Webcast on recent changes in form 3CD AY 2018-19

20th August 2018

CA. D K Bholusaria

Disclaimer

This presentation has been prepared for academic use only for sharing knowledge on the subject. Though every effort has been made to avoid errors or omissions in this presentation yet any error or omission may creep in.

It is suggested that to avoid any doubt the user should cross check the correctness of text, contents and the law with the original documents and to dispel confusion should seek professional help/opinion.

Agenda for webcast

Today’s agenda

Notification and legal provisions

Changes in brief

Detailed analysis of changes

Queries of the viewers

Law

Notification and effective dateSection 139

Notification

CBDT Notification No. 33/2018 dated 20th July 2018

Effective from 20th August 2018

Effective date of notifications

Till 19th

August 2018

Old Notification

From 20th

August 2018

New Notification

New utility has been made available

Frequently asked questions on date of applicabilityQ1: Can I digitally upload tax audit in form 3CD

in old format till 19th August 2018?A: Yes, pre-revised forms shall remain valid till

19th August 2018.

Q2: Can department later on ask for revised form 3CD if I upload old form 3CD till 19th

August 2018?A: No. CBDT on previous occasion had “clarified”

a position similar to this, in its order u/s 119dated 26/09/2014, that audit report filed inpre-revised format, prior to new notificationshall be treated as valid tax audit report.

F.No.153/53/2014-TPL (Pt.I) dated 26/09/2014Relevant extracts from order u/s 119:

“1. … Vide Notification No. 33/2014 dated 25th July,2014, the forms for filing tax audit report have beenrevised…”

“2. ...It has been further clarified that the tax auditreport filed during the period from 01.04.2014 to24.07.2014 in the pre-revised forms shall be treatedas valid tax audit report under section 44AB.”

Frequently asked questions on date of applicabilityQ3: Can I upload audit report for AY 2017-18 in

in old format after 19th August 2018?A: No, audit report of any assessment year

(including prior to AY 2018-19) needs to be uploaded in new format only.

Q4: I signed physical 3CD on 1st August, 2018, but due to some reasons could not upload it. Can I upload after 19th in old format?

A: In presenter’s opinion, it can not be!

Detailed analysis of key changes

Registration details of indirect taxesClause 4

Clause 4 – Indirect tax registrations

• Now you are also required to disclose your all GSTINs in addition to other indirect tax registration / identification numbers.

• GSTINs obtained during FY 2017-18 are relevant.

• Even ISD registration is required to be disclosed.

What about number obtained for TDS under GST?

Deduction for investment in new plant or machineryClause 19 and 24

Clause 19 & 24 - Section 32AD

• Disclosure with regard to section 32AD has beenadded in these clauses to Form 3CD.

• Allowance or Deemed gains u/s 32AD to bedisclosed in appropriate clause.

• This section allows deduction in respect ofinvestment made in new plant or machinery innotified backward areas of Andhra Pradesh,Bihar, Telangana and West Bengal.

• This section was inserted by the Finance Act, 2015 w.e.f 1-04-2016

Section 43B:Sum payable to Indian Railways for use of assetsClause 26

Clause 26 – Section 43B(g)

• Section 43B(g) has been added by Finance Act,2016 for reporting under this clause which pertainsto allowing of liability outstanding towards IndianRailways for use of their assets, on actual paymentbasis.

• Corresponding changes already carried out in ITRs(Schedule OI) as well.

Section 56(2)(ix) & 56(2)(x)New clauses 29A and 29B

New clause 29A and 29B

• This clause is triggered if any income is chargeable:

• u/s 56(2)(ix) : Advance received on capital asset forfeited

• u/s 56(2)(x): Income of gifts exceeding INR 50,000

• Following details to be disclosed:

• Nature of Income• Amount (in Rs.)

FAQs on clause 29A & 29B

Q1: Is auditor responsible for income in personal books of auditee (in case of individuals)?

A: No, auditor’s responsibility is restricted to examination of books of accounts (and connected material) of business audited by him.

Q2: What precautions an auditor should take?A: Auditor must give proper disclosure, specify

scope of audit, following SA 700. He must alsospecify reasons in his report if he is unable toreport on a particular clause.

Section 269STClause 31(ba) to (bd)

269ST: Bare Provisions269ST. Mode of undertaking transactionsNo person shall receive an amount of two lakh rupees or more—

a) in aggregate from a person in a day; orb)in respect of a single transaction; orc) in respect of transactions relating to one event or

occasion from a person,

otherwise than by an account payee cheque or anaccount payee bank draft or use of electronicclearing system through a bank account:

269ST: Bare Provisions…Provided that the provisions of this section shall not apply to—

i. any receipt by—a) Government;b) any banking company, post office savings bank or co-operative

bank;ii. transactions of the nature referred to in section 269SS;iii. such other persons or class of persons or receipts, which the Central

Government may, by notification in the Official Gazette, specify.

Explanation.—For the purposes of this section,—

a) "banking company" shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;

b) "co-operative bank" shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.

Notification No. 57 /2017

a) receipt by a business correspondent on behalf of a banking company orcooperative bank, in accordance with the guidelines issued by the ReserveBank of India;

b) receipt by a white label automated teller machine operator from retail outletsources on behalf of a banking company or co-operative bank, inaccordance with the authorisation issued by the Reserve Bank of India underthe Payment and Settlement Systems Act, 2007 (51 of 2007);

c) receipt from an agent by an issuer of pre-paid payment instruments, inaccordance with the authorisation issued by the Reserve Bank of India underthe Payment and Settlement Systems Act, 2007 (51 of 2007);

d) receipt by a company or institution issuing credit cards against bills raised inrespect of one or more credit cards;

e) receipt which is not includible in the total income under clause (17A) ofsection 10 of the Income-tax Act, 1961.

Provision of section 269ST shall not apply to the following-

Section 10(17A)

Any payment made, whether in cash or in kind -

i. in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or

ii. as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest;

Clarification – Circular 22/2017

“…3. It is clarified that in respect of receipt in the natureof repayment of loan by NBFCs or HFCs, the receiptof one instalment of loan repayment in respect of aloan shall constitute a ‘single transaction’ asspecified in clause (b) of section 269ST of the Actand all the instalments paid for a loan shall not beaggregated for the purposes of determiningapplicability of the provisions section 269ST.”

Changes in respect of Sec. 269ST

Particulars of each receipt in an amount exceeding the limit specified in section 269ST, in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, during the previous year:

➢ sub-clause (ba): where such receipt is otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account – Non Banking channel mode i.e. Cash or Wallets etc.

➢ sub-clause (bb): received by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year - Banking channel mode but non- account payee cheques etc.

Changes in respect of Sec. 269ST

Particulars of each payment made in an amount exceeding the limit specified in section 269ST, in aggregate to a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion to a person, during the previous year:

➢ sub-clause (bc): otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account – Non Banking channel mode i.e. Cash or Wallets etc.

➢ sub-clause (bd): made by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year - Banking channel mode but non- account payee cheques etc.

Googlies in 269ST

• Even though section 269ST is applicable on receipt side, but auditor is obliged to report transactions from payment side as well.

• Reporting for payment u/s 269ST will not trigger any penalty u/s 269ST for payer but “MAY” trigger reporting for section 40A(3)/32 and consequences shall follow.

• This new reporting requirement is on the line of reporting required for section 269T to be reported by lender (Since last year).

Section 2(22)(e)Deemed DividendNew clause 36A

Section 2(22)(e)

Under the provisions of this section -• Where any company, in which public are not

substantially interested - [basically “closely held companies”]

• Makes any payment by way of loan or advance• To any person who holds not less than 10 percent

voting power or to any other person in which such shareholder has substantial interest,

• Then such payment to the extent of accumulated profits, will be treated as deemed dividend.

Clause 36A: Deemed dividend

• If the assessee has received any amount in thenature of dividend as referred to in section2(22)(e), then following disclosures are required –(i) Amount received (in Rs.):(ii) Date of receipt:”;

• Till AY 2018-19, deemed dividend is taxable in the hands of shareholders at maximum marginal rate.

• W.e.f. AY 2019-20, deemed dividend shall be taxable as DDT u/s 115-O in the hands of closely held companies.

Rule 114B~115EForm 61, 61A, 61BNew clause 42

Rule 114B/114D

114B: Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of Section 139A(5)(c)

114D: Time and manner in which persons (read auditee) shall furnish a statement containing particulars of Form No. 60 –Basically persons who are required to get accounts audited.

Form 61: To be filed electronically half yearly capturing details from Form 60.

Rule 114E: SFT

Rule 114E -• Statement of financial transactions (SFT) under

section 285BA(1)

Form 61A -• To be filed annually by May 31st every year. • Different SFTs to be filed for different kinds of

transactions.• Heavy penalties for non-compliances

Clause 42 - 3CD reporting

Income-tax Department Reporting Entity Identification Number

Type of Form

Due date for furnishing

Date of furnishing, if furnished

Whether the Form contains information about all details/ transactions which are required to be reported. If not, please furnish list of the details/transactions which are not reported

42. (a) Whether the assessee is required to furnish statement in Form No.61 orForm No. 61A or Form No. 61B? (Yes/No)

(b) If yes, please furnish:

TDS Compliance reportingClause 34(b)

Changes in Clause 34(b)

Old Clause New Clause Comments

Whether the statement of tax deducted or collected contains information about all transactions which are required to be reported

Whether the statement of tax deducted or collected contains information about all details /transactions which are required to be reported.

If not, please furnish list of details /transactions which are not reported.

Till now you could simply say yes or no.

Now you are supposed to provide complete details of transactions which escaped reporting.

Expenditure with respect to GSTNew clause 44

Deferment of clause 44

This clause 44 along with clause 30C on GAAR has been deferred till March 31, 2019

Clause 44 - GST

• Details in respect of expenditure on or after 1st July, 2017 to be filled up by the assessee who is liable to get accounts audited u/s 44AB.

• Break-up of total expenditure with entities registered or not registered under the GST to be provided.

• Reporting entity is registered under GST or not is immaterial.

• Corresponding schedule GST in ITR 6 for companies who are not required to get audit u/s 44AB, but no such schedule in form 3 or 5.

Clause 44 – Details required

1. Total amount of Expenditure incurred during the year

2. Expenditure in respect of entities registered under GST 1. Relating to goods or services exempt from GST 2. Relating to entities falling under composition scheme3. Relating to other registered entities 4. Total payment to registered entities (should be sum

total of 1, 2 and 3

3. Expenditure relating to entities not registered under GST

Clause 44Total Expenditure

incurred

(e.g., INR 100)

Expenditure in relation to Registered

Suppliers

(e.g. INR 70)

Exempt Supplies from registered suppliers

(e.g. INR 10)

Supplies from Composition Taxable

Persons

(e.g. INR 20)

Taxable Supplies from Non-Composition

Registered Taxable Person

(e.g. INR 40)

Expenditure in relation to Unregistered

Suppliers

(e.g., INR 30)

Some food for thought

• Salaries: Exempt GST supply or supply by unregistered suppliers or not to disclose?

• Reimbursements – To be treated as part of salary or to further dive deep?

• What if expenses have been netted off?• Are clients ready for this level of disclosure?• Are auditors ready/prepared to complete this

mammoth exercise?• Can/should auditors give disclaimer? Can auditor

apply concepts of materiality and audit sampling? [Reputation of auditors already at all time low ]

Questions

Slide No. 47

Thanks for your time!