Capital asset converted into stock-in-trade,Amounts not credited to the profit and loss account,Various deductions including depreciation, Tax loss deduction, Tax Incentive deductions
Clause 15 - Capital asset converted into stock- in-trade
15. Give the following particulars of the capital asset converted into stock-in- trade:-
(A) Description of capital asset;
(B) Date of acquisition
(C) Cost of acquisition
(D) Amount at which the asset is converted into stock-in-trade
Clause in TAR reads as under -
Remarks
1. Background – A phenomenon of converting a capital asset into stock- in-trade exists in Income-tax. In yesteryears, the difference between the cost of a capital asset and market value on conversion was held not taxable under the head “Business Income” since, for finding out business income, it was thought essential to record the stock- in-trade at market value. To overcome the plausible tax loss, section 45(2) was introduced. An obligation was cast upon the Tax Auditor to provide details of the said transaction.
2. Relevant sections and scope in Tax Audit Report (‘TAR’) – We need to consider sections 45(2) and 2(47) of the Income-tax Act, 1961 (‘the Act’) in this context. Section 45(2) of the Act refers to two different situations, first of “conversion” and second of “treatment” of a capital asset into stock-in-trade. The wording in clause-16 refers to merely the “conversion” phenomenon. The clause does not require details regarding the taxability of capital gains or business income arising from such deemed transfer. Further, there is no opinion sought to be expressed by the Tax Auditor. As such, this clause appears merely informative. Artificial Intelligence (‘AI’) of The Centralised Processing Center ('CPC') is becoming more and more robust every day. At some future date, this information is certain to be used working of business income as well as, pro-rata capital gain.
3. Compliances in TAR – Date & Cost of acquisition - The particulars to be stated under clauses 15 (b) and (c) should be furnished with respect to the previous year in which the asset has been converted into stock-in-trade. This reporting is to be done one-by- one for each of such conversions. For ascertaining the correct date, the tax auditor will have to refer to the accounts of the financial year in which such capital asset is acquired. The date assumes importance to determine whether the asset is long-term or short- term in nature. The cost of acquisition as per the books of account is to be mentioned. In the case of depreciable assets, the carrying cost that appears in the books will be the written-down value. As per the block of assets mechanism, the individual identity of an asset is lost, once such asset enters the block of depreciable assets. But the value to be reported will be the original cost of acquisition. The date to be reported will be the date of the original acquisition. Even in the case of an asset acquired before the 1st day of April, 2001; the value to be reported will be the original cost of acquisition. To this extent, there is a diversion between reporting in TAR as against, provisions and mechanism of law. But this part will have to be left to the tax proceedings.
- Under clause (d), the amount recorded in the books of account at which the asset is converted into stock-in-trade should be stated. Such an amount may not be the fair market value as on the date of conversion or treatment as stock- in-trade. This value is not required to undergo an auditing process. As such, it is a mere reporting of the conversion value as appears in books and records.
5. Entries in books - It is essential to relate to accounting entries passed in the books of account at the time of conversion of the asset/assets into stock- in-trade. After all, this is the basis of the entire reporting process.
6. Caution – Under this clause, only conversion from capital asset to stock- in-trade is to be reported. No specific clause exists for reverse reporting, though, from AY 2019-20, conversion of stock-in-trade into capital asset triggers taxation (in a little awkward manner). Such reverse reporting is not envisaged here.
16. Amounts not credited to the profit and loss account, being, -
(A) the items falling within the scope of section 28
(B) the proforma credits, drawbacks, refund of duty of customs or excise or service tax, or refund of sales tax or value added tax where such credits, drawbacks or refunds are admitted as due by the authorities concerned
(C) escalation claims accepted during the previous year
(D) any other item of income
(E) capital receipt, if any
1. Background – It is the expectation of the tax system that, all revenue items/ taxable incomes, ought to find a place in the credit side of P & L. With “AI of CPC” pressed into life, this clause assumes crucial relevance. Tax Auditor is expected to list out all such items one-by-one and report them into the appropriate sub-clause of the TAR. While so reporting, a professional view as regards such items is necessary. Hence, even in the absence of words like “admissible/allowable/taxable, etc.”, the opinion of the Tax Auditor is expected to be exercised in this compliance reporting. In other words, this is not mere compliance, but, an opinion-based compliance. This issue is often the bone of contention between assessee and tax officials.
2. Relevant sections – Relevant sections to be remembered for this compliance are section 2(24), section 28, section 41 and so on. Now, section 2(24) is an inclusive section defining the meaning and scope of income. It consists of natural streams of income, as well as, artificial ponds of income too. Again, section 28 of the Act starts with the wording ‘profits and gains of business of profession” which includes direct items of profits as well as peripherals. Section 41 of the Act is a specific section adhering to specific situations. Now, for culling out and zeroing on items not considered in P & L, all these sections are to be kept in perspective. The true import of these sections, clarified by various court rulings, needs to be considered here, before any actual reporting. Reporting under this clause is a clear trigger point for the “AI of CPC” to perform additions of equal amounts.
3. Compliances in TAR – Segregation of overall set of all eligible unreported items of income items into subsets, and then, reporting – Considering the expectation of separate sub-sets, one will have to report each item under a proper sub-set only. These sub-sets are mutually exclusive. For culling out such items which are reported in P & L, a deep analysis of factual and legal aspects is required to be gone into by Tax Auditor. For example, consider the case of carbon credit, which, despite being a value add for the business, does not satisfy the test of “business”. Another issue (till AY 2023-24) is a waiver of bank loan or FOREX gains, etc. The impact of Income Computation and Disclosure Standards (‘ICDS’) is required to be ensured in this case. In the reporting windows, one gets many row items, wherein, such deserving amounts (and not credited top P & L) are to be stated one-by-one. Gimmicks of circumvention of taxation by credit to Capital/Reserves, etc. ought to be overcome by reporting all such issues.
4. Certainty – Only such items are required to be reported herein, which pass the test of accrual of income following ICDS. For example, export/import benefits or, area dispersal benefits or MEGA project benefits, are typically recognised only upon receipt of the said amounts. ICDS provides taxation based on reaching of reasonable certainty. All items of such benefits are to be deliberated to their minute details. Many examples exist when such committed benefits (especially fund- based subsidies) are not being released by Government for many years. But with the advent of systems and cessation of funds-based benefits, life is a bit easy. Hence, the system of extending benefits is to be carefully studied by the Tax Auditor, before emerging with any reportable items in this clause.
5. Compliance – In clause (b), reporting is to trigger only when benefits or claims are admitted/accepted by the sanctioning authorities. That too, in only such cases where corresponding debits are routed through P & L. Example could be a case where Goods and Service Tax (‘GST’) is applied by vendors of the assessee for an export assignment. On export, there is no GST. As such, some enterprises maintain the GST portion out of the vendors bills into “Current Assets” and then, upon admission of the claims/receipt of the refund, adjust them against earlier created “Current Assets”. Now, such claims/refunds ought not to be reported herein. In other words, reporting herein ought to be confined to their plausible debits in P & L. Further, Tax Auditor is expected to peruse correspondence with the Government departments/ authorities in this regard. In these days of online compliances and e-governance,
it would be expected of the Tax Auditor to log in on the relevant portals/ websites, to test and verify, the factual aspect of such admissions/acceptance in a real sense. As regards clause (c), acceptance of the escalation claims is to be culled out from the factual events,
i.e. correspondence and the related quid- pro-quo. As regards other clauses i.e. (a),
(d) and (e) are concerned, deep study till endpoint is expected. Further, such items to be reported herein, should be in consonance with phraseology used in various relevant sections. Let is take two case studies.
a) Waiver of Cash Credit loans – Judicial precedents are divergent on this aspect. One view is, Cash Credit loans are part of current liabilities and used for payment to creditors and as such, fit into 41(1) wording. Reference – Solid Containers Ltd vs. DCIT – 308 ITR 417 (Bom). A contrary view is, vis-à-vis the loan amount per se, no deduction is/was claimed as a debit to P & L, and as such, the waiver is not taxable at all – PCIT vs. GSFC
b) Benefit arising from business
– Considering the peculiar phraseology of “arising” used in section 28(iv) instead of the word ‘accruing”, divergent results are noticed. Consider the case of CIT vs. KNB Investments – 367 ITR 616 (AP) where market value (and value difference benefit) relating to shares under a lock-in period of 3 years was held as not “arising” unless such period is over. In the majority of situations, the difference between “accrual” and “arisal” is lost sight of. Further, it
is qualitatively difficult to come out with conviction as regards such issues.
The challenge arises, which view to be adopted. In such cases, it will be reasonable to resort a conservative approach and report all items or, at least, add a qualifier in the main report in Form 3CA/3CB. Issues also arise considering the wider scope of the last limb i.e. sub-clause (e) which requires all capital receipts to be reported here. On a conservative view, many professionals report even items like the share of profit from firm/AOP in this clause. Now, such reporting may lead to the addition by “AI of CPC” leading to frivolous demand of double taxation. To overcome the same, it is apt to include such reported items in TAR in relevant parallel row-items of Return of Income, and thereafter, to remove them.
6. Caution – In clause-41, information as regards refunds received during the year, is required to be stated. In a case where such refunds emanate from the sub- clauses specified herein, there would be a duplicated disclosure. One should not get confused about duplicate reporting and plausible additions thereto. The purposes of the two clauses are different.
18. Particulars of depreciation allowable as per the Income-tax Act, 1961 in respect of each asset or block of assets, as the case may be, in the following form :-
(d) Description of asset/block of assets
(g) Rate of depreciation
(h) Actual cost of written down value, as the case may be
1[(ca)Adjustment made to the written down value under section 115BAC/115BAD (for assessment year 2021-2022 only)
(cb) Adjustment made to written down value of Intangible asset due to excluding value of goodwill of a business or profession
(cc) Adjusted written down value]
(i) Additions/deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustments on account of-
(i) Central Value Added Tax credits claimed and allowed under the Central Excise Rules, 1944,in respect of assets acquired on or after 1st March, 1994
(ii) change in rate of exchange of currency, and
(iii) subsidy or grant or reimbursement, by whatever name called
(j) Depreciation allowable
(k) Written down value at the end of the year
1. Substituted by the Income-tax (Eighth Amendment) Rules, 202 l w.e.f. 1-4-2021.assessee client of his block of assets, Tax Auditor is expected to report precise details after due verification and after forming an opinion. Depreciation finally reported herein is compared by the “AI of CPC” and adjustments are made directly in the 143(1)(a) intimation (after affording an opportunity, etc.)
2. Relevant sections – Application of all relevant sections is to be ensured in a sacrosanct manner. Relevant Sections are section 32, 36(1)(iii), 43(1), 43(2), 43(3), 2(11), 43(6), and 43A. Practically, it results in certification of the claim of depreciation made by the assessee. As such, this compliance is very crucial in the process of overall tax compliance. The word “allowable” implies that depreciation should be permissible as a deduction, as per the provisions of the Act and the Rules. This would require the exercise of judgment having regard to the facts and circumstances of the case, developments in law from time to time, etc.
3. Compliances in TAR – Classification - At present, even the TAR is required to be prepared by adhering to a drop-down menu. Hence, classification issues and puzzles thereto are mitigated. But the listing is expected to be given vis-à-vis each item of addition to asset/each item of deletion from block and so on. The additions/deductions during the year have to be reported, with dates. The tax auditor is advised to get the details of each asset or block of assets added during the year or disposed of during the year with the dates of acquisition/ disposal. Where any addition was made, the date on which the asset was put to use is to be reported. In respect of deductions, the sale value of the assets disposed of along with dates should be mentioned. Making compliance herein becomes tedious at times, yet an essential part. To determine the rate of depreciation, the tax auditor has to examine the classification of the assets into various blocks. For example, a particular asset may be classified as plant or machinery from the viewpoint of one class of assessees, yet it may not be plant or machinery from the viewpoint of another class of assessees. The purpose for which the asset is used is also very material in this regard. Hence, the tax auditor should ensure that the classification as made by the assessee is in consonance with legal principles. In this connection, he should traverse through judicial pronouncements as well as through the past assessment history of the assessee, and upon an analysis thereof, if he comes to the conclusion that the matter is not free from doubt or controversy, he has to indicate the fact in his report by way of suitable qualification. It may also be necessary to rely upon technical data for determining the proper classification of the block. Since the tax auditor is not a technical expert, he has to obtain a suitable certificate from concerned experts.
4. Compliance in TAR – Rates - Once the classification has been ascertained and checked properly, the rates applicable as per the Income-tax Rules, 1962 follow as a natural corollary. The tax auditor must have due regard to the Income-tax Rules, 1962, relevant clarifications from the Department and judicial decisions. The tax auditor should check the working regarding the calculation of depreciation allowable under the Act.
- In respect of the existing assets, the computation of depreciation would involve stating the opening written down value of the block of assets which should be taken from the relevant income-tax records. The auditor should ensure the opening block of assets matches with the Income Tax Return filed for the immediately preceding previous year. The tax auditor will be conducting the audit in the current year only. As such the tax auditor can rely upon the classification of assets and written down value stated in the income tax records available with the assessee. The tax auditor should mention the fact that he has relied upon the income tax records of the assessee in respect of the information regarding the classification of assets and written down value of the existing assets. To ascertain when the asset has been put to use, the tax auditor could call for basic records like production records/installation details/ excise records/service tax records/goods and service tax records/records relating to power connection for operating the machine, title deeds or building completion certificate etc. in case of immovable assets and any other relevant evidence. In the absence of any specific documentation with regard to the effective date from which the asset is put to use, he could get a representation letter from the management, in respect of the assets acquired. He should examine whether the apportionment of depreciation in cases like succession, amalgamation, demerger etc. has been properly made. The auditor should reconcile the additions made in books of account matches with that of additions made for computation of depreciation for Income Tax purposes. Considering the relevance of these compliances, a mini-assessment of the depreciation claim occurs at the end.
6. Issues – Many issues arise in this area. Some are listed down to get a glimpse of the same.
a)FOREX impact - In many situations, ECB loans/foreign currency credits are availed for the purchase of plant & machinery and some FOREX impact arises at the year end. Such impact is to be adjusted on the WDV in cases covered u/s 43A i.e. when assets are imported. However, in cases where assets are not imported, such impact ought to go to P & L as a revenue item considering the ICDS and evolving accounting wisdom. This aspect needs the attention of the Tax Auditor as well.
b)Subsidies – After the amendment in section 2(24)(xviii), all subsidies and assistances from the Government are considered as “income” to the extent, such subsidies are not taken into account for determining the actual cost of the asset. A major shift has started evolving, wherein, in yesteryears, such subsidies were claimed as capital receipts (and not taxable at all); which are nowadays, considered as a mitigation of the actual cost of the assets. These treatments are bound to meet objections from I-T officials. Tax Auditor is expected to go through the foot-prints of the subsidy scheme and locate, whether, such schemes were meant for mitigating actual cost, or whether, for inducing businesses to say put units in remote areas or (say) enter into desired lines of activity. In mixed situations,
the principal purpose test will have to be adhered to. Reference could be made to many landmark decisions like CIT vs. Ponni Sugar & Chemicals Ltd – 306 ITR 392 (SC) or Sahney Steel & Press Works Ltd vs. CIT – 306 ITR 392 (SC) or, CIT vs. P.J. Chemicals Ltd. 210 ITR 830 (SC) and so on.
c) Goodwill – After much discussion about the decision in the case of CIT vs. Smiff Securities Ltd – 348 ITR 302 (SC), major amendments were proposed in the Income Tax Act for denying the claim of depreciation of Goodwill. Conceptually, Goodwill was considered as a compendium of many intangible assets. Despite the denial of depreciation on Goodwill, other intangible assets are retained as they were and permitted to be depreciated. Attempts are made to segregate Goodwill and place the same into various permissible intangibles and, claim depreciation on the same. Though the proposition is valid, Tax Auditor finds himself facing first-degree heat of the entire process and hence, ought to be cautious and ought to avail suitable backup papers for any such exercise. The principle remains that, Tax Auditor is expected to state, allowable depreciation on such intangibles. Suitable notes ought to exist in Form 3CA or 3CB as the case may be.
d) Thrusting of depreciation – After the insertion of Explanation 5 below sub-section (1) of section 32, depreciation is to be allowed (rather thrust if not claimed) to the assessee. Thus, the claim for depreciation is now mandatory and the written-down value of each asset every year has to be reduced by the amount of depreciation allowable under the Income-tax Rules and the details required under the relevant sub-clauses need to be stated. Tax Auditor ought not to concur with the assessee for any pretext and should report allowable depreciation in a sacrosanct manner.
e) Opting for the different regime – Various new sections permit the assesses to opt for a lower tax regime such as section 115BAA, 115BAB, 115BAC or 115BAD of the Act. In such cases, the claim for depreciation under section 32(1) (iia) of the Act cannot be made. The tax auditor will need to verify the claim of additional depreciation under this clause as well and should also work out the enhanced opening WDV as the case may be.
f) Concessional tax regimes – In sub-clause (ca), two sections i.e. 115BAC and 115BAD are mentioned, i.e. new regimes for individuals and cooperative societies. One wonders, why there is no mention of sections 115BAA/115BAB. Considering specific stipulations, a view could be formed that, reporting need not be extended to 115BAA/115BAB situations. But, considering the obligation to quantify correct depreciation, opening WDV is required to be correctly stated. In cases of 115BAA and 115BABA also, the mechanism demands restatement of opening WDV after sacrificing the unabsorbed depreciation w.r.t. section 32(1)(iia).
As such, it is recommended that, despite the absence of mention of sections 115BAA and 115BAB, similar reporting be extended for these sections. Further, one wonders, why there is a specific mention of words “AY 2021-22 only”. Considering the context, there could arise a situation where an assessee may opt for a
concessional regime u/s 115BAC
/115BAA/115BAB/115BAC/115B
AD in any subsequent year, say AY 2023-24 or so. For ensuring congruence with the correct claim of depreciation, the reporting even for such subsequent years, overcoming the embargo of “AY 2021-22 only” ought to be adopted.
Clause 19 - Various admissible deductions starting from section 32AC till Section 35E
19. Amounts admissible under sections :
1. Background – The degree of compliance expected herein is also of a higher degree considering the usage of the word “admissible”. Due to the said word, such claims are akin to certification by Tax Auditor. Despite a long list, typically, one or two of these sections come into life for actual certification. Some of these sections are irrelevant as of date, yet occur in the above long list.
2. Compliance - As the table indicates, there is information as regards debit to P & L, and then, the actual admissible amount against the same. Tax Auditor is expected to refer to all relevant sections, conditions thereto, the satisfaction of the same, and then, report the final admissible amount. There are some sections for which, the admissible deduction is linked to the deposit of the amount in the designated account for a specific purpose. In this connection, the Tax Auditor has to work out, on the basis of the conditions prescribed in the concerned Section, the amount admissible there under and report the same.
3. Peculiarities – Some of these sections have special features. For example, sections 35(1)(i) and 35(1)(iv) require the presence of a scientific research pursuit. Such a scientific pursuit is not required to have any approval from (say) DSIR. As such, it works on the simple claim to that effect from the assessee. Here, Tax Auditor has to proceed one step forward and satisfy himself as to the existence of such a pursuit.
Clause in TAR reads as under -
32. 2[(a) Derails of brought forward loss or depreciation allowance, in the following manner. to the extent available:
* If the assessed depreciation is less and no appeal pending than take assessed. ˆ To be filled in for assessment year 2021-22 only.)
*As corrected by corrigendum GSR 841(E), dated 6-7-2017.
(b) Whether a change in shareholding of the company has taken place in the previous year due to which the losses incurred prior to the previous year cannot be allowed to be carried forward in terms of section 79
(c) Whether the assessee has incurred any speculation loss referred to in section 73 during the previous year, If yes, please furnish the details of the same
(d) whether the assessee has incurred any loss referred to in section 73A in respect of any specified business during the previous year, if yes, please furnish details of the same
(e)In case of a company, please state that whether the company is deemed to be carrying on a speculation business
as referred in explanation to section 73, if yes please furnish the details of speculation loss if any incurred during the previous year
1. Clause (a) – The degree of compliance expected herein, as regards clause (a) is rudimentary. Information in the columns across clause (a) is related to past years returns/TAR and current year’s TAR. Link has to be ensured appropriately since any variation may lead to some adversities at the “AI of CPC” level.
2. Clause (b) - As regards clause (b), compliance proceeds through the specific pharology imported from section 79 of ITA 1961. By itself, the clause does not inform us, the exact situations for which, the reporting is to be done.
2. Substituted by the Income-tax (Eighth Amendment) Rules, 2021, w.e.f. 1-4-2021.
A reference to section 79 becomes essential, as per which, we are told that,
- trigger point when losses are not to be allowed for carry forward is, 51% change
- this 51% change has to be qua new shareholders v. old shareholders and to be gauged on the basis of voting power
- such 51% shareholding test is to be applied qua beneficial owners
- company in which public are substantially interested does not suffer from rigor of section 79
- transmission of gift of shares is not considered as change in shareholding for this section
- inbound cross border amalgamations are also an exception
- change in shareholding due to resolution plan under IBC is also an exception .. and so on
Hence, for effective reporting under this clause, an in-depth study of all conditions is required to be undertaken. Various crucial decisions have made the applicability of this section a further challenge. For example, in the case of Yum Restaurant (India) P Ltd vs. ITO
– 380 ITR 637 (Del), losses suffered by the Indian entity were denied owing to a change in shareholding (despite that, the transferor and transferee were subsidiaries of the same ultimate parent). In another interesting case of Daimler Chrysler India (P) Ltd vs. DCIT – 120 TTJ 803 (Pune), despite the change in shareholding between the immediate owners, the loss was permitted to be carried forward
considering that (and after invoking Article-24 of the DTAA), the company is a company in which, the public are substantially interested. Many such situations exist, which are required to be deeply mind applied by the Tax Auditor before concluding the issue and reporting in affirmative or in negative for carry forward of losses.
3. Clause (c) – Similar to clause (b), even categorising losses as “speculation losses” under section 73 is a challenging situation for the Tax Auditor. Compliance herein is least on quantitative terms and heavy on qualitative aspects. Tax Auditor has to start from the concept of “speculative losses” for the purpose of Explanation to section 73 of ITA. Now, this Explanation categorises actual losses from share transactions, as “speculative losses”. Some riders exist for this harsh categorisation such as –
- non applicability to a company whose GTI consists of four heads of income other than business income
- non-applicability to a company whose main business is trading in shares or banking
- Losses in derivative trading is not hit by this section
- Losses arising from sale of shares allotted initially (and not purchased) is not hit … As in case of section 79, a subject- oriented view ought to be developed by the Tax Auditor before proceeding for reporting herein.
4. Clause (d) - Details of Losses incurred in respect of a Specified business as referred to under section 73A. This is a niche area reporting. Section
73A provides for provisions relating to carry forward and set off of losses by specified business. It provides that any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business. Conditions specified in this regard are required to be ensured by the Auditor before stipulating the view.
5. Concessional tax regimes – Comments stated in clause 6(f) w.r.t. clause-18 of TAR may be considered here also for drawing congruence to each other.
Clause 33 - Tax Incentive/deductions
Clause in TAR reads as under -
33. Section-wise details of deductions, if any, admissible under Chapter VIA or Chapter Ill (Section 10A, Section 10AA).
1. Background – The degree of compliance expected herein is also of a higher degree considering the usage of the word “admissible” as stated in earlier clauses. Moreover, unlike the earlier clause, for deductions specified herein, separate forms like form no. 10CCB, etc. are also required to be filed. Congruence between these figures is expected so that, “AI of CPC” does not cause disturbance.
2. Compliance – As the table indicates, there is information as regards debit to P & L, and then, the actual admissible amount against the same. Tax Auditor is expected to refer to all relevant sections, conditions thereto, the satisfaction of the same, and then, report the final admissible amount. There are different situations like (say) claim of deduction for SEZ unit or, (say) claim of deduction u/s 80JJA for increased employment and so on. Conditions of each section are expected to be verified by the Tax Auditor before certifying the admissibility of such deductions.
3. Peculiarities – While so certifying, the Tax Auditor enters into the realm of controversies relating to these deductions. Consider few interesting examples –
- The claim of deduction u/s 10AA without the creation of the adequate reserve in the current year, but having an extra reserve of past year/years
- The claim of deduction of (say)
` 1 CR u/s 80-IBA is set off by a loss of Rs. 1 CR from another housing project, but, rent income of ` 2 CR exists, and as such, the assessee becomes entitled to claim 80-IBA relying upon ratio of CIT vs. Reliance Energy Ltd dated 28/4/2021
- As per present norms, Tax Audit Report is to be uploaded one month prior to the last date of compliance u/s 139(1) of the ITA, 1961. Now, data relating to head-wise and source-wise incomes, forming part of the final GTI may not be available with the Tax Auditor at a (say) one month earlier stage. Such final formation of incomes into GTI has a direct bearing on the eligible claims under various sections of Chapter VI-A. Tax Auditors may find themselves into a puzzling situation regarding the correct quantification of such claims.
A way out could be, obtaining the entire data as of the date of the report and stipulating quantifications accordingly with suitable remarks.
Conclusion
Despite challenges in the phraseology used in various clauses of form 3CD, the tax Auditor is expected to orient his compliances considering the veiled sections of the ITA, 1961. The focus ought not to be on “AI of CPC” but, the focus ought to be on, expectations/mechanism implicit into various sections of ITA. Afterall, “AI of CPC” is an evolving system, becoming robust year-after-year. Suitable qualifiers ought to find their place in form 3CA/3CB (only place for any subjective remarks available now). Transparent reporting will be beneficial in the long-run despite initial hiccups.
“Take up one idea. Make that one idea your life; dream of it; think of it; live on that idea. Let the brain, the body, muscles, nerves, every part of your body be full of that idea, and just leave every other idea alone. This is the way to success, and this is the way great spiritual giants are produced.”
— Swami Vivekananda
“This is my belief: that through difficulties and problems God gives us the opportunity to grow. So when your hopes and dreams and goals are dashed, search among the wreckage, you may find a golden opportunity hidden in the ruins.”
— Dr. A.P.J. Abdul Kalam
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