Recently, the Hon’ble Delhi HC in its Judgement dated 8.11.2017 in the case of Chamber of Tax Consultants v. Union of India has struck down certain paras of the ICDSs to the extent as noted in the said Judgement as ultra vires the Income-tax Act, 1961. The impugned notification Nos. 87 and 88 dated 29th September 2016 and Circular No. 10 of 2017 issued by the CBDT are also held to be ultra vires the Act and struck down as such. Issues in the implementation of ICDS:

Coordination between specialised bodies set up by the Government of India

It is pertinent that the notified ICDS have prescribed an approach for deriving income different from Accounting Standards (AS) and Indian Accounting Standards (Ind AS) which are global bench marked Standards for determination of true and fair profits. This is achieved by AS/Ind AS notified by National Advisory Committee on Accounting Standards (NACAS), a body set up under the Companies Act by the Ministry of Corporate Affairs, Government of India. Hence, it is requested that there should be proper coordination between specialised bodies set up by the Government of India . In the absence of coordination, the gap would widen and situation would get complicated for tax payers.

Significant difference between the provisions of ICDS and Judicial pronouncements

The preamble states that if there is any conflict between the provisions of the Act and the ICDS, the latter will prevail. ICDSs, at many places, differ significantly from decisions pronounced by the Supreme Court and High Courts [ viz Bharat Earth Movers Ltd – 245 ITR 428 (SC); Sakthi trading Company – 250 ITR 871 (SC); East Coast Construction I Ltd – 283 ITR 297 (Mad) P & C constructions P Ltd – 218 ITR 113 (Mad); East Coast Construction I Ltd – 283 ITR 297 (Mad) etc.]

Implementation of ICDS – Non-desirable – A whole new set of standards being burdensome for taxpayers and would create confusion

Implementation of ICDS has been a matter of utmost concern not only for assessees, chartered accountants but also the Department officials. In various representations made by ICAI, it has been respectfully submitted that a whole new set of standards would create confusion, increase complexity and drastically reduce the ease of doing business in India, which is not desirable.

No need of ICDS for Ind AS compliant companies

Applicability of Ind As has tax impact only on Book Profit and not under normal tax. Section 115JB has been amended for Ind As companies and hence argument of need of ICDS for Ind As companies is not correct.

With the country resounding the ‘Ease of business’ slogan, the emphasis needs to be laid on  Simplification of tax laws in India’. Ease of complying with law would ensure speedy and effective justice. The notified ICDS has more questions than answers. There are apparent contradictions with the Act and within itself. The attendant confusion has the power to slow down the justice which effectively translates in denial of taxpayer rights. ICDS should not obscure the original fabric of the Act.

ICAI firmly believes that the principle of “ease of doing business” should be followed holistically and there should be only one set of accounting standards and different departments of the Government should work for “One Nation One Standard” like Government has created history by successfully implementing and enacting the much awaited GST law “one nation one tax” regime.


In view of aforesaid and the recent Judgement of the Hon’ble Delhi HC dated 8.11.2017, it is requested that the ICDSs should not be implemented.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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June 2021