SECTION 139 OF INCOME TAX ACT’1961
[AMENDED UPTO FINANCE ACT (NO.2) 2019]
Ques 1: Why this post?
Ans: In the approaching return filing season the aforesaid section namely ‘FILING OF RETURN’ has a great importance and that too w.r.t. amendments it contains till AY 2020-21 i.e. FY 19-20. Thus, the author has come up with the glance at the major provisions of this section with few clarifications.
Ques 2: Is bird eye view of the section 139 possible?
Ans: Attached image can be referred to for the bird–eye view of Section 139 of Income Tax Act 1961. It contains 19 subsections. Few of them are not in existence from the stated dates, thus ignored in our discussion. (Readers can refer bare act for their reference, author has tried to be precise)
We will be restricting our discussion to only grey highlighted area.
Ques 3: Who all have obligation to file return of income under section 139(1)?
|a) Company or Firm||In every case|
|b) Any other person other than company or firm||It total income exceeds maximum amount not chargeable to tax.|
Ques 4: What are the FOURTH and FIFTH proviso to section 139(1)? Please elaborate with illustrations. First three provisos have been skipped as they are not relevant as stated in summary chart.
Ans. Fourth and Fifth proviso states that following person has to file return:
– being a resident other than not ordinarily resident in India,(i.e. ROR)
– who is not required to furnish a return under section 139(1), and
a)who holds, as a beneficial owner, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India
b)who is beneficiary of any asset (including any financial interest in any entity) located outside India
However an individual being a ‘beneficiary referred in (b)’, where if any income arising from such asset is includible in the income of the person referred to in (a),
Then, the beneficiary is not required to file return of income under this proviso.
Explanation 4 and 5 defines the terms ‘beneficial owner’ and ‘beneficiary’ respectively.
Illustration: Parties Involved: Mr. K(ROR) , Mr D(resident of Dubai) and Mr.F (Father of Mr. D lives in India)
Mr. K gifted his rural agricultural land(not capital asset) to Mr. F, worth Rs. 10Crores.
Mr. D buys a flat in Dubai in his name and gives an irrevocable power of attorney to Mr. K to sell/gift/lease/transfer the flat in any manner, with clause that home will be transferred to Mr. K/his wife after 10th year.
As per Explanation 4: “beneficial owner” in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person
Therefore, although the flat in Dubai is not in the name of Mr. K, but he is beneficial owner of the flat since he has
– provided consideration indirectly
– for the flat which is for immediate or future benefit
– direct or indirect
– of Mr. K or his wife
Illustration: Mr. A (ROR), transferred his black money INR 5crores to Mr. B in Singapore through Hawala. Now Mr. B forms a Trust in Singapore, donates the sum in Trust and buys securities of INR 5Crores through trust. Mr. A is the sole beneficiary of Trust and Mr. A donot have taxable income in India.
As per Explanation 5: “beneficiary” in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary
Thus Mr. A satisfies the definition of beneficiary, hence he is under obligation to file return of income under fourth proviso.
Illustration: Mr. X(ROR) has substantial incomes in India and Mrs. X(ROR) does not have any income. Mr. X opens an account in the wife’s name in Australia and transfers INR 2 Crores of his taxable income to his wife’s account. Mrs. X purchases a house property from the bank balance of INR 2 Crores in Australia in her name.
Now, Mr. X is the beneficial owner and Mrs. X is the beneficiary w.r.t. the house in Australia.
As per Fifth proviso, Mrs. X is not under obligation to file return of income, if income from house property in Australia is clubbed with income of Mr. X.
Ques 5: Under SIXTH proviso to section 139(1) who is required to file Return of Income?
Ans: This is applicable to all assesses other than Company and Firm
If total income before giving effect to the following benefits exceeds the maximum amount not chargeable to tax, then, the person has to file return of income:
|Section:||In relation to:|
|10A||For newly established undertakings in free trade zone|
|10B||For newly established 100% per cent export-oriented undertakings|
|10BA||For of export of certain articles or things|
|54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB||For persons availing rollover benefit of capital gains exemptions. [inserted by Finance Act (No.2) 2019]|
|Chapter VIA||Deductions under Section 80C-80U|
To illustrate lets say a senior citizen who has interest income of Rs. 1 lakh, sells his residential house and earns capital gains of Rs. 15 lakhs. He reinvests the entire gains in bonds issued under section 54EC. Now even if his tax liability is Nil, then also he has to file return under sixth proviso to section 139(1).
The ptoviso does not apply if the total income of a person including capital gains does not exceed the maximum amount not chargeable to tax.
Ques 6: Who all are required to file return of income under newly inserted SEVENTH proviso to Section 139(1)?
Ans: Seventh proviso to section 139 has been inserted with effect from 1st April 2020 to provide for furnishing of return by a person who is otherwise not required to furnish a return under section 139(1), if such person during the previous year—
i) has deposited an amount or aggregate of the amounts exceeding Rs.1 crore in one or more current account maintained with a banking company or a co-operative bank; or
ii) has incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 2 lakhs for himself or any other person for travel to a foreign country; or
iii) has incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 1 lakh towards consumption of electricity; or
iv) fulfils such other conditions as may be prescribed.
Note: 1) The limits stated in the conditions are for a previous year and hence, for every assessment year, it has to be examined whether the condition is fulfilled or not.
2) The aforesaid conditions are in alternative; hence a return of income will have to be filed even if any one of the aforesaid condition is fulfilled
|Analysis of Condition – (i)
Analysis of Condition – (ii)
Other points worth evaluation:
The word ‘travel’ has been explained as: “go from one place to another, make a journey, especially of some length or abroad” [New India Assurance Co. Ltd. v. Annakutty AIR 1993 Ker. 299]
Thus, travel means a journey or going to a particular place. It could therefore be argued that the expense for travel to the foreign country means the ticket expenses and not the subsequent lodging, boarding, and sightseeing expenses. It may be noted that broader meaning had been given to the word in the context of erstwhile section 37(3) [see Beardsell Ltd. v. CIT  (Mad.)]. The limitation in that section was on travelling expenses (including hotel expenses). A safer view is that the condition under section 139 covers all expenses.
For the purposes of this sub-section, the expression “travel to any foreign country” does not include travel to the neighboring countries or to such places of pilgrimage as the Board may specify in this behalf by notification in the Official Gazette.
NOTIFICATION NO. S.O. 508(E), DATED 11th June, 2001
Neighbouring countries includes Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka
NOTIFICATION NO. S.O. 508(E), DATED 11th June, 2001
Travel to Saudi Arabia on Haj pilgrimage and to China on pilgrimage to Kailash Mansarover
Now the issue is seventh proviso has been inserted by Finance Act (No.2) 2019, but the above explanation 3 is there from a way back from 2001 and so are the above notifications issued in June 2001. Thus whether the same shall be applicable to the newly inserted seventh proviso?
Analysis of Condition – (iii)
Ques 7: What are the provisions related to Loss Return under section 139(3)?
Ans: Section 80 read with Section 139(3) provides that the loss under the section 72(1)[Business Loss], or section 73(2)[Speculation loss], or section 73A(2)[Specified Business u/s 35AD Loss] or section 74(1)&(3)[Captial Loss], or section 74A(3) [O/M Horse races Loss] cannot be carried forward if ROI is filed after the due date specified in section 139(1).
1) Loss under head “Income from house property” can be carried forward if ROI is furnished after the due date.
2) Losses can be setoff even if ROI is furnished after due date u/s 139(1).
3) Unabsorbed depreciation is governed by Sec 32 of Income tax Act, thus can be carried forward even if the ROI is furnished after due date and even if ROI has not been furnished.
Ques 8: What are the provisions related to Belated Return under section 139(4)?
Ans: If a person has not furnished the return of income within the time allowed under section 139(1), then he may furnish the return of income at any time before the end of the relevant Assessment Year or before the completion of assessment whichever is earlier.
Ques 9: What are the provisions related to Revised Return under section 139(5)?
Ans: If any person, having furnished a return under section 139(1) or section 139(4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
The revised return substitutes the original return from the date the original return was filed [Dhampur Sugar Mills Limited]
A loss return filed belatedly under section 139(4) can be revised under section 139(5), but loss is not allowed to be carried forward as original return was itself filed belatedly.
Ques 10: What are the provisions related to Defective Return under section 139(9)?
Ans: A return of income shall be regarded as defective return unless it is accompanied by the documents stated in the explanation to Section 139(9).
If the Assessing Officer considers that the return is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within fifteen days from the date of such intimation. He can extend this time period on an application made by the assesse. If the defect is not rectified within fifteen days or, the extended time, then, the return shall be treated as an invalid return and it shall be deemed as if the assessee has failed to furnish the return.
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