Summary of ​Report of Easwar Committee to Simplify Income-tax provisions

The Central Government issued Notification NoA.50050/112/2015-Ad.I dated 27th October, 2015 constituting a 10-Member Committee under the chairmanship of Justice R.V. Easwar, Former Judge of the Delhi High Court and Former President of the Income Tax Appellate Tribunal with the following broad objectives:

(i) to study and identify the provisions/phrases in the Income Tax Act which have given rise to litigation on account of interpretative differences;

(ii) to study and identify the provisions which impact the ease of doing business;

(iii) to study and identify the provisions of the Act for simplification in light of the existing jurisprudence, and

(iv) to suggest alternatives or modifications with a view to ensuring certainty and predictability in tax laws without substantially impacting the tax base or revenue collections.

The committee has come out with the first phase of its report which has been hosted on this website for comments.

EXECUTIVE SUMMARY

Recommendations to check or curb litigation/facilitate speedier disposal

(a) Amendments to provide that in cases where shares are shown as capital assets and held for one year or less, the Assessing Officer will not re-characterise the surplus on sale as business income, provided the surplus in a year is rupees five lakhs or less; in case they are held for a period more than one year, and shown as capital assets (and not as stock-in-trade), surplus to be taxed as long-term capital gains.

(b) Amendments to Section 14A to provide that (i) dividend received after suffering dividend-distribution tax and share income from firm suffering tax in the firm’s hands will not be treated as exempt income and no expenditure will be disallowed as relatable to them; (ii) expenditure disallowed shall not exceed the amount claimed. Recommendation for issue of executive instructions that no interest be disallowed if source of investment is directly relatable to taxable income.   Simplify Section 14A to remove ambiguity

(c) Amendments to Section 50C to bring it in line with Section 43C so far as it relates to agreements for sale of property executed prior to the date of registration of sale deed, fixing the sale price.

(d) Amendment to Section 56(2)(viib)(ii) to eliminate taxation of the purchaser of the property on the amount of difference between the sale price and the stamp-duty value.

(e) No re-opening or revision of assessments under sections 147 and 263 respectively merely on the basis of audit objections.

(f) Amendment to Section 255(3) to enhance the monetary limit for SMC cases before the Tribunal to rupees one crore from the present rupees 15 lakhs.

(g) Amendment to Section 254(2) to reduce the time-limit for rectification of orders of the Tribunal from the present four years to 120 days.

(h) No penalty for concealment (i) if assessee has taken a bona fide view of a provision enabling a claim etc. or on the basis of any judicial ruling of any Tribunal, High Courts or Supreme Court and (ii) if any addition or disallowance is made ad hoc on assumptions or without evidence.

(i) Deletion of section 143(1D) – Avoiding undesirable delay in issue of refunds

(j) Making of fresh claim during assessment proceedings

(k) Stay of disputed demand under certain circumstances

(l) Prescribing time limit for disposal of petitions for waiver of penalty and interest under sections 273A, 273AA and 220(2A)

Recommendations to promote ease of doing business and simplify procedures‑

(a) Enhancement and rationalisation of the threshold limits and reduction of the rates of TDS. TDS rates for individuals & HUFs to be reduced to 5% as against the present 10%.

(b) Simplification & rationalisation of the provisions of Section 197 and Rules for lower or non-deduction of TDS, aimed to improve ease of doing business.

(c) Proposal for certain amendments in rules 28, 28AA and 28AB to resolve practical difficulties faced by persons granted certificates for lower deduction under section 197

(d) Proposal for certain amendments in rule 37BA to obviate hardships arising in relation to claiming of credit for tax deducted under section 199

(e) Proposal for certain amendments in rule 30 and 31 in relation to time and mode of payment of TDS and filing of statement of TDS under the provisions of section 200

(f) Rationalisation of the provisions for maintenance of books of account and tax audit.

(g) A presumptive income scheme for professionals

(h) Deferment of ICDS

(i) Exemption to non-residents not having Permanent Account Number (PAN), but who furnish their Tax Identification Number (TIN) in their country of residence from the applicability of TDS at a higher rate under section 206AA

(j) Amendment to section 234C to provide relief where a new business is started during the financial year

(k) Grant of timely refund with interest and also providing for payment of higher interest in case of delayed refund

(l) Rationalization of the provisions relating to set off of refunds due to an assessee

(m) Release of property attached under section 281B on submission of bank guarantee

Download Report

All stakeholders have been requested to e-mail their comments/views on the proposals to [email protected] or send by post to Room No 1604, 16th Floor, Block E-@, Pratyaksha Kar Bhavan, DR. S.P.M Civic Centre, Jawaharlal Nehru Matg, New Delhi 110002. The Comments/views should reach the committee not later than 23rd January, 2016.

The committee will be finalizing and submitting the report it to the Central Government before 31st Januray,2016.