Statutory Update for November, 2022 Examination

The June 2021 edition of the Study Material is based on the provisions of income- tax law,
as amended by the Finance Act, 2021. The relevant assessment year for November 2022
examination is A.Y.2022-23. The significant notifications/circulars issued upto 30th April 2022,
relevant for November 2022 examination but not covered in the June 2021 edition of the Study
Material, are given hereunder:
Chapter 7: Capital Gains

Computation of Fair Market Value of Capital Assets for the purposes of section 50B
[Rule 11UAE]
As per section 50B(2)(ii), in relation to capital assets being an undertaking or division
transferred by way of slump sale, fair market value of the capital assets as on the date of
transfer, calculated in the prescribed manner, shall be deemed to be the full value of the
consideration received or accruing as a result of the transfer of such capital asset.
Accordingly, the CBDT has prescribed that, for the purpose of section 50B(2)(ii), the fair
market value (FMV) of capital assets would be the higher of –
(i) FMV 1, being the fair market value of capital assets transferred by way of slump sale;
and
(ii) FMV 2, being the fair market value of the consideration (monetary and non-
monetary) received or accruing as a result of transfer by way of slump sale
Note – Notification No.68/2021 dated 24.5.2021, to the extent relevant at Intermediate level,
has been included in this Statutory Update.
Note - It may be noted that the ULIP related provisions under section 2(14), section 45(1B)
and section 112A (definition of equity oriented fund) discussed in Unit 4 Chapter 4 Capital
Gains and the ULIP related provisions under section 10(10D) discussed along with deduction
under section 80C in Chapter 7 Deductions from gross total income in the June, 2021 edition
of the Study Material are not applicable for Intermediate examinations. Hence, students are
advised to ignore the ULIP related provisions discussed in the above sections in the
Study Material.

Chapter 9: Advance Tax, TDS and Introduction to TCS

Notification of “Specified bank” and manner of computing total income and deducting
tax under section 194P [Notification No.98/2021 and 99/2021 dated 2 nd September, 2021]
Section 194P requires deduction of tax at source on the basis of rates in force by a specified
bank, being a banking company as notified by the Central Government, on the total

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 income of specified senior citizen for the relevant assessment year, computed after giving
effect to -
- deduction allowable under Chapter VI-A; and
- rebate allowable under section 87A

Accordingly, the CBDT has, vide Notification No.98/2021 dated 2.9.2021, notified specified
bank to mean a banking company which is a scheduled bank and has been appointed as
agents of RBI under section 45 of the RBI Act, 1934.
A specified senior citizen is exempted from filing his return of income for the assessment year
relevant to the previous year in which the tax has been deducted under section 194P.
“Specified Senior Citizen” means an individual, being a resident in India, who
- is of the age of 75 years or more at any time during the previous year;
- is having pension income [Also, he should have no other income except interest income
received or receivable from any account maintained by such individual in the same
specified bank in which he is receiving his pension income]; and
- has furnished a declaration to the specified bank containing such particulars, in
the prescribed form and verified in the prescribed manner.

The CBDT has, vide Notification No.99/2021 dated 2.9.2021, provided that on furnishing of
such declaration in the prescribed form by the specified senior citizen, the specified bank has
to compute the total income of such specified senior citizen for the relevant assessment year
and deduct income-tax on such total income on the basis of the rates in force, after giving
effect to the deduction allowable under Chapter VI-A and rebate allowable under section
87A. The effect to the deduction allowable under Chapter VI-A has to be given based on
the evidence furnished by the specified senior citizen during the previous year.
The declaration given in the prescribed form and evidence submitted for claiming deduction
under Chapter VI-A by the specified senior citizen has to be properly maintained by the
Specified Bank and made available to the Principal Chief Commissioner of Income-tax or
Chief Commissioner of Income-tax, as and when required.
Guidelines under section 194Q of the Income-tax Act, 1961 [CBDT Circular No.13/2021
dated 30th June, 2021]
The Finance Act, 2021 has inserted new section 194Q in the Income-tax Act 1961 which is
effective from 1.7.2021. It applies to any buyer who is responsible for paying any sum to any
resident seller for purchase of any goods of the value or aggregate of value exceeding ` 50
lakhs in any previous year. The buyer, at the time of credit of such sum to the account of the

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 seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to
0.1% of such sum exceeding ` 50 lakhs as income tax.
“Buyer” is defined to be person whose total sales or gross receipts or turnover from the
business carried on by him exceed ` 10 crore during the financial year immediately preceding
the financial year in which the purchase of goods is carried out. The Central Government has
been authorised to specify, by notification in the Official Gazette, person who would not be
considered as buyer for the purposes of this section.
Section 194Q(3) empowers the CBDT (with the approval of the Central Government) to issue
guidelines for the purpose of removing difficulties. In exercise of power contained under
section 194Q(3), the CBDT has, with the approval of the Central Government, issued the
following guidelines. These guidelines at some places also removes difficulties in
implementing the provisions of section 194-O and section 206C(1H) using power contained in
section 194-O(4) and section 206C(1-I), respectively.
Guidelines
1. Applicability on transactions carried through various Exchanges
There are practical difficulties in implementing the provisions of TDS contained in section 194 -
Q in case of certain exchanges and clearing corporations. In these transactions, sometimes,
there is no one to one contract between the buyers and the sellers.
In order to remove such difficulties, it is provided that the provisions of section 194Q shall not
be applicable in relation to,-
(i) transactions in securities and commodities which are traded through recognized stock
exchanges or cleared and settled by the recognized clearing corporation, including
recognized stock exchanges or recognized clearing corporation located in International
Financial Service Centre (IFSC)
(ii) transactions in electricity, renewable energy certificates and energy saving certificates
traded through registered power exchanges.
2. Calculation of threshold for the F.Y. 2021-22
Section 194Q has come into effect from 1st July, 2021. Accordingly, as regards the manner of
computation of threshold of ` 50 lakh specified under this section, it is clarified that since the
threshold of ` 50 lakhs is with respect to the previous year, calculation of sum for triggering
TDS u/s 194Q shall be computed from 1 st April, 2021. Hence, if a person being buyer has
already credited or paid ` 50 lakhs or more up to 30th June 2021 to a seller, TDS u/s 194Q
shall apply on all credit or payment during the previous year, on or after 1st July 2021, to such
seller.

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 As regards whether tax is required to be deducted in respect of advance paid before 1 st July
2021 and sum credited thereafter, it is clarified that since section 194Q mandates buyer to
deduct tax on credit of sum in the account of seller or on payment of such sum, whichever is
earlier, the provisions of this section shall not apply on any sum credited or paid before 1st
July 2021. If either of the two events had happened before 1st July 2021, that transaction
would not be subjected to the provisions of section 194Q.
3. Adjustment for GST, purchase returns
As regards whether adjustment is required to be made for GST or purchase returns for the
purpose of tax deduction u/s 194Q vide Circular No.17/2020 dated 29.9.2020, it was clarified
that no adjustment on account of GST is required to be made for collection of tax under
section 206C(1H), since the collection is made with reference to receipt of amount of sale
consideration.
However, the situation is different so far as TDS is concerned. It has been clarified in Circular
No.23/2017 dated 19th July 2017 as under -
"wherever in terms of the agreement or contract between the payer and the payee, the
component of 'GST on services' comprised in the amount payable to a resident is indicated
separately, tax shall be deducted at source under Chapter XVII-B on the amount paid or
payable without including such 'GST on services' component. GST for these purposes shall
include Integrated Goods and Services Tax, Central Goods and Services Tax, State Goods
and Services Tax and Union Territory Goods and Services Tax."
Accordingly, with respect to TDS u/s 194Q, it is clarified that when tax is deducted at the time
of credit of amount in the account of seller and in terms of the agreement or contract between
the buyer and the seller, the component of GST comprised in the amount payable to the seller
is indicated separately, tax shall be deducted u/s 194Q on the amount credited without
including such GST. However, if the tax is deducted on payment basis because the payment is
earlier than the credit, the tax would be deducted on the whole amount as it is not possible to
identify that payment with GST component of the amount to be invoiced in future.
Further, with respect to purchase return it is clarified that the tax is required to be deducted at
the time of payment or credit, whichever is earlier. Thus, before purchase return happens, the
tax must have already been deducted u/s 194Q on that purchase. If that is the case and
against this purchase return, the money is refunded by the seller, then, this tax ded ucted may
be adjusted against the next purchase against the same seller. No adjustment is required if
the purchase return is replaced by the goods by the seller as in that case the purchase on
which tax was deducted under section 194Q has been completed with goods replaced.

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 4. Whether non-resident can be buyer under section 194Q?
As regards whether the provisions of section 194Q would apply to a buyer being a non -
resident, it is clarified that the provisions of section 194Q shall not apply to a non-resident
whose purchase of goods from seller resident in India is not effectively connected with the
permanent establishment of such non-resident in India. For this purpose, "permanent
establishment" shall mean to include a fixed place of business through whi ch the business of
the enterprise is wholly or partly carries on.
5. Whether tax is to be deducted when the seller is a person whose income is
exempt?
As regards whether the provisions of section 194Q would apply to a seller whose income is
exempt, it is clarified that the provisions of section 194Q would not apply on purchase of
goods from a person, being a seller, who as a person is exempt from income tax under the Act
(like person exempt under section 10) or under any other Act passed by the Parliament (Like
RBI Act, ADB Act etc.).
Similarly, with respect to section 206C(1H), it is clarified that the provisions thereof would not
apply to sale of goods to a person, being a buyer, who as a person is exempt from income-tax
under the Act (like person exempt under section 10) or under any other Act passed by the
Parliament (like RBI Act, ADB Act etc.).
The above clarifications would not apply if only part of the income of the person (being a seller
or being a buyer, as the case may be) is exempt.
6. Whether tax is to be deducted on advance payment?
As regards whether the provisions of section 194Q would apply to advance payment made by
the buyer, it is clarified that since the provisions apply on payment or credit whichever is
earlier, the provisions of section 194Q shall apply to advance payment made by the buyer to
the seller.
7. Whether provisions of section 194Q shall apply to buyer in the year of
incorporation?
As regards whether the provisions of section 194Q shall apply to a buyer in the year of its
incorporation, it is clarified that u/s 194Q, a buyer is required to have total sales or gross
receipts or turnover from the business carried on by him exceeding ` 10 crore during the
financial year immediately preceding the financial year in which the purchase of goods is
carried out. Since this condition would not be satisfied in the year of incorporation, the
provisions of section 194Q shall not apply in the year of incorporation.

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 8. Whether provisions of section 194Q shall apply to buyer if the turnover from
business is ` 10 crore or less?
As regards whether the provisions of section 194Q would apply to a buyer who has turnover or
gross receipts exceeding ` 10 crore but total sales or gross receipts or turnover from business
is ` 10 crore or less, it is clarified that, for the purposes of section 194Q, a buyer is required to
have total sales or gross receipts or turnover from the business carried on by him exceeding
` 10 crore during the financial year immediately preceding the financial year in which the
purchase of goods is carried out. Hence, the sales or gross receipts or turnover from business
carried on by him must exceed ` 10 crore. His turnover or receipts from non-business activity
is not to be counted for this purpose.
9. Cross application of section 194-O, section 206C(1H) and section 194Q
Clarification of how section 194-O, section 206C(1H) and section 194Q apply on the same
transaction.
Under section 194-O(3), a transaction in respect of which tax has been deducted by the e -
commerce operator under sub-section (1), or which is not liable to deduction under sub-
section (2), shall not be liable to tax deduction at source under any other provision of Chapter
XVII of the Act. Under the second proviso to section 206C(1H), provisions of this sub -section
shall not apply, if the buyer is liable to deduct tax at source under any other provisions of this
Act on the goods purchased by him from the seller and has deducted such tax.
Under section 194Q(5), the provisions of this section would not apply to a transaction on
which-
(i) tax is deductible under any of the provisions of this Act; and
(ii) tax is collectible under the provisions of section 206C, other than a transaction on which
section 206C(1H) applies
After conjoint reading of all these provisions, it is clarified that:
(i) If tax has been deducted by the e-commerce operator on a transaction u/s 194-O
[including transactions on which tax is not deducted on account of section 194-O(2)], that
transaction shall not be subjected to tax deduction u/s 194Q.
(ii) Though section 206C(1H) provides exemption from TCS if the buyer has deducted tax at
source on goods purchased by him, to remove difficulties, it is clarified that this
exemption would also cover a situation where, instead of the buyer, the e -commerce
operator has deducted tax at source on that transaction of sale of goods by seller to
buyer through e-commerce operator.

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 (iii) If a transaction is both within the purview of section 194-O as well as section 194Q, tax is
required to be deducted u/s 194-O and not u/s 194Q.
(iv) Similarly, if a transaction is both within the purview of section 194-O as well as section
206C(1H), tax is required to be deducted u/s 194-O. The transaction shall come out of
the purview of section 206C(1H) after tax has been deducted by the e-commerce
operator on that transaction. Once the e-commerce operator has deducted the tax on a
transaction, the seller is not required to collect the tax u/s 206C(1H) on the same
transaction. It is clarified that here primary responsibility is on e-commerce operator to
deduct the tax u/s 194-O and that responsibility cannot be condoned if the seller has
collected the tax u/s 206C(1H). This is for the reason that the rate of TDS u/s 194-O is
higher than rate of TCS u/s 206C(1H).
(v) If a transaction is both within the purview of section 194Q as well as section 206C(1H),
then, tax is required to be deducted u/s 194Q. The transaction shall come out of the
purview of section 206C(1H) after tax has been deducted by the buyer on that
transaction. Once the buyer has deducted the tax on a transaction, the seller is not
required to collect the tax u/s 206C(1H) on the same transaction. However, if, for any
reason, tax has been collected by the seller u/s 206C(1H), before the buyer could deduct
tax u/s 194Q on the same transaction, such transaction would not be subjected to tax
deduction again by the buyer. This concession is provided to remove difficulty, since tax
rate of deduction and collection are same in section 194Q and section 206C(1H).
Guidelines u/s 194-O, 194Q and 206C(1-I) [Circular No. 20/2021 dated 25.11.2021]
Adjustment of various state levies and taxes other than GST:
Treatment of tax deduction on GST component included in the invoice has been clarified vide
CBDT Circular No. 13/2021 dated 30.6.2021. This circular gives clarification in case of
purchase of goods which are not covered within the purview of GST, but which are subject to
VAT/Sales tax/Excise duty/CST.
Condition Amount on which tax is to be
deducted u/s 194Q
(i) Where tax is deducted at the time of Tax has to be deducted on the
credit of amount in the account of the amount credited (without including
seller such VAT/ Sales tax/ Excise
and duty/CST)
In terms of the agreement or contract
between the buyer and seller, component
of VAT/Sales tax/Excise duty/CST is
indicated separately in the invoice

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 (ii) Where tax is deducted on payment basis Tax has to be deducted on the whole
(if payment is earlier than the credit) amount (since it is not possible to
identify the payment with the tax
component to be invoiced in the future)
(iii) In case of purchase returns, where the Tax deducted earlier u/s 194Q on such
money is refunded by the seller purchase (which is now returned) may
be adjusted against the next purchase
from the same seller
(iv) In case of purchase returns, where goods No adjustment is required.
are replaced by the seller
Applicability of section 194Q in cases where exemption has been provided under
section 206C(1A)
Section 194Q does not apply in respect of transactions where tax is collectible u/s 206C
[except sale of goods under section 206C(1H)].
Section 206C(1H) requires to collect tax at source in respect of sale of goods other than
goods which have been covered u/s 206C(1)/ (1F)/(1G).
In accordance with section 206C(1A), tax is not required to be collected in the case of a
resident buyer who furnishes declaration to the effect that the goods u/s 206C(1) are to be
utilised for the purposes of manufacturing, processing or producing articles or things or for the
purposes of generation of power and not for trading purposes.
In case of goods which are covered u/s 206C(1) but exempted u/s 206C(1A), tax would not be
collectible u/s 206C(1)/(1H).
It is clarified that the provisions of section 194Q will apply in such cases covered under
section 206C(1A) and the buyer is to be liable to deduct tax u/s 194Q, if the conditions
specified therein are fulfilled.
Applicability of the provisions of section 194Q in case of department of Government not
being a public sector undertaking or corporation
To be considered as a buyer for the purposes of 194Q, such person should be carrying out a
business/commercial activity; and the total sales, gross receipts or turnover from such
business/commercial activity should be more than ` 10 crore during the financial year
immediately preceding the financial year in which goods are being purchased by such person.
Issue Would TDS u/s 194Q be attracted?
(i) Can Department of Government be a
“buyer” for the purposes of section 194Q?
- If it is carrying on business/ Yes
commercial activity (subject to fulfillment of other conditions)

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 - If it is not carrying on any No, since it will not be considered as a
business/commercial activity buyer
(ii) Can Department of Central/State No
Government be considered as “seller” for [Hence, no tax can be deducted u/s 194Q
the purpose of section 194Q? by the buyer]

Note - A Public sector Undertaking or corporation established under Central or State Act or
any other such body, authority or entity, would, however, be required to comply with the
provisions of section 194Q and tax shall be deducted accordingly.
Non-applicability of provisions of section 206C(1G) to a non-resident individual visiting
India [Notification No. 20/2022 dated 30.03.2022]
Tax is collectible u/s 206C(1G) by -
- an authorised dealer who receives amount under LRS of RBI for overseas remittance
from a buyer, being a person remitting such amount out of India; and
- a seller of an overseas tour package who receives any amount from the buyer who
purchases the package.
However, TCS u/s 206C(1G) would not be applicable, if the buyer is an individual who:
• is not a resident in India [in terms of section 6(1) and (1A)]; and
• who is visiting India.

Chapter 10: Provisions for filing return of income and self-assessment

“Other person” prescribed for verification of return of income in case of a company or

LLP [Section 140(c) and (cd)]
Section 140 specifies the persons authorised to verify returns of income in case of different
assessees, namely, individual, HUF, company, firm, LLP, local authority and political party.
In case of a company, clause (c) of section 140 requires the managing director thereof to
verify the return of income. Where for any unavoidable reason, such managing director is not
able to verify the return or where there is no managing director, any director of the company
or any other person prescribed for this purpose can verify the return.
In case of an LLP, clause (cd) of section 140 requires the designated partner thereof to verify
the return of income. Where for any unavoidable reason, such designated partner is not able
to verify the return or where there is no designated partner, any partner of the LLP or any
other person prescribed for this purpose can verify the return.

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 The CBDT has, vide Notification No.93/2021 dated 18.8.2021, specified that “any other person”
referred to in section 140(c) and 140(cd) shall be the person, appointed by the Adjudicating
Authority (i.e., National Company Law Tribunal constituted under section 408 of the
Companies Act, 2013) for discharging the duties and functions of an interim resolution
professional, a resolution professional, or a liquidator, as the case may be, under the
Insolvency and Bankruptcy Code, 2016 and the rules and regulations made thereunder.
Requirement of filing return of income u/s 139(1) by certain persons, when the quantum
of prescribed transactions exceed the prescribed monetary threshold [Notification No.
37/2022 dated 21.04.2022]
Clause (iv) to seventh proviso of section 139(1) provides that a person (other than a company
or a firm) who is not required to furnish a return u/s 139(1) has to furnish return on or before
the due date if the person fulfills such other conditions as may be prescribed.
Rule 12AB has been inserted vide this notification to prescribe the following other conditions
for furnishing return u/s 139(1). Accordingly, the persons referred to in column (2) of the table
below have to furnish their return u/s 139(1), in cases where the amount of prescribed
transaction (sales/turnover/gross receipts/TDS +TCS/aggregate of savings bank deposits, as
the case may be) referred to in column (3) exceed (> or ≥, as the case may be) the prescribed
monetary threshold in the corresponding row of column (4) of the table below:
Case Prescribed transaction(s) Prescribed Monetary
threshold
(1) (2) (3) (4)
(i) A person carrying on His total sales, turnover or > ` 60 lakhs during
business gross receipts, as the case the relevant P.Y.
may be, in the business
(ii) A person carrying on His total gross receipts in > ` 10 lakhs during
profession profession the relevant P.Y.
(iii) (a) A resident individual The aggregate of TDS and ≥ ` 50,000 during
who is aged ≥ 60 TCS in his case the relevant P.Y.
years at any time
during the relevant
P.Y.
(b) Any other person The aggregate of TDS and ≥ ` 25,000 during
TCS in his case the relevant P.Y.
(iv) A person having savings The deposit in one or more ≥ ` 50 lakhs during
bank account savings bank account of the the relevant P.Y.
person, in aggregate

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 Fee for subsequent intimation of Aadhaar [Notification No. 17/ 2022 dated 23.03.2022]
Under section 234H, where a person, who is required to intimate his Aadhar Number under
section 139AA(2), fails to do so on or before the notified date i.e., 31st March, 2022, he would
be liable to pay such fee, as may be prescribed, at the time of making intimation under section
139AA(2) after 31st March, 2022. However, such fee shall not exceed ` 1,000.
As per section 139AA(2), every person who has been allotted PAN as on 1 st July, 2017 and
eligible to obtain Aadhar Number, is required to intimate his Aadhaar number to the prescribed
authority in the prescribed form and manner.
Accordingly, the CBDT has, vide notification no. 17/2022 dated 29.3.2022, inserted Rule
114(5A) to provide that if such person fails to do so by the date notified in section 139AA(2)
i.e., 31st March, 2022, then, at the time of subsequent intimation of his Aadhaar number to the
prescribed authority, such person would be liable to pay, by way of fee, an a mount equal to,—
(a) ` 500, in a case where such intimation is made within three months from the date
referred in section 139AA(2) i.e., by 30.06.2022; and
(b) ` 1,000, in all other cases.
Clarification with respect to relaxation of provisions of Rule 114AAA prescribing the
manner of making PAN inoperative [Circular No. 7/2022 dated 30.03.2022 read with
Notification No. 17/ 2022 dated 23.03.2022]
Section 139AA(2) makes it mandatory for every person who has been allotted a PAN as on 1 st
July, 2017 to intimate his Aadhaar Number so that the Aadhaar and PAN can be linked. This is
required to be done on or before a notified date, failing which the PAN would become
inoperative.
Accordingly, in case of failure to intimate the Aadhaar Number by 31.03.2022, the PA N
allotted to the person would be made inoperative. Further, section 234H provides that where a
person who is required to intimate his Aadhaar under section 139AA(2) fails to do so on or
before a notified date, he would be liable to pay a fee not exceeding ` 1,000, as may be
prescribed, at the time of making intimation under section 139AA(2) after the said date.
Further, Rule 114AAA provides that if PAN of a person has become inoperative, he will not be
able to furnish, intimate or quote his PAN and would be liable to all the consequences under
the Act for such failure. This will have a number of implications such as: -
(i) The person would not be able to file return using the inoperative PAN
(ii) Pending returns will not be processed
(iii) Pending refunds cannot be issued to inoperative PANs

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 (iv) Pending proceedings as in the case of defective returns cannot be completed once the
PAN is inoperative
(v) Tax will be required to be deducted at a higher rate as PAN becomes inoperative
In addition to the above, the tax payer might face difficulty at various other fora like banks and
other financial portals, as PAN is one of the important KYC criterion for all kinds of financial
transactions.
As per Rule 114AAA(2), where a person, whose PAN has become inoperative under Rule
114AAA(1), is required to furnish, intimate or quote his PAN, it would be deemed that he has
not furnished, intimated or quoted the PAN, as the case may be, in accordance with the
provisions of the Act. Consequently, he would be liable for all the consequences under the Act
for not furnishing, intimating or quoting the PAN.
In order to have smooth application of section 234H and existing rule 114AAA, it is clarified
that the impact of Rule 114AAA(2) would come into effect from 1 st April, 2023; and the period
from 1st April, 2022 to 31 st March, 2023, would be the period during which Rule 114AAA(2)
would not have its negative consequences.
However, the tax payer would be liable to pay a fee in accordance with section 234H read with
Rule 114(5A).
Note - The last date for intimating Aadhaar number under the Income-tax Act, 1961 for the
purposes of linking Aadhaar with PAN has been extended from 30th June, 2021 to 31st March,
2022 [Section 139AA] [Refer page no. 10.26 of the June, 2021 edition of the Study Material].

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