No re-opening pre-April 1 tax cases: Govt

In a bid to mollify harried foreign investors, Finance Minister Pranab Mukherjee today reiterated that assessments that have already been completed will not be reopened by the income tax department under the retrospective amendments proposed in the Finance Act, 2012.

Further, the minister said the department has also done away with the cascading impact of tax deducted at source (TDS) that was introduced in the Budget on sale of software.

The Central Board of Direct Taxes (CBDT) has written to all chief commissioners of income tax and director generals of international taxation clarifying that cases where assessment proceedings had been finalised before April 1, 2012 would not be opened.

“The board…directs that in case where assessment proceedings have been completed under section 143(3) of the act, before April 1, 2012, and no notice of reassessment has been issued prior to that date, then such cases shall not be reopened under section 147/148 of the Act on account of the clarificatory amendments introduced in the Finance Act, 2012,” the CBDT said in an internal communication to its officers.

The amendment is likely to impact around 10 cases that are pending at various levels, including Euro Pacific Securities Ltd, Cairn UK Holding Ltd, Unilever HPC Finance Service Inc. USA, Accenture Services Pvt Ltd, Tata

Industries Ltd and AT&T, Mcleod Russel India, SAB Miller (A&A), and Sanofi Pasteur Holding SA. The total gain for the exchequer is likely to be around Rs 15,000 crore.

“I gave a commitment in Parliament with regard to retrospective amendments that CBDT will issue a policy circular to clarify that in cases where assessment proceedings have become final before first day of April 2012, such cases shall not be reopened,” Mukherjee said at an event here.

s a reprieve to software distributors, Mukherjee announced that the income tax department will soon issue a circular to avoid multi-level taxation of software. “On the advice of (the advisory) group and Nasscom, I have approved issuance of a circular to avoid multi-level TDS on software under section 194 J (of the Income Tax Act). This will remove hardship in case of software distributors,” he said. Section 194-J of the I-T

Act deals with fees for professional and technical services and covers royalty and non-competence fees.

The issue was also flagged after a meeting last week of the advisory group relating to transfer pricing and International taxation and the NASSCOM, Mukherjee said. Som Mittal, President, NASSCOM said the move to resolve the current issues of multi-level TDS on packaged software products under ‘Section 194J’ of the IT Act was a positive step forward that provided a boost to the software industry, especially the smaller software distributors. “While we await the detailed circular, this announcement will help to alleviate industry concerns on this issue,” he said.

On the major issue of transfer pricing and international taxation, he said the advisory group constituted by the Finance Minister has held its first meeting on May 25 and the issues are expected to be taken up in due course. “The fact that we’re engaging on the issue is in itself a positive outcome,” he told The Indian Express.

The budget proposals required captive BPOs to re-compute their taxable profits based on transfer pricing guidelines, without adequate safe harbour provisions. Safe harbour provisions essentially enable the income tax authorities to accept the transfer pricing — the price at which one arm of a company, usually a multinational corporation, transfers goods or services to another division of the same organisation — returns without scrutiny.

This article was originally published on Indian Express | ENS Economic Bureau : New Delhi, Wed May 30 2012, 00:27 hrs