Chamber of Tax Consultants has submitted a representation to CBDT Chairman Shri Sushil Chandra on 25th September 2017 on Proposed Income Tax Rule 39A by which department has proposed a mechanism by which Taxpayer needs to submit Estimate of their income. Chamber has objected to the proposal and said that the proposal will take taxpayers back to 1987 era in which a similar provision was there. But even that provision was less harsher than proposed provision and it is unfair, burdensome and against the policy of EASY OF DOING BUSINESS. Text of the Representation is as follows :-
Ref. No.: 436/BM/2017-18 Dated: 25/09/2017
MR. SUSHIL CHANDRA
Central Board of Direct Taxes
Ministry of Finance,
New Delhi – 110 001.
Sub: Rule 39A
Pursuant to the Notification – F. No.370142/27/2017-TPL dated 19th September, 2017 comments and suggestions are invited from the public on the proposed Rule 39A.
At the first instance we do appreciate the gesture of the Finance Ministry to seek public opinion before the introduction of the new provision.
The Chamber of Tax Consultants (The Chamber), established in 1926, is one of the oldest non-profit organizations of tax practitioners, having Corporate, Chartered Accountants, Advocates, and Tax Practitioners as its members.
On basis of the feedback received from tax payers across the categories, The Chamber poignantly object the introduction of proposed Rule 39A and these provisions are to be expunge for following reasons‑
A similar provision under section 209A was on the Statute book till 1987. On revamping the system for payment of advance tax, said provision was deleted from the statute books by Direct Tax Laws (Amendment) Act, 1987. The revamped system has been successfully in place for 30 years. At this juncture, we wish to accentuate para 10.5 of the Circular No, 551 dated 2409-1989. Extracts of the circular reproduced as under:
“10.5 The old sections 209A and 212 contained detailed provisions which were different for old and new assessees in regard to filing of statement, estimate or revised estimates, etc. of advance tax payable by them, on the basis of which the assessees paid advance tax during the financial year. These provisions were very complex and became unnecessary under the new scheme of payment of advance tax introduced by the Amending Act, 1987, under which assessees have themselves to pay advance tax in three instalments. In case of default, a mandatory interest @ 2 per cent p.m. and in case of deferment of instalment of advance tax, a mandatory interest @ 11/2 per cent p.m. is to be charged in all cases under the provisions of the new sections 234B and 234C introduced by the Amending Act, 1987. The Amending Act, 1987 has, therefore, omitted sections 209A and 212, thus dispensing with the requirement of filing of statements/estimates of advance tax payable by the assessees. This saves the assessees as well as the Department from enormous paper work involved”
The new form proposed to be introduced is more complicated than the form prevalent at that point of time. The Revenue at that point of time has very aptly observed that withdrawal of requirement of submission of estimate and revise estimate of advance tax will save enormous paper work at both places i.e. tax payer and tax gatherer. Further withdrawal of submission of form was very well ring fenced for any loss of revenue with the introduction two-interest provisions u/s 234B & 234C.
It is therefore a plea that if charging of interest for late payment of advance tax or for short payment in a particular installment continues – with the increase in installments to four (even for a non-corporate tax payer) for the facilitation of revenue collection – then the need to file workings under Rule 39A is unfair and an unnecessary burden on assesses. It shall obliterate the very purpose of deleting section 209A. No reasons are given for reintroduction of an abandoned section
The foremost objective of the new government is to improve India’s ranking in ease of doing business. In 2017 & 2016 India ranks at 172th position out of 190 counties on “ease of paying taxes”. Compliance with tax laws is important to keep the system working for all and to support the programs and services that improve lives. One way to encourage compliance is to keep the rules as clear and simple as possible. Overly complicated tax systems are associated with high evasion. High tax compliance costs are associated with larger informal sectors, more corruption and less investment. Economies with simple, well-designed tax systems are able to help the growth of businesses and, ultimately, the growth of overall investment and employment. New research evidence shows that an important determinant of firm entry is the ease of paying taxes, regardless of the corporate tax rate. A study of 118 economies over six years found that a 10% reduction in the tax administrative burden—as measured by the number of tax payments per year and the time required to pay taxes—led to a 3% increase in annual business entry ratesl.
The financial information sought for in form 39A is an invasion of privacy. A lot of financial information is price sensitive for a listed entity and filing of such information would cause governance issues. The assessee would be providing information which has neither released to a Stock Exchange nor is in public domain and there is no guarantee that this information which is filed and lying in a folder will not be accessed in a price sensitive manner. Hence for larger listed entities, provision of such information is unfair and improper.
If the intent of the Scheme is self-reporting and then to insist on filing of such information defeats the purpose and creates an environment of lack of trust on an assessee.
You may appreciate that GDP, quarter after quarter is decelerating and various international agencies are also revising GDP estimates at lower end. These show that business is lacking exuberance for growth. D & B Business Optimism Index has fallen by 13.3% (y-o-y) during Q3 2017. At this economic juncture, introduction of new compliance is resulting in an over regulatory environment and with no benefit to the stake holders. An assessee is being obligated to pay taxes in advance right from the month of June and shortfalls for the amount of every installment of advance tax is mulcted with the liability to pay interest. He is thereafter asked to file detailed explanations and of information that is privy is unfair, burdensome and against the policy of EASY OF DOING BUSINESS. There cannot be two views that low tax compliance cost and efficient procedures can make a big difference.
We trust proposed provisions would be dropped before their introduction for the various reasons set out above.
|For THE CHAMBER OF TAX CONSULTANTS|
AJAY R. SINGH
|LAW & REPRESENTATION COMMITTEE|
CC to: DR. HASMUKH ADHIA
Ministry of Finance
Department of Revenue 128-A,
North Block New Delhi – 110 001
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