Recognized associations within their region and monitor collection & deposit of CTT by them;

♣  Frequent interactions by PrCCsIT/CCsIT/CsIT with the industry/trade associations and professional bodies with a view to explain the tax policies of the Government and receiving feedback on the financial condition of various industries/trades should be continued.

4. Apart from the above guidelines, which are not exhaustive, the Pr CCsIT/CCsIT/ DsGIT may further devise their own strategy taking into consideration local factors. The feedback on the steps taken by the Pr CCsIT/CCsIT/DsGIT and the resultant gains will be reviewed by the Zonal Members of CBDT periodically through reports or while making official tours to different regions in their jurisdiction.

Source- CENTRAL ACTION PLAN 2016-17- Released by CBDT on 20.06.2016

(Above been Republished with Amendments to earlier Article on the Subject)

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